Erni v Brooky
[2020] NZHC 3116
•24 November 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2019-419-105
[2020] NZHC 3116
BETWEEN PETER MICHAEL ERNI AND BETTY MERLE ERNI
PlaintiffsAND
KATRINA JEAN BROOKY
Defendant
Hearing: 30 June 2020 Appearances:
J K Matena & M D Branch for Plaintiffs K J Patterson for Defendant
Judgment:
24 November 2020
JUDGMENT OF PAUL DAVISON J
This judgment was delivered by me on 24 November 2020 at 3:30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Harkness Henry, Hamilton Grantham Law, Hamilton
ERNI v BROOKY [2020] NZHC 3116 [24 November 2020]
Introduction
[1] Peter and Betty Erni (the plaintiffs) bring this action against their granddaughter, Katrina Brooky (the defendant) seeking to recover sums they claim to have advanced to the defendant as loans. The defendant does not dispute receiving the sums advanced by the plaintiffs, but she says that the sums were not loans, and were either gifts, advances on her inheritance from her grandparents, or unenforceable loans.
[2] The amounts advanced by the plaintiff can be conveniently divided into two categories: property loans and truck loans. None of the loans were governed by written contracts.
Background
[3] The plaintiffs are now both aged in their mid-late 70s. They have three children and eight grandchildren. While they are close to all of their grandchildren, they were always particularly close to the defendant, who was their first grandchild. When the defendant was an infant and young child, she was in the day-to-day care of her parents, however the plaintiffs were also closely involved in her upbringing.
[4] The plaintiffs previously owned and operated a holiday park at Pauanui on the Coromandel Peninsula. The defendant frequently spent time with them there and helped them out as required.
[5] The plaintiffs say that over the course of their lives they have often provided financial assistance to their children and grandchildren, including from time to time gifting them money for various purchases.
The house loan – Te Kuiti
[6] In 2013, the defendant’s son, K, was born. At that time the defendant was in a relationship with BP. The defendant and BP separated in April 2014, by which time K was one year old. The defendant then set about looking for a property to purchase. She and the plaintiffs together viewed several prospective residential properties,
including a property at 1007 State Highway 3, Hangatiki, Te Kuiti (the Te Kuiti property).
[7] Betty Erni (Betty) says that around August 2014, the defendant contacted her to tell her she intended to make an offer to purchase the Te Kuiti property. In discussions that followed, the defendant told Betty she did not have any money to pay the deposit, and she asked her to pay it for her. Betty says that she and the defendant then discussed how the defendant would repay the money. She says it was agreed between them that the defendant would repay the sum advanced at $250 per week with no interest. Pursuant to that agreement, Betty paid the deposit of $30,800 for the Te Kuiti property to Wrightson’s Real Estate from the plaintiffs’ joint Westpac Bank account on 15 August 2014.
[8] On Betty’s account, in September 2014, she and the defendant discussed how the defendant would pay the balance of the purchase price on settlement of the property. The defendant said that she had not arranged finance and did not have the money to pay the balance of the purchase price. The defendant told her grandmother she needed the house as a means of getting away from her former partner, and to provide a home for herself and her young son. Betty and the defendant agreed that the plaintiffs would provide her with the amount the defendant required to purchase the house on the same terms as the sum loaned to her for the payment of the deposit. Betty wanted to make sure that the defendant and her great grandson had a roof over their heads, and she and Peter were willing to assist by lending her the necessary funds. The terms she agreed with the defendant were that the plaintiffs would provide the funds required to complete the purchase as an interest-free loan to be repaid in instalments of $250 each Monday.
[9] The defendant’s account of these discussions is somewhat different. She says that the plaintiffs were always very supportive of her and K, and had offered to help her relocate. The plaintiffs made it very clear to her that they would assist her in purchasing a property for herself and K to live in. The plaintiffs repeatedly told her that their financial assistance was their way of giving her an early inheritance. She agreed with the plaintiffs that the weekly payments of $250 she made were to be by way of compensation for them having provided her with the money for the house
purchase. It was agreed that she would make the weekly payments into a bank account that the plaintiffs controlled, and which would be her nest egg or savings, so that when they died, she would have built up her savings. Her grandparents explained to her that in buying her a house they had provided her with an early inheritance, and so she would not be left any further money in their wills.
[10] On 24 September 2014, Betty paid $278,736 from the plaintiffs’ joint account at Westpac to the trust account of the solicitor handling the purchase. The sum included the amount required to complete the purchase of the Te Kuiti property and to meet the related legal fees. The plaintiffs had therefore advanced $309,536 to the defendant for the Te Kuiti property, comprising $30,800 for the deposit, and $278,736 to settle and meet legal fees (the house loan). The title to the property was transferred to the defendant and registered in her sole name on 29 September 2014.
[11] On 13 October 2014, the defendant made her first payment of $250 to the plaintiffs. The payment was made into the plaintiffs’ joint account at Westpac pursuant to an automatic payment arranged by the defendant and noted by her as “Trina House Mortgage”. Although these payments were described as relating to a mortgage, no mortgage security for the house loan had been discussed or arranged, and there was no mortgage registered on the title of the property. The defendant thereafter continued to make weekly payments of $250 by automatic payments into the plaintiffs’ Westpac account.
[12] The defendant says she understood the plaintiffs to be keeping these $250 payments aside for her.
Other sums advanced by the plaintiffs
[13] During October 2014, the defendant asked Betty if she would meet the cost of house insurance for the Te Kuiti property. Betty agreed and, on 22 October 2014, she paid $1,461 to Rothbury Insurance Brokers for the house insurance.
[14] On 2 February 2015, Betty accompanied the defendant to a shopping centre in Hamilton where the defendant was looking for a new stove for the house on the Te Kuiti property. Betty says that, once the defendant had chosen the stove she wanted
to purchase, she asked her grandmother if she would pay for it, saying that she would pay her back. Betty says that, on the understanding that the defendant would repay her, she proceeded to pay $1,670 for the stove and later added this sum to the amount of the house loan.
The plaintiffs’ wills
[15] On 10 December 2014, both plaintiffs made wills in which they revoked all earlier wills. In each case the plaintiffs appointed the other and the defendant as their executors and trustees, and gave a life interest to the other over whatever property constituted their principal place of residence at the date of their death. Both wills provided that upon the death of the surviving spouse, their estate was to be held on trust for their three adult children in equal shares. The wills also provided that in the event the other predeceased them (as testator), the net estate would then be divided equally between the plaintiffs after bequests to the plaintiffs’ six grandchildren who, other than the defendant, were to receive specified sums of either $200,000 or
$100,000. In relation to the defendant, the wills provided that:
I give to my granddaughter KATRINA JEAN BROOKY (or her executors or administrators, if she predeceases me) any debts owing by her to me.
The truck loan
[16] In 2016 the defendant was operating a small business which supplied fencing materials. The plaintiffs say that, in early 2016, the defendant asked them whether they would assist her with finance to purchase a truck at a cost of around $300,000. The defendant intended to use the truck for transporting fencing supplies and to expand her business to include transport services. Betty says that at the time the defendant raised this proposal with her and Peter, she was maintaining the weekly payments of
$250 for the house loan. Accordingly, they had no concerns about her reliability and trusted her to repay any further loan that they provided to her.
[17] Betty says that she and Peter agreed with the defendant to lend her the money she required to purchase a truck on the understanding the loan would be short-term. The plaintiffs believed that once the defendant had the trucking-related aspects of her business up and running, she would arrange finance for the truck from a financial
institution and repay the plaintiffs’ loan. Betty says that she and Peter discussed with the defendant what the defendant would do if the trucking aspects of her business did not go well. The plaintiffs understood from their discussions that in that event, the defendant would simply sell the truck and repay the truck loan. There was also discussion about interest. Betty says that, although the defendant offered to pay interest at between seven and nine per cent per annum of the loan amount, the plaintiffs were willing to adopt an interest rate closer to the rate they would obtain on money on a term deposit with their bank. A rate of five per cent was agreed. Betty says that it was also agreed that the defendant would make interest-only payments rounded up to
$1,200 per month, and that the loan would be reviewed on its second anniversary. Betty says her understanding of the agreement was that by the second anniversary of the loan the defendant would have repaid them, either by arranging replacement finance for the truck or by selling it. Betty says it was agreed the truck loan would commence on 11 August 2016, with the monthly interest payments of $1,200 required on the eleventh day of each month thereafter, and the loan to be reviewed on 11 August 2018.
[18] On 20 June 2016 the plaintiffs advanced the sum of $20,000 to the defendant to enable her to pay the deposit for the truck. Then on 11 and 12 July 2016, the plaintiffs transferred a total of $250,000 to the defendant’s business bank account held in the name of “KB Haulage”, to enable her to settle her purchase of the truck. The plaintiffs had therefore advanced $270,000 to the defendant for the purchase of the truck (the truck loan).
[19] The defendant failed to make the first interest payment due on 11 August 2016, and Betty says the defendant explained it would be paid shortly. On 30 September 2016, following her receipt of a GST refund relating to the truck purchase, the defendant paid $20,000 to the plaintiffs’ Westpac Bank account as principal reduction of the loan. The defendant referenced the payment on the bank record as “Truck loan Repayments”. This principal repayment reduced the loan to $250,000.
[20] Betty says that, notwithstanding the principal repayment, no arrangement was made to reduce the $1,200 per month interest-payment to which they had agreed. Betty assumed that on the second anniversary of the truck loan there would be an
accounting undertaken and any excess paid by the defendant on account of interest would be applied to reduce the principal sum.
[21] On 28 November 2016, when the defendant’s truck required repairs which she could not afford, the plaintiffs loaned her a further $15,000 to enable her to meet the cost of the repairs. The plaintiffs say that this sum was advanced as a loan on the same terms as the truck loan, and accordingly, added to the outstanding principal of the truck loan (bringing the outstanding principal of the truck loan to $265,000).
[22] On 20 December 2016, the defendant made her first interest payment on the truck loan of $1,200. The payment came from the defendant’s “KB Haulage” account, and was referenced as “Truck-loan Repayments”. The defendant then made two further payments of $1,500 in respect of the truck loan, on 23 January and 21 February 2017. Betty says that, when she queried the defendant as to why the defendant had paid more than the agreed sum of $1,200 per month, the defendant told her that she thought she would repay some of the principal. Betty says she reminded the defendant that their agreement was for an interest-only loan.
[23]On 23 March 2017, the plaintiffs loaned the defendant a further sum of
$15,000, to enable her to pay for further truck repairs and her driver’s wages. The plaintiffs say that this sum was advanced as a loan on the same terms as the truck loan, and accordingly, also added to the outstanding principal of the truck loan.
[24] During 2017 and throughout 2018 (with one exception in November 2017), the defendant maintained her monthly payments of $1,200. In each case, the payments were made to the plaintiffs’ Westpac account and noted as “Truck-loan Repayments” made by “KB Haulage”. The payments ceased on 31 December 2018.
[25] The defendant also continued to make her payments of $250 per week for the house loan until 22 January 2018.
The relationship deteriorates
[26] Early in 2017, the plaintiffs decided to sell their residential property at Pauanui on the Coromandel Peninsula and move closer to Hamilton, where they would be
closer to the defendant and their great grandson, as well as hospital and medical facilities. The plaintiffs suggested to the defendant that she sell the Te Kuiti property and, with the proceeds, purchase a one-third interest in a lifestyle property where she and her son could reside with the plaintiffs. The plaintiffs would contribute the other two-thirds of the purchase price. Following purchase, all ongoing expenses relating to the property could be met by them as to two-thirds and the defendant as to one- third. The plaintiffs’ proposal was made on the basis that the defendant would continue to repay the house loan at the rate of $250 per week. The defendant initially agreed to the proposal. The three eventually found a suitable property at Highden Road, Te Awamutu (Highden Road) and entered into an agreement to purchase for $1,175,000. The plaintiffs and the defendant then put their respective existing residences, at Pauanui and Te Kuiti, on the market for sale.
[27] Prior to settlement of the purchase of Highden Road, the plaintiffs arranged for their solicitor to prepare a family trust deed with the intention of the family trust owning Highden Road. The deed establishing the “Erni Brooky Family Trust” is signed and dated 16 August 2017 (the family trust). The trust deed names the plaintiffs and the defendant as settlors, and names the plaintiffs, the defendant, and Miller Poulgrain Trustees (2016) Limited as trustees. The discretionary beneficiaries of the trust are the plaintiffs and the defendant, and the final beneficiaries are the defendant’s children.
[28] However, the plaintiffs arranged with their solicitor to take title to Highden Road in their own names personally, because the defendant had not yet sold her Te Kuiti property and was unable to contribute any money towards the purchase price. The plan was to transfer the property to the family trust once the defendant had sold her property and had paid her share of the purchase price.
[29] The plaintiffs sold their Pauanui residence very quickly, and the purchase of Highden Road was settled on 30 August 2017 with the plaintiffs funding the purchase price. The plaintiffs moved in straight away, followed two days later by the defendant and her son, even though the defendant had not yet sold her Te Kuiti property.
[30] The parties’ relationship progressively deteriorated at Highden Road. The defendant sold her Te Kuiti property on 8 November 2017 for $442,000. It had been arranged that she would contribute $385,000 from the Te Kuiti property sale proceeds as her share of the purchase price for Highden Road. However, she put off paying and repeatedly told the plaintiffs that she would “do it tomorrow”. She did continue to maintain the weekly payments of $250 in reduction of the house loan.
[31] By late November 2017, the disagreement between the parties had come to a head. On 2 December 2017, the defendant and her son moved out of Highden Road. It is unnecessary to detail the differences and tensions that developed between the defendant and her grandparents at Highden Road. The differences appear to have arisen from the way in which the defendant saw herself as being treated by her grandparents. She considered the plaintiffs were not treating her as an independent adult, were unnecessarily critical of her, were exploiting her and treating her like their “slave”. For their part, the plaintiffs observed that the defendant was experiencing relationship issues with her boyfriend, was quite volatile in her behaviour and overly sensitive to criticism.
[32] The depth of the division that had developed between the defendant and her grandparents is evident from the correspondence sent after the defendant moved out.
[33] On 15 December 2017, the defendant wrote three letters to the plaintiffs. The first read:
To Nana and Grandad.
Regarding the money from the sale of the property in Te Kuiti.
To my understanding and my lawyer Joe @ Forgeson Law who was present on the purchase of 1007 State Highway 3 Te Kuiti is the money given by you was gifted as part of my inheritance.
There was no agreement Verbal or written that if the property was sold that the gifted amount was to be given back to you.
The only verbal agreement that was made between us was that I would pay
$250 each week not as a payment to the gifted amount but to go into an account held by you so when you do pass I would have something to fall back on.
Regards Trina.
[34] In the second letter, the defendant gave notice that she resigned as a trustee of the family trust. In the third letter, she expressed her love for her grandparents and explained that she felt unable to meet with them because of the verbal dispute she expected would inevitably develop. The defendant included with the third letter a document, in which she set out a lengthy list detailing comments and actions of the plaintiffs which had caused her distress, and which had resulted in her deciding to leave Highden Road. She said:
Please read the list and try to see it from my point of view and try and understand why I needed to go and try …salvage our relationship.
Honestly from the bottom of my heart I really do hope that when things settle down we can try and build our relationship again as [K] and myself do miss you both but for now I think this is best.
Once again remember I do love you both so much and I will always be grateful for everything you both have done for myself and [K].
[35] Following receipt of these letters, the plaintiffs took steps in an attempt to restore their relationship with the defendant and resolve their differences. With the assistance of the defendant’s father, they arranged to meet with the defendant at Highden Road on the afternoon of 31 December 2017. The meeting was attended by the plaintiffs, the defendant and her father.
[36] Betty says that, at this meeting, she and Peter told the defendant that they were not worried about the house loan at that stage, but that on the second anniversary of the truck loan on 11 July 2018, they would require her to make full repayment of the truck loan. At the conclusion of the meeting the defendant told Betty that all she wanted was to have her grandparents back.
[37] Some two weeks after the meeting on 31 December, the defendant and Betty met again at Highden Road at Betty’s request, to go over the defendant’s list of complaints about her grandparents which she said had led her to her moving out of Highden Road. At the conclusion of the meeting, the defendant told her grandmother that she would never return. A week or so after that meeting, the plaintiffs went to see the defendant where she was then living. She told them to get off her property.
[38] On 31 January 2018, the defendant served each of the plaintiffs with a trespass notice requiring them not to enter her residential property located in Te Awamutu. The plaintiffs then wrote to the defendant by letter dated 1 February 2018. They said:
Trina,
Received your trespass notice (how sad). Yes we will abide by it.
Money lent. This seems to be our best option after much thought. Pay off the whole debt of the truck and trailer plus $30,000 borrowed back in March and April. Total $280,000.
The $308,000 loan for the Te Kuiti property can sit there with you (as you were) pay[ing] $250 per week. (Mon)
We will wind the trust up as soon as possible for Highden Rd. Could you please sign this letter asap.
We have an appointment with our lawyer next week and will get everything drawn up legally.
[signed by both plaintiffs]
[39] Included in the letter were summaries of the truck loan and the house loan, detailing the amounts the plaintiffs had advanced and the payments made by the defendant. The truck loan statement said the amount owing was $280,000. The truck loan statement included the following:
It was agreed you would pay 5% interest only from 11.7.16. To be reviewed 11.7.18 re principal pay back.
This still stands.
[40] The house loan summary included with the plaintiffs’ letter of 1 February 2018 stated:
House Loan
As per both Peter and my wills on our deaths you were to receive $200,000 from our estate. You asked when you were on a big down over your split with [BP] could we help [you] relocate. This money ($308,000) was a loan not a give away.
House Deposit. $30,000
Bal. 23.9.14 $278,000 = $308,000
We paid for the 1st 12 mth Insurance also the new stove. Plus several amounts put on your credit card when you were in dire straights [sic]. These we will wave. [sic]
The only money put into Highden Rd is the builder’s report which we are happy to pay.
[41]On 5 February 2018, the defendant sent a letter to the plaintiffs. She said:
To Peter and Betty
I have received your letter (via Di) on the 03.02.18
1 I did not want to issue the trespass notice but it seemed to be the only way I could be left alone to gather my thoughts.
2 The money lent to KB Haulage for the purchase of 1x truck and trailer it was agreed by yourselves to make monthly payments of $1200 into your nominated bank account. The extra $30000 was to be added to the truck debt. The final amount on [sic] this debt will be determined once my accountant has worked out the amount I have borrowed plus the 5% interest per year and then the amount I have paid into your bank account. I will advise you of this figure once they give it to me. From the advice of my lawyer as there was NO loan agreement made between myself and yourselves so the monthly payments will remain (There will be no lump sum payment to clear this debt).
3 The $308,000 given to me by yourselves was my EARLY INHERITANCE (this was Noted by my lawyer the day we sign[ed] the house agreement) the only reason I was paying $250 was to build my inheritance account back up so when you did pass I had something to fall back on this was NOT a loan as you have tried to say.
4 I stood down from the Highden Road trust as stipulated in my first letter to you guys in December, please find attached again.
5 I will not be signing the letter as a the loan amount for KB Haulage still has to be finalised.
Regards Trina
[42] On 14 February 2018, the defendant sent the plaintiffs a KB Haulage invoice for $13,831.38 for items and services supplied while she was living at Highden Road including labour, truck transport for timber poles, timber poles and other supplied items such as garden hoses and cobblestones. The invoice was dated 30 November 2017. The plaintiffs responded to the invoice in an undated letter (sent around 14 February 2018). In this letter they stated that they disputed liability for the items detailed in the invoice apart from the timber and posts for which $3,283.71 (including GST) was charged. In this letter, which was signed by both plaintiffs, they said:
…
Once again your interest money ($1,200) on the truck loan came in late. This should be paid on the 11th of each month. (As agreed by you.)
Trina. A little advice, you are digging yourself a bigger hole each week. Please sit down smell the roses and get a few things sorted out. Who[’s] hand has fed you for the last 15 years? We don’t care what your business mentor has to say. Have you told him or her everything. (No)
…
[43] The plaintiffs paid the sum of $3,283.71 relating to the invoiced timber, and also sent the defendant a written demand for payment of the truck loan. Although this demand is undated, it would appear to have been sent shortly after the correspondence between the parties in February 2018, sometime in March 2018. The demand was typewritten and signed by both plaintiffs. The typewritten demand set out details of the truck loan advances and noted that $20,000 had been paid by the defendant following her receipt of a GST refund leaving a balance of $280,000. The letter of demand continued:
You agreed to pay interest of $1,200 per month from 11 July 2016 on the balance owing and we all agreed to review the loan two years after the purchase of the truck 11 July 2018.
This letter is written demand of our requirement for you to repay the loan amount of $280,000 to us on or before 11 July 2018, together with interest owing on the loan.
Interest payments did not begin until 20 December 2016 and no interest was paid in May 2017 meaning at the date of this letter rent [sic] is in arrears by
$6,000 (five months).
Repayment should be made to the same bank account where interest payments have been made.
[44] This typewritten demand in relation to repayment of the truck loan also appears to have been accompanied by a handwritten letter relating to the Te Kuiti property. It was headed “Money for Te Kuiti Property” and signed by both plaintiffs. The plaintiffs stated that the cost of the stove and the house insurance which they had paid for added to the sum paid for the purchase of the house meant the amount outstanding on the house loan totalled $311,131. The plaintiffs also wrote:
…
Re our wills 2014. You were to be gifted $200,000 as your inheritance on our deaths. We are prepared to let you have this early (now). Your letter 5-2-18 Par 3. We don’t understand where you are coming from nor does our lawyer. Why are you paying money now back to rebuild your inheritance? Come on. Why was this payment of $250 per week stopped on 29 Jan 2018?
Trina we just want to get this whole thing tidied up so we can all get on with our lives. We can’t sit down and discuss this with you (very sad).
[45]On 23 July 2018 the plaintiffs wrote to the defendant:
Trina
Further to our notice (drawn up by our lawyer) sent to you back in March re finance on the truck trailer etc $280,000. You were told back in January we were thinking of pulling the truck loan then after February we advised you the loan was to be repaid by due date 11.7.18. Could you please settle this full amount by 11 Aug 18.
Trina This money that has been lent to you is our life savings. Please.
Your Grandparents (signed)
[46] Betty wrote to the defendant again on 21 August 2018 requesting that she repay the truck debt. She concluded her letter saying:
Trina, I could sit down and write pages about this (like you did) but I’m over the whole thing. Please tidy the truck debt up. Have you sat down and added up what you have had out of us. $600,000. (Grandparent financial abuse) All we ask. Please. It will not go away.
…
[47] On 6 September 2018, the plaintiffs’ solicitors wrote to the defendant noting that the truck loan of $300,000 was overdue and requesting the defendant to advise her intentions regarding repayment. The defendant did not respond to the plaintiffs’ demand.
[48]On 2 May 2019, the plaintiffs commenced this proceeding, in which they claim
$279,917 in respect of the house loans and $290,800 in respect of the truck loan, together with interest and costs.
The defendant’s position
[49] In relation to the house loan, the defendant’s position is that her grandparents gifted her the money for the house and related costs (including insurance) as an early payment of her inheritance, with the consequence that she would not receive anything from their estates upon their death. The defendant says that there is no documentation to prove that the house loan was anything other than a gift, and that the plaintiffs are “simply trying to rewrite history for their own benefit”.
[50] As regards the truck loan, the defendant says that her grandfather was assisting her at the time when she was looking to purchase a truck and trailer unit for her business. She says that she had already arranged to finance the purchase with a loan from UDC, with interest payable at eight per cent per annum. She says that Peter told her that he and Betty were only getting 2.5 per cent interest on their money in a term deposit at the bank. She says that he said they would do better by providing her with the finance to purchase the truck and trailer unit. Consequently, a rate of five per cent per annum was agreed. The defendant says that nothing was said about her paying interest on a loan. She says that Peter told her that he wanted to help her, see her grow her business and do well with money.
[51] She says that it was Betty who set the $1,200 amount she was to pay monthly, but it was not a payment of interest on a loan. The defendant says that the $1,200 per month payments were made to accumulate an interest free “nest egg” for herself, in the same way as the accumulated $250 per week payments she had been making in respect of the house loan. She says that when she paid more than $1,200 on two occasions, Betty got angry with her and told her to keep the payments at $1,200, as payment at that level was beneath the threshold that the plaintiffs could earn without the payments interfering with their pensions. She says the $1,200 payments were not interest payments and were not principal payments. She says that there was in fact no fixed term in relation to the money provided by the defendants for the truck and trailer, and it was never agreed that she would be expected to repay the entire amount at any time in the future, let alone after two years.
[52] The defendant says that the first she heard of the truck money being treated as a loan she was required to repay within two years, was when she received the plaintiffs’ letter of 27 July 2018. The defendant denies the plaintiffs ever told her that the money they provided for the truck purchase was a loan to be repaid in two years. She says the plaintiffs are making that up and have also fabricated the terms of a loan when there was in fact no loan.
Submissions
The plaintiffs
[53] The plaintiffs found their claim in contract. They allege that they advanced the house and truck loan monies pursuant to oral loan agreements with the defendant, pursuant to which the defendant is contractually bound to repay the sums advanced.
[54] The plaintiffs allege the terms of the oral contract for the house loan include that any money they advanced the defendant to enable her to purchase her Te Kuiti house in August 2014, would be interest free and repaid at the rate of $250 per week.
[55] As regards the money they agreed to advance the defendant in June 2016 to enable her purchase of the truck, they allege the contractual terms were: that the sum advanced would bear interest at five per cent per annum; the defendant would make monthly payments of $1,200 by way of interest only, commencing 11 August 2016 and thereafter on the eleventh day of each month; the arrangements for interest-only repayments would be reviewed on the second anniversary of the loan.
[56] The plaintiffs further allege it was an implied term of both loan contracts that, in the event of the defendant defaulting on the principal repayments of the house loan and interest-only payments of the truck loan, the outstanding balance of the loans would become payable upon demand.
[57] The plaintiffs allege the defendant breached the terms of the house loan by failing to make the weekly payments of $250 per week from 22 January 2018, by which date she had made 171 weekly payments of $250 totalling $42,750 in reduction of the house loan leaving an outstanding balance of $279,917.
[58] The plaintiffs allege the defendant breached the terms of the truck loan by failing to make payments of interest due from 11 January 2019. She also failed to repay the truck loan following demand for repayment on 27 February 2019, leaving an unpaid principal sum of $280,000 together with unpaid missed interest payments of $27,600.
[59] By way of evidence of the oral contracts, the plaintiffs rely on Betty’s testimony, the contents of the correspondence exchanged between the plaintiffs and the defendant, and the defendant’s conduct (making payments in accordance with the terms).
The defendant
[60] Mr Patterson, for the defendant, submits the plaintiffs’ claim must fail for three reasons:
(a)The plaintiffs have failed to prove the formation and existence of the contracts they allege were the basis on which they made loan advances to the defendant.
(b)The presumption of advancement applies with the effect that the advances are properly treated as being gifts.
(c)The plaintiffs are estopped from recovering the sums advanced by reason of statements they made to the defendant to the effect that the money they provided was an advance on her inheritance and that she was not required to repay it.
[61] Counsel says that it was not until after the defendant had moved out of the Highden Road property in December 2017, that the plaintiffs claimed the funds they had provided for the house and truck were loans.
[62] As regards the plaintiffs’ claim founded on the existence and breach of contracts, Mr Patterson says that, while significant sums of money were undoubtedly advanced to the defendant to enable her to purchase the Te Kuiti house and the truck,
there is no evidence that the parties intended to enter into contracts, and no evidence of any loan documentation. He submits that there is no evidence of offer, acceptance, nor any intention to be bound.
[63] Mr Patterson submits that there is no evidence that the defendant ever intended to enter into a contract with the plaintiffs in relation to the money they advanced to her. He submits that, in the absence of any documentation, there is no foundation for the Court to find that contracts existed. Nor, he submits, is there any certainty as regards the terms of any alleged contracts. Absent evidence, the Court is unable to make an objective assessment of the duration of the loan, the time or date for repayment of principal and the payment of interest. None of these terms are known, counsel submits, because the parties never intended to enter into contracts to govern the sums provided by the plaintiffs.
[64] In summary, Mr Patterson submits the plaintiffs have failed to prove the ingredients required for the creation of contractual relations between the parties existed. The plaintiffs accordingly do not have contracts against which they can seek enforced repayment of the advanced sums.
[65] As regards the presumption of advancement, Mr Patterson submits that by reason of the close family connection between the plaintiffs and the defendant when they provided her with the sums, the presumption of advancement applies and the sums are properly to be treated as gifts. He notes the plaintiffs themselves have stressed their close relationship with the defendant, which began with their involvement in the defendant’s upbringing. He also submits that there is no evidence demonstrating a contrary intention so as to rebut the presumption the sums advanced were gifts. There were no “strings” whatsoever attached to the advancement of the sums; the plaintiffs did not put their own names on the title of the house purchased with their money, nor did they require a written loan contract or a mortgage to secure the sums advanced. Further, Mr Patterson highlights that the weekly repayments of
$250 would never amount to full repayment of the principal during the lives of the plaintiffs (due to their ages). He submits that this illustrates the advances were gifts.
[66] As regards the defendant’s affirmative estoppel defence, Mr Patterson submits the defendant’s evidence establishes:
(a)In relation to the money advanced for the purchase of the Te Kuiti property, that at the time the sum was advanced, the plaintiffs made it clear that the defendant was to use the money to provide a home for herself and their great-grandson. They imposed no requirement on her to repay them the money.
(b)In relation to the money provided for the purchase of the truck, the plaintiffs (primarily Peter), represented to the defendant that there was no expectation of repayment and no requirement for a written contract or other documentation. Counsel accordingly submits there is no evidence to show that the advances made by the plaintiffs for the truck were anything other than gifts. As regards the $1,200 per month payments, Mr Patterson submits the plaintiffs were gaining the advantage of obtaining income on funds that they would otherwise be holding in their bank account and on which they were not receiving any significant income having regard to the low interest rates for bank investments.
[67] Counsel submits that the plaintiffs are clearly estopped from making demand for repayment of the money they advanced to the defendant.
Discussion
[68] As illustrated, the plaintiffs’ and defendant’s accounts of the circumstances and terms on which the plaintiffs advanced money to the defendant are in sharp conflict. The plaintiffs claim that the advances were loans and that this was made clear to the defendant in discussions prior to payment and from the correspondence and conduct of all parties. The defendant claims the advances were gifted as a means of providing her with her early inheritance and, as such, that she has no legal obligation to repay them.
[69] Of the two plaintiffs, only Betty gave evidence. Consequently, the Court did not have the advantage of hearing from Peter in response to the defendant’s testimony regarding what he allegedly said to her in relation to the advanced sums. Of particular relevance here is the defendant’s testimony as to a claimed conversation between her and Peter in September 2017, during which he allegedly told her that the reason the plaintiffs were providing her with financial assistance for the house and truck was because she had been supporting them, as well as telling her that he was not expecting her to ever have to pay the money back.
[70] However, I do not consider the plaintiffs’ failure to call Peter is a matter on which I should place any significant weight, because the defendant failed to adequately plead her estoppel defence by providing particulars specifying the facts upon which she would rely. This is despite the plaintiffs filing a Statement of Reply, in which they put the defendant on notice that, if she intended to rely on the affirmative defence of estoppel, it would need to be adequately pleaded with particulars.
Credibility findings
[71] Having heard and observed Betty and the defendant each give evidence, I prefer Betty’s account of events over that of the defendant.
[72] The defendant’s evidence and version of events is simply implausible and lacking in credibility in a number of respects. This was evident from the following:
(a)The defendant instructed her bank to describe and identify the weekly payments of $250 for the house loan as “Trina House Mortgage”. While the defendant accepted under cross-examination that the use of the word “mortgage” is a clear indication that the payments related to a loan, she claims the notation was chosen to show that her weekly payments were in the nature of a loan from her to her grandparents. That proposition is in my view quite implausible. To the contrary, I find that the word “mortgage” in the bank notations is consistent with the defendant knowing the sums advanced by the plaintiffs to enable her to purchase the Te Kuiti house were loans. I also reject the defendant’s suggestion that the bank notation was simply the result of
Betty telling the defendant what it should say. I note that this explanation was not put to Betty in cross-examination. From this I infer the explanation had not previously been offered by the defendant prior to her giving evidence.
(b)The defendant’s claim to be paying $250 per week to her grandparents so as to accumulate a “nest egg” for herself is also implausible. If the payments were to be for the defendant’s own benefit, then she could have made them into a bank account in her own name. She offered no evidence to suggest the nest egg was accumulating in the plaintiffs’ bank account so as to prevent her spending it on short-term indulgences. Similarly, the defendant’s pleading in her statement of defence that she made the $250 payments to accumulate a sum of money for her young son, is inconsistent with her claim in evidence that the money was to be a nest-egg for herself. Such inconsistencies reveal the unreliability of her evidence.
(c)In her statement of defence, the defendant admitted the plaintiffs’ allegations that they had entered into an oral agreement whereby they would lend her sums of money necessary for the purchase of a truck for her business known as KB Haulage. The defendant’s formal admission is inconsistent with her claim that the money advanced for the purchase of the truck was gifted to her as an early inheritance.
(d)The defendant’s denial of having any knowledge of the letter sent to the plaintiffs on 5 February 2018 regarding repayment of the truck loan and which was signed, “ Regards Trina” also lacks credibility. She claims that she cannot remember the letter, and did not write it, despite the letter being included in the documents she produced as discovery in the proceeding. In the letter the defendant refers to the money advanced for the purchase of the truck: as being “lent to KB Haulage for the purchase of 1x truck and trailer..”; the “extra $30000 was to be added to the truck debt”. The letter also contains the following:
The final amount on this debt will be determined once my accountant has worked out the amount I have borrowed plus the 5 % interest per year and then the amount I have paid into your bank account.
(e)It is clear from the 5 February 2018 letter that the defendant understood that the money advanced to finance the truck purchase for the defendant’s business was a loan that was required to be repaid. I am also satisfied that the only person who would have the knowledge to write the letter in those terms was the defendant. The fact that the defendant seeks to avoid the consequences of being the author of the letter by advancing an implausible explanation suggesting that someone else may have written the letter only adds weight to the conclusion that her evidence lacks credibility.
(f)The defendant’s payment of $20,000 to the plaintiffs with the funds she received as a refund of GST paid on purchasing the truck, is consistent with her treating the advance as a loan. The defendant’s explanation in her evidence, that she made the payment because she was trying to do the decent thing and show gratitude to her grandparents for having helped her, lacks credibility.
(g)The defendant accepted under cross-examination that the advances for the purchase of the truck had started off as a loan in July 2016. She says, however, that the loan arrangement was changed in September 2017, when the plaintiffs told her she was not required to repay the money. While there is no evidence to support that claim, there is evidence that both the plaintiffs and the defendant proceeded throughout the relevant time on the basis that the truck loan was repayable. In particular, the defendant wrote the letter dated 5 February 2018, in which she referred to borrowing the money to purchase the truck and referred to the advance as a “debt”. Had she in fact been told by the plaintiffs that she was not required repay the truck loan, there would have been no need to write them a letter regarding repayment of a debt.
[73] The defendant’s actions of setting up the weekly automatic payment and thereafter paying the $250 per week in respect of the house loan to reduce the principal sum, and her action of paying the $1,200 per month interest on the truck loan, provides further support for the plaintiffs’ claim that the money was loaned to her, and demonstrates that from the time the advances were made the defendant knew and understood this.
[74] For those reasons, I reject those parts of the defendant’s evidence in which she claims that it was the common intention of the parties that the plaintiffs would give her the funds as an early distribution of her inheritance which she was never under any obligation to repay.
[75] I accept Betty’s evidence and her account of the arrangements made with the defendant to lend her the money required to purchase a house and truck and to cover other related expenses such as insurance. The plaintiffs’ reference in their wills, dated 10 December 2014, to forgiving “any debts owing by her to me”, is consistent with Betty’s testimony that the sums advanced prior to making their wills (for the Te Kuiti property, insurance and stove) were loans that would be repayable by the defendant unless and until forgiven by them pursuant to their wills.
[76] The subsequent correspondence between the plaintiffs and the defendant further corroborates Betty’s account. For example, in her letter to the defendant of 1 February 2018, Betty referred to the finance for the truck purchase as being, “Money lent” and the defendant having “borrowed” the money for the purchase. In relation to the Te Kuiti house, Betty said, “[t]he $308,000 loan for the Te Kuiti property can sit there with you (as you were) paying $250 per week (Mon).”
[77] These repeated and consistent references to the money having been loaned to the defendant provide strong support for Betty’s evidence that the money was advanced to the defendant as loans, and that their intention was that any remaining debt would be forgiven upon their deaths.
Onus on the defendant to prove advances were gifts
[78] Having acknowledged that she received the sums that enabled her to purchase the Te Kuiti house and the truck, by asserting that the sums were gifted to her, the defendant bears the onus of proving that the sums were a gift. In Williams v Williams, North J observed:1
The cases show that in order that there should be a valid gift of a chattel inter vivos three things are necessary. First, the expression of the intention of the donor to make a gift, secondly, the assent of the donee to the gift, and, thirdly, the actual or constructive delivery of the chattel to the donee.
…
I conclude then that the line of authority still requires that even in the case of a gift to a member of the donor’s family, there must be evidence of some overt act on the part of the donor which can be treated as evidence of the delivery of the subject of the gift to the donee.
[79] I find that the defendant has failed to discharge the onus to prove that the sums advanced to her for the purchase of the Te Kuiti house and the truck were provided to her as gifts simpliciter. The fact that contemporaneously with her receipt of the money for the house she arranged to make weekly “mortgage” payments to reduce the debt is inconsistent with the money having been gifted to her when it was provided by the plaintiffs. Similarly, the fact that the defendant paid monthly interest of $1,200 in respect of the money provided by the plaintiffs to enable her to purchase the truck and her references in correspondence to the money being a loan are actions that are only explicable as confirming her understanding that the money had been provided to her as a loan and not a gift.
[80] Furthermore, the fact that the plaintiffs intended that any amounts still outstanding on the death of the last survivor of them, by the terms of their wills, would eventually be forgiven, does not alter the status of the advances as being loans, notwithstanding the defendant’s expectation that the terms of the wills meant that ultimately she would not be required to repay any outstanding debt.
1 Williams v Williams [1956] NZLR 970 (SC) at 972 and 974; Smith v Jones [2014] NZHC 2674 at [20].
Presumption of advancement
[81] As the defendant has failed to discharge the onus of proving that the sums advanced to her were gifts simpliciter from the plaintiffs, I turn to consider Mr Patterson’s alternative submission that the sums advanced are to be treated as gifts by reason of the application of the presumption of advancement.
[82] In Nelson v Meier,2 Hinton J described the application of the presumption of advancement as follows:
Where money has been paid by one person to another without consideration, the burden of proof lies on the person asserting a gift to show an intention on the payer’s part to make a gift, unless the presumption of advancement applies.
The presumption of advancement applies between parent and child where the relationship is in loco parentis, i.e. the child is dependent on the parent. The presumption implies the donor intended to make a gift to the donee because of the relationship between the parties, which assumes a natural obligation for the parent to provide for the child.
[83]In N v N, Wylie J noted:3
The presumption of advancement can be rebutted by evidence showing that there was no intention to benefit the alleged donee by way of gift. A contemporaneous act or declaration by the alleged donor will suffice. Acts or declarations by the donor subsequent to the purchase or transfer, unless so connected with it as to be reasonably contemporaneous, are not admissible in favour of the donor to rebut the presumption.
[84] The presumption of advancement may be engaged in relation to transfers between parents and their children, husbands and wives and where the transferor was in a position of loco parentis to a child. In Nelson v Meier, Hinton J did not rule out the presumption of advancement applying to a relationship between a person in loco parentis as regards an adult child, however that relationship must be one of dependency.4 In Equity and Trusts in New Zealand, Jessica Palmer explains the scope of the presumption as follows:5
2 Nelson v Meier [2016] NZHC 787 at [56] – [57].
3 N v N [2010] NZFLR 161 at [47].
4 Nelson v Meier [2016] NZHC 787 at [58].
5 Andrew Butler and others Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington) 2009 at 12.5.4 (citations omitted); and Woolf v Kaye [2018] NZHC 2191, [2019] 3 NZLR 93 at [197] – [200].
It is well settled that a father’s provision for his offspring, including step- children and ex-nuptial children, gives rise to a presumption of advancement. This has been extended to include anyone who is in loco parentis. A person is said to be in loco parentis to a child if he or she stands in the position of parent to that child. For example, uncles and grandfathers might fulfil the role of father when the natural father died. In the last century there was doubt whether the presumption of advancement applied when a mother, as opposed to a father, purchased property in the name of her children. This was because mothers were under no legal or moral duty to maintain their children. This view is unlikely to prevail today, and is probably inconsistent with s 19 New Zealand Bill of Rights Act 1990 (the right not to be discriminated against on grounds of, among other things, gender), and therefore unlawful. Relationships to which the presumption of advancement has not applied include transfers from a stepparent to stepchild, and from a parent to a son-in- law or daughter-in-law.
…
A transfer between a grandparent and a grandchild does not attract the presumption of advancement (unless the grandparent is in loco parentis).
[85] Mr Patterson submits that the presumption applies here, because at the time the plaintiffs made the advances to the defendant they were in loco parentis as regards the defendant. He submits that, although the presumption of advancement may be rebutted by evidence showing that there was no intention to benefit the alleged donee by means of a gift, the plaintiffs made no contemporaneous act or declaration indicating that the advances were anything other than a gift to the defendant. Counsel also notes that acts or declarations by a donor subsequent to making the transfer of their property to the donee, unless so connected as to be reasonably contemporaneous, are not admissible in favour of the donor to rebut the presumption.6
[86] Here however, the defendant’s father continued to play a role in her life. I note that, after the defendant moved out of Highden Road, she sought his help to arrange meeting with the plaintiffs and he attended that meeting to support her. In her evidence, the defendant’s mother said that she and the defendant’s father were responsible for her upbringing and care and she disputes the suggestion that the plaintiffs were very involved in the defendant’s upbringing. The defendant’s mother said in evidence that the plaintiffs’ financial assistance for their grandchildren was “at their selection”.
6 N v N, above n 3, at [47].
[87] The evidence of the plaintiffs and the defendant does show that the plaintiffs were in a close and mutually supportive relationship with the defendant and that such a relationship subsisted during 2014 and 2016 when they advanced the sums for the Te Kuiti property and the truck to her. However, the evidence also shows that the defendant was not financially dependent on them. At the time, the defendant was running her own business and was living entirely independently from her grandparents, having recently separated from her partner. The plaintiffs, as supportive grandparents and great-grandparents, from time to time provided sums of money to the defendant to cover various personal expenses for herself and her young son, and to help her out financially at birthdays and at Christmas. The defendant gave examples of her grandparents paying $412 for a haulage welder, and $1,260 for some batteries required for a boat. While the plaintiffs provided that level of financial support to the defendant, she in return supported them by assisting with work around their Pauanui camping facility and by transporting Peter to and from his hospital and medical appointments. It is clear that the nature of the relationship was not one of dependency, and I find that the evidence falls well short of the defendant establishing that the plaintiffs were in loco parentis as regards the defendant when they advanced the sums to her.
[88]In Milne v Armijo, Hardie Boys J observed:7
The law is that where there is not the kind of relationship in which the presumption of advancement arises… the payment of money by one person to another prima facie gives rise to an obligation to repay within a reasonable time of the making of demand but if the borrower repudiates the loans and asserts that the payments were gifts that repudiation renders the moneys immediately repayable.
[89] As detailed in relation to the defendant’s submission that the sums were advanced as gifts simpliciter at [79] and [80], the conduct and correspondence of the parties clearly evidences the plaintiffs’ intention that the sums advanced were loans. Had I found that the presumption of advancement was engaged here, which I have not, I would nonetheless have found this conduct and correspondence to displace the presumption.
7 Milne v Armijo HC Christchurch CP7/88, 25 August 1989 at 2.
[90] In summary, the defendant has failed to discharge the onus of proving that the sums advanced to her were gifts simpliciter, and I have found that the presumption of advancement is not engaged. Further, by asserting that the sums advanced were gifts, the defendant has repudiated the loans, rendering the sums immediately repayable absent any contractual terms to the contrary.
Did the parties enter into an enforceable contract in relation to the money provided for the purchase of the Te Kuiti property?
[91] Although the parties did not record the terms on which the plaintiffs advanced money to the defendant, the absence of a written document does not mean that they did not enter into an enforceable contract in relation to the matter. In Meates v Attorney General, Cooke J said:8
The real question in this part of the case is whether an implied contract can be spelt out of the words and acts of the parties… I would not treat difficulties in analysing the dealings into a strict classification of offer and acceptance as necessarily decisive in this field, although any difficulty on that head is a factor telling against a contract. The acid test in a case like the present is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain.
[92] In determining the existence of a contract it can be relevant to consider conduct and communications between the parties subsequent to the date of the alleged formation of the contract in relation to the formation of a contract and interpretation.9 In Wholesale Distributors Ltd v Gibbons Holdings Ltd, Tipping J observed:10
As a matter of principle, the court should not deprive itself of any material which may be helpful in ascertaining the parties’ jointly intended meaning, unless there are sufficiently strong policy reasons for the court to limit itself in that way. I say that on the basis that any form of material extrinsic to the document should be admissible only if capable of shedding light on the meaning intended by both parties. Extrinsic material which bears only on the meaning intended or understood by one party should be excluded. The need for extrinsic material to shed light on the shared intention of the parties applies to both pre-contract and post-contract evidence. Provided this point is kept firmly in mind, I consider the advantages of admitting evidence of post- contract conduct outweigh the disadvantages.
8 Meates v Attorney-General [1983] NZLR 308 (CA) at 377.
9 Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR433(CA) at [56]; Wholesale Distributors Ltd v Gibbons Holdings Ltd [2007] NZSC 37, [2008] 1 NZLR 277 at [51] – [55].
10 Wholesale Distributors Ltd v Gibbons Holdings Ltd [2007] NZSC 37, [2008] 1 NZLR 277 at [52].
[93] I am satisfied that here, the conduct of the parties following the making of the claimed loan advances, does shed light on the meaning and intentions of the parties when entering into the arrangements whereby the plaintiffs agreed with the defendant to advance the funds she required to purchase the Te Kuiti house and the truck. In the circumstance of this case, where the arrangements were entered into by means of oral agreements, the conduct of the parties subsequent to the plaintiffs’ advancement of funds to the defendant are relevant and inform the issues of both the existence and terms of the loan contracts.
[94]For a contract to exist the terms must be expressed with sufficient certainty. In
Wellington City Council v Body Corporate 51702, Tipping J explained:11
The essence of the common law theory of contract is consensus. It follows that for there to be an enforceable contract, the parties must have reached consensus on all essential terms; or at least upon objective means of sufficient certainty by which those terms may be determined.
[95] Having accepted Betty’s evidence regarding this matter, I find that the plaintiffs have established on the balance of probabilities that in August 2014 they made an oral agreement with the defendant to lend her the money she required to pay the deposit of
$30,800 for the purchase of the Te Kuiti house. The express terms of this agreement included that the money was to be loaned to the defendant interest-free, and was to be repaid by her at the rate of $250 per week each Monday. Later in September 2014, the parties made a further oral agreement with the defendant to lend her the amount of
$278,736 required to complete the purchase of the Te Kuiti house on the same terms, namely that the money would be loaned to her interest-free and was to be repaid at the rate of $250 per week each Monday. The agreement included the plaintiffs providing consideration by means of the funds advanced and the defendant agreeing to repay the money at the agreed rate of $250 each week.
[96] The existence of the consensus reached between the parties and of the oral contract they had entered into is further evidenced by the defendant establishing an automatic bank payment of $250 per week describing the payments as being, “Trina House Mortgage”. The payments commenced on 13 October 2014.
11 Wellington City Council v Body Corporate 51702 [2002] 3 NZLR 486 (CA) at [30].
[97] These terms of the agreement made by the parties satisfy the requirements for the formation of an enforceable contract for the lending and borrowing of the money advanced with an obligation of repayment. Furthermore, I find that it was an implied term of the contract that in the event of the defendant failing to pay the required weekly payments, the plaintiffs could make demand for repayment of the whole of the balance then outstanding. I find that such an implied term satisfies the criteria set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings and is necessary to give business efficacy to the contract.12 The fact that the parties also contemplated that the debt created by the loan contract may be forgiven by the plaintiffs at a future date, does not negate the formation and existence of an enforceable loan contract that I find was intended to subsist unless and until the debt was discharged or forgiven.
[98] I find that the defendant’s failure to maintain the weekly payments from 22 January 2018 was a breach of the contract entitling the plaintiffs to demand and recover the whole of the balance of the loan then outstanding.
Did the parties enter into an enforceable contract in relation to the money provided for the purchase of the truck?
[99] The defendant accepts that the funds advanced to her by the plaintiffs for the purchase of the truck were a loan. Having accepted Betty’s evidence in relation to the making of the arrangements for the loan, I find that the terms of the oral agreement governing the truck loan were that: the plaintiffs would advance the sum of $270,000 to the defendant to enable her to purchase the truck; interest on the loan would be payable at the rate of five per cent per annum, with monthly payments of $1,200 commencing 11 August 2016, and thereafter on the eleventh day of each month; and the loan would be reviewed after two years on 11 August 2018.
[100] I further find that the parties made additional oral agreements pursuant to which the plaintiffs loaned the defendant two further amounts of $15,000 on 28 November 2016 and 18 April 2017 on the basis that they were to be aggregated with the loan provided for the purchase of the truck and repaid by the defendant in accordance with the terms of the agreement governing the truck loan.
12 BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] 180 CLR 266 (PC) at 282 – 283.
[101] I reject the defendant’s evidence that the first time she ever heard of the two- year term of the truck loan was when she received the plaintiffs’ letter to her of 27 July 2018, being some two weeks after the two-year term had expired.
[102] The two-year term is consistent with the intention of the parties that it would allow a period of time for the defendant to establish her business and be in a position to obtain finance from a bank or other commercial financier. The two-year term was subsequently referred to in correspondence between Betty and the defendant, including in Betty’s letter to the defendant of 1 February 2018 to which the defendant replied by letter dated 5 February 2018, and in which she confirmed the existence of the loan, the applicable interest payable of five per cent per annum, and the agreed term that she pay $1,200 per month which could only have related to interest.
[103] Despite the lack of any formal documentation of the plaintiffs’ advances to the defendant as being loans, in my view the arrangements made between the parties together with their conduct prior to, when, and after the advances were made, show that the advances were made on the basis that they were to be treated as being loans.
[104] I accordingly find that the plaintiffs have proven on the balance of probabilities that the house loan and the truck loan were advanced by them and on the terms pleaded, and that pursuant to the contractual agreement made between the plaintiffs and the defendant in respect of each loan, the defendant is contractually bound to repay the loans on demand.
The defendant’s claim of the loans being an advance of her inheritance
[105] In her statement of defence, the defendant pleaded that $200,000 of the house loan was gifted to her by the plaintiffs as an advance on her inheritance. She asserted that the balance of the sum advanced ($109,536) was an unenforceable loan which would be forgiven on the deaths of the plaintiffs.
[106] The defendant supports this claim by her evidence that the plaintiffs had told her repeatedly that their financial assistance was their way of providing her with an early inheritance and not to worry about the loans. The defendant notes that in the
letter Betty wrote to her around March 2018, she said that the plaintiffs were prepared to let her have her $200,000 inheritance “early (now).”
[107] It is apparent from the terms of the plaintiffs’ wills that they intended that on the death of the surviving spouse, the defendant would be forgiven repayment of any debt or debts then owing by her to that grandparent. However, notwithstanding that testamentary intention, it is clear that when the relationship between the plaintiffs and the defendant deteriorated following her departure from Highden Road in December 2017, the plaintiffs changed their minds about whether they would forgive the defendant any outstanding balance of the money previously loaned to her. It is clear that, notwithstanding anything the plaintiffs may have said to the defendant regarding their intention to make a bequest of the loan money (or any part of it) to her by forgiving repayment as a bequest in their wills, they had taken no steps to carry out such an intention by making an inter-vivos gift of the sums loaned to her.
[108]In Harvey v Beveridge the Court of Appeal confirmed:13
… it is well established that an incomplete gift may be revoked by the donor at any time. No question of conscience enters into the matter, for there is no consideration and there is nothing dishonest on the part of an intending donor who chooses to change his or her mind at any time before the gift is complete.
[109] The three essential elements required to make a valid inter vivos gift were described by the Court of Appeal in Reid v Castleton-Reid as follows:14
[43] A gift inter vivos is a gratuitous transfer of property of any kind to another by a living donor, not making it in contemplation of, and conditionally upon, the donor’s death. It is a voluntary transfer from the owner to another made with the intention that the subject matter is not to revert to the donor.
[44] The three essential elements of a valid inter vivos gift of chattels (such as money) are:
(a)an expression of intention by the donor to make the gift;
(b)the assent of the donee to the gift; and
(c)actual or constructive delivery of the chattel to the donee.
…
13 Harvey v Beveridge [2014] NZCA 72, [2014] NZAR 677 at [32] (citations omitted).
14 Reid v Castleton-Reid [2019] NZCA 372 (citations omitted).
[56] … An inheritance is something that Mr Castleton-Reid could expect to receive in due course, on Mr Reid’s death. An inheritance is not an inter vivos gift.
[110] In the present case, the evidence establishes that the defendant was told by the plaintiffs that she would receive an inheritance upon their deaths, and the contents of their December 2014 wills are consistent with that. Any statements made by the plaintiffs to the defendant in which they said that the money that they advanced to her were an early inheritance were also consistent with the terms of their wills and an intention that, by means of their wills, they would forgive repayment of the money being advanced to the defendant by way of loans. This future event that would occur on the deaths of the plaintiffs, in my view shows that the plaintiffs did not intend to make a gift to the defendant of the sums they advanced to her, and that it would only be when they died and their wills were given effect that the bequest they made to the defendant by forgiving her obligation to repay the debts owed to them would take effect. That is also consistent with the terms of the plaintiffs’ wills, as had they in fact made inter vivos gifts to the defendant of the sums advanced for the house loan and truck loan, there would have been no need to provide in their wills for the defendant’s debts owing to them to be forgiven upon their deaths.
[111] I accordingly find that the defendant has failed to prove that the plaintiffs ever made an expression of their intention to make her an inter vivos gift of either the house loan money or the truck loan money they advanced to her.
The defence of estoppel
[112] To establish a defence of estoppel, the defendant would have needed to show that:15
(a)the words or conduct of the plaintiffs created or encouraged a belief or expectation in her;
(b)to the extent an express representation was relied upon, it is clearly and unequivocally expressed;
15 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44].
(c)she reasonably relied to her detriment on the representation; and
(d)it would be unconscionable for the plaintiffs to depart from the belief or expectation.
[113] In her statement of defence, the defendant pleads that even if the money advanced to her by the plaintiffs is found to have been advanced as enforceable loans, the plaintiffs are estopped from seeking full repayment of the sums. However, the defendant failed to plead any particulars of the facts upon which she relied to establish the existence of an estoppel. Furthermore this failure was notwithstanding the plaintiffs’ filing a Statement of Reply in which they put the defendant on notice that, if she intended to rely on the affirmative defence of estoppel, it would need to be adequately pleaded with particulars.
[114] As a consequence of the defendant’s failure to adequately plead the estoppel defence, the Court and the plaintiffs had no prior notice that the defendant would assert in her evidence that, although the sum advanced for the truck was a originally a loan, in September 2017 the “deal” changed when Peter told her that the money did not have to be paid back. That assertion only emerged in the course of the defendant’s cross- examination. As Peter was not called as a witness by the plaintiffs, the Court has not heard from him regarding the accuracy of the defendant’s claim that he told her in September 2017 that she was no longer required to repay the truck loan. Nevertheless, as the plaintiffs have continued to maintain, in their communications with the defendant post September 2017, that the truck loan was repayable, and as the defendant herself referred to the outstanding truck loan debt in her letter to the plaintiffs dated 5 February 2018, I reject the defendant’s evidence that she was told by Peter in September 2017 that she was not required to repay the truck loan.
[115] I however also agree with Ms Matenga’s submission, for the plaintiffs, that notwithstanding the defendant’s failure to adequately plead the estoppel defence supported by particulars, that there is no evidence that the defendant changed her position to her detriment in reliance on what she says Peter told her regarding not being required to repay the truck loan. I note that following the alleged conversation in September 2017, the defendant continued to make the monthly payments of $1,200
through until 31 December 2018. The defendant also continued to make the weekly payments of $250 in respect of the house loan until 22 January 2018.
[116] Accordingly, I find that the defendant has failed to make out her pleaded defences of estoppel in relation to either the house loan or the truck loan.
Quantum of damages – house loan
[117] In relation to the house loan, the plaintiffs claim the sum of $269,917 which is calculated pursuant to the schedule annexed to the plaintiffs’ closing submissions. This sum includes: the sum advanced to pay the deposit on the Te Kuiti property ($30,800); the balance required on settlement of the purchase ($278,736); and the house insurance payment ($1,461). Also included in the calculation is $1,670, being the cost of the stove. When the stove was being purchased, the defendant asked Betty to pay for it, saying “I’ll pay you back”. Betty thereafter added the cost of the stove to the principal of the house loan, although there was no express arrangement made for that to be done. I consider that the plaintiffs paying for the stove was an example of their practice of providing financial assistance to the defendant, rather than part of the house loan, and I accordingly exclude it from the damages to be awarded to the plaintiffs.
[118] The plaintiffs have calculated the total of the $250 per week principal repayments made by the defendant as $42,750. Accordingly, deducting the sum of the principal repayments from the house loan advances (excluding the sum advanced for the stove) produces a net amount outstanding as regards the house loan of $268,247.
Quantum of damages – truck loan
[119] The plaintiffs claim the sum of $305,762.37 as the outstanding balance of the truck loan, comprised of principal of $280,000 and interest of $25,762.37, as detailed and set out in the schedule annexed to the plaintiffs’ closing submissions. I am satisfied as to the accuracy of the sum claimed in relation to the truck loan.
Interest on judgment sums awarded to the plaintiffs
[120] In relation to the house loan, the plaintiffs also claim interest on the judgment sum pursuant to s 10 of the Interest on Money Claims Act 2016 (IMC Act) from the date of judgment until payment. Section 10 provides that in every money judgment, a court must award interest pursuant to the section as compensation for a delay in payment of money. Section 12 of the IMC Act stipulates how interest awarded under s 10 is to be calculated using the Internet site calculator in accordance with ss 14 and 15.
[121] In relation to the truck loan, the plaintiffs claim interest at five per cent per annum on the judgment sum pursuant to s 22 of the IMC Act from the date of judgment until the date of payment.
[122] I am satisfied that the plaintiffs are entitled to interest on the house loan and truck loan as claimed.
Result
[123]I make the following orders:
(a)In respect of the house loan, an order for judgment for the plaintiffs against the defendant in the sum of $268,247.
(b)I award the plaintiffs interest on the judgment sum in respect of the house loan pursuant to s 10 of the IMC Act.
(c)In respect of the truck loan, an order for judgment for the plaintiffs against the defendant in the sum of $305,762.37
(d)I award the plaintiffs interest on the judgment sum in respect of the truck loan at the rate of five per cent per annum from the date of judgment until the date of payment pursuant to s 22 of the IMC Act.
[124] The plaintiffs have succeeded in their claim and in the ordinary course would be entitled to an award of costs. I note however that following the hearing, counsel
for the plaintiffs filed a memorandum and requested that the question of costs be reserved in any judgment and a timetable for the parties to make submissions on costs be set. Counsel advises that, as a without prejudice offer save as to costs has been made, the question of entitlement to costs will require determination by the Court.
[125] I accordingly make an order reserving costs and direct the parties to file memoranda as to costs as follows:
(a)The plaintiffs are to file and serve a costs memorandum within 10 working days of delivery of this judgment.
(b)The defendant is to file and serve her costs memorandum within five working days of receipt of service of the plaintiffs’ costs memorandum.
(c)The costs memoranda are not to exceed three pages in length apart from annexures or schedules.
(d)Upon the filing of the costs memoranda by both parties, I shall determine the question of costs on the papers.
Paul Davison J
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