Ford v Strangwick
[2020] NZHC 2163
•25 August 2020
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2018-485-557
CIV-2019-096-262 [2020] NZHC 2163
BETWEEN PETER LESLIE FORD
Plaintiff
AND
ALYSSA AILENE STRANGWICK AND TRAVIS BRADLEY STRANGWICK
Defendants
Hearing: 20 and 21 July 2020 Counsel:
Plaintiff in person
C J Nicholls for Defendants
Judgment:
25 August 2020
JUDGMENT OF SIMON FRANCE J
Introduction
[1] On 15 April 2014 the plaintiff Mr Ford transferred a property to his stepdaughter Ms Alyssa Strangwick and her husband, Mr Travis Strangwick. The motivation behind the transfer was to provide them with an asset against which they could secure borrowings needed for a business venture. The primary trial issue is the basis on which the property was transferred. Mr Ford contends that there was an oral agreement that once the loan was paid off, the house would be returned to him. Mr Ford filed proceedings seeking the return of the house, he having himself paid off borrowings secured against it.
[2]In a related proceeding Mr Ford sought to recover the sum of money – around
$200,000 – he spent to pay off the loan secured against the property. This was filed in
FORD v STRANGWICK [2020] NZHC 2163 [25 August 2020]
the District Court but subsequently consolidated with the above-mentioned High Court proceeding.1
A legal history
[3] The application for return of the property was called before Associate Judge Johnston in March 2019 for judgment by default, the defendants not having entered a defence or taken any other steps in the proceeding.2 The case was advanced on the basis of an oral agreement between the parties on the transfer of the property that:3
(a)Mr Ford would retain beneficial ownership;
(b)the loan secured against the property was not to exceed $100,000; and
(c)the property would be transferred back to the plaintiff once the loan was repaid.
[4] On the basis that Mr Ford’s evidence was not challenged, an order was made transferring title back to Mr Ford but subject to the existing mortgage.4
[5] There were at that time mortgagee sale proceedings under way. Mr Ford avoided these by paying the sum claimed and having the mortgage transferred to him. He was entered on the title as mortgagee. Pursuant to the Associate Judge’s judgment he then had the title transferred into his name, although by then the defendants had applied to set aside the default judgment.5
[6] The defendants, Mr and Mrs Strangwick, advanced their application to set aside on the basis that they had not been served. In relation to that issue, the Court had previously held both defendants had been served.6 Mallon J had found that Mrs Strangwick had been personally served and made an order for substituted service
1 Ford v Strangwick and Strangwick HC Wellington CIV-2019-096-262 and CIV-2019-485-557, 23 March 2020.
2 Ford v Strangwick [2019] NZHC 614.
3 At [4].
4 At [14].
5 High Court Rules 2016, r 15.10.
6 Ford v Strangwick and Strangwick HC Wellington CIV-2018-485-557, 10 December 2018.
in relation to Mr Strangwick. On the application to set aside, Mr Ford relied on the evidence of the process server who said he had personally served Mrs Strangwick; she denied being served.
[7] Churchman J found that Mrs Strangwick had been served.7 His Honour considered Mrs Strangwick denied events that had clearly occurred, and advanced improbable explanations. Her evidence reflected “very poorly on her”.8 However, it was held that the Associate Judge lacked jurisdiction to enter judgment by default.9 Further, on Churchman J’s analysis, the defendants had at least an arguable case that the arrangements were not as Mr Ford contended.10 The judgment by default was set aside.
[8] Pending resolution of Mr Ford’s claim, the parties agreed the property could remain in his name. In addition to the claim that there was an oral agreement that the property was to return to him, for which Mr Ford seeks redress by way of a vesting order, Mr Ford challenges the initial transfer of the property to Mrs Strangwick on the basis of undue influence and/or that it was an unconscionable bargain. Separately, Mr Ford claims reimbursement for the money he paid to the original mortgagee.
[9]I address the issues under the following headings:
(a)the basis of the transfer;
(b)undue influence and/or unconscionable bargain; and
(c)Mr Ford’s repayment of the money.
Facts
[10] Mrs Strangwick is Mr Ford’s stepdaughter. She was born subsequent to Mr Ford’s divorce from her mother. Mr Ford and Alyssa’s mother had three sons. For much of their life until adulthood, Alyssa and one of the boys lived with their mother
7 Ford v Strangwick [2019] NZHC 2245.
8 At [59].
9 At [38].
10 At [62]-[71].
and the other two boys with Mr Ford. There was some contact between Mr Ford and Alyssa but it was irregular. When Mr Ford’s son came to visit, Alyssa did not come also.
[11] However, at around the age of 18, Alyssa moved to Wellington for study purposes. Over the next two and a half years she rotated between living with Mr Ford, with her mother (who briefly relocated to Wellington) or flatting. It is common ground a close relationship developed. This is supported by the tone of email correspondence which indicates a level of affection consistent with a parent-child relationship.
[12] Alyssa moved to Australia in mid-2003 and has lived there ever since. In 2013 she married an Australian, and Mr Ford and his three sons attended the wedding. Mr Ford gave his stepdaughter away.
[13] In late 2013 Alyssa, or Mrs Strangwick as she now was, became pregnant with the couple’s second child. Around that time Mr Strangwick developed health issues which have persisted. It is relevant to a trial issue to note that Mrs Strangwick advises that a diagnosis of what manifests as abdominal issues has never been achieved. The illness has led to hospitalisations, and has impeded Mr Strangwick’s ability to work. He was to be a witness at the trial, and a brief had been filed. However, he took ill on the morning of the final day of this two-day fixture and it did not improve such as to allow him to testify. His evidence was not called.
[14] In May 2013 Mr and Mrs Strangwick had started up a photography and videoing business. As I understand it, the business has a specialty in weddings but also involves teaching photography and videoing skills.
[15] In 2014 the Strangwicks wanted money for the business. They were unable to secure a loan so sought assistance from the Fords. The first proposal was that one of the sons, Shane, might invest money that he had inherited into the business. It is relevant to the issue to note that Shane has a mental illness which has meant he has generally been in either his father’s care or mental health services. There have also been times of independent living, although, as I understand it, this is usually in a house owned by his father and situated next to where his father was living.
[16] Shane’s inheritance money was in an account concerning which another brother was a required signatory. That brother would not agree to the investment, seemingly considering it not to be a good use of the money.
[17] Mr Ford was, on the face of matters, supportive of Mrs Strangwick obtaining finance and so looked for other options to help her. It is necessary to interrupt the narrative to observe that in submissions11 Mr Ford said he was upset at Mrs Strangwick’s efforts to obtain money from Shane, and so felt he had to come up with another idea. On this I consider Mr Ford’s recollection is not accurate. The objective contemporaneous evidence points to Mr Ford being fully supportive of the proposal concerning Shane’s money, and viewing the brother as the obstacle. There is no material that discloses Mr Ford having any doubts or concerns about Mrs Strangwick suggesting she access Shane’s money.
[18] Another finance route being needed, Mr Ford emailed his stepdaughter suggesting he could transfer a house to her. At the time Mr Ford owned three. The email firmly grounds the idea in a reorganisation of his testamentary dispositions. The relevant paragraph reads:
I am prepared to write a new will that gives you and Travis No 36 (with Title transferred to you both immediately), Jackal [Shane] No 32 (Title transferred on my death) and Jax and Toni No 34 (In whatever condition it happens to be in, title transferred on my death). Derek gets to keep Shane’s money. However I could include (now or later) a clause that after my death a property valuation be done and the most valuable property mortgaged to to pay cash to the others to achieve a better balance?
[19] Matters progressed from there. The idea emerged that Mrs Strangwick would borrow more than was needed for the business so that the balance could be used to assist Mr Ford’s building work on another of his properties. The three properties are neighbouring properties. Two have houses; the third had a garage and Mr Ford was
11 Mr Ford acted for himself, and did so to a reasonable standard. However, in the questioning of witnesses, in discussions with the bench and in submissions, Mr Ford regularly disclosed information that should have been in evidence. It is not a matter that I consider has disadvantaged the defendants who were represented. Their position on all the matters is clear, and Mrs Strangwick commented on all the matters she wanted to and needed to. There has been a complete breakdown in the relationship between Mr Ford and Mrs Strangwick and for both sides this reality, plus their firm respective views about what happened, made individual answers predictable (and consistent).
building a house. Health issues had required him to stop and the money would enable progress to be made.
[20] Mr Ford visited a lawyer he knew to get matters rolling. However, he did not find the visit satisfactory, and afterwards emailed Mrs Strangwick to that effect. It seems the lawyer had suggested Mr Ford visit a mortgage broker with a view to borrowing the money himself. Mr Ford emailed his stepdaughter to say he was going to do this, but then later emailed to say he had gone to a different lawyer, Mr McDonnell. This visit to Mr McDonnell reignited the house transfer proposal. It is of relevance to note that in an email describing the visit to Mr McDonnell, Mr Ford’s opening comment to Mrs Strangwick was that:
He looked at the will etc from another perspective.
[21] Mr Ford continued to work on his will and eventually gave instructions concerning a will to Mr McDonnell. The idea that was being advanced was that each of three children would get a property. The fourth, the one who had blocked the use of Shane’s inheritance, was not to receive a property but would receive, in his lifetime, the money in Shane’s account. Of note the will left nothing to Mrs Strangwick, it being anticipated she would already have had her inheritance by getting the property transferred.
[22] Mr McDonnell advised Mr Ford to prepare a document explaining the reasons for the proposed dispositions. He then subsequently met with Mr Ford and the draft will was discussed. There is a handwritten amendment to the draft in Mr McDonnell’s writing. Mr McDonnell says Mr Ford told him to do what was needed to transfer the property.
[23] Various things had been happening consistent with the plan to alter testamentary dispositions, transfer the property and arrange finance against it. Concerning the will, Mr Ford’s son Shane wrote to Mr McDonnell to confirm his agreement to the funds in his account being credited solely to his brother. This reflected the plan to leave Shane a property, and to make an immediate gift to the other brother of the balance in the account.
[24] Concerning the transfer, Mr McDonnell prepared a Deed of Gift of Land. It recorded a transfer by gift without any conditions. Mr McDonnell testified that no conditions were ever suggested. Mr McDonnell sent the Deed of Gift to the Strangwicks for signing, which they did. There were meetings between Mr Ford and Mr McDonnell. The evidence-in-chief of each reveals disagreement over how many meetings, and what happened at which meeting. In the end I consider nothing turns on this.
[25] It is common ground that, however it happened, at these meetings Mr McDonnell somehow omitted to have Mr Ford sign either the Deed of Gift or the necessary conveyancing authorisations that enable electronic processing of a transfer. Notwithstanding this, Mr McDonnell proceeded to register the transfer. He was later to advise the Law Society, and it is not disputed, that he mistakenly believed Mr Ford had signed them.
[26] Subsequent to completing the transfer, Mr McDonnell forwarded Mr Ford a copy of the new title with the property now in Mr and Mrs Strangwick’s names. He also included his account. Mr Ford replied, thanking him for his efforts and paying the account. The obvious inference from this is that Mr Ford was happy with the transfer having happened even though he had not signed the transfer or Deed of Gift.
[27] Mr Ford disputes this. He says it is just a matter of settled practice that he politely pays for work done and thanks the person. It is not indicative of what he really felt which was that he did not want it to happen. He was having doubts. Consistent with this viewpoint, Mr Ford never signed a new will. It seems he was having doubts about the unequal distribution. These doubts were reflected in various emails where he mused whether a valuation process should be included in the will.
[28] These doubts accepted, I do not otherwise accept Mr Ford’s evidence on this aspect. There is nothing in the objective material, of which there is quite an amount, that points to any doubts over transferring the property to Mr and Mrs Strangwick. Mr Ford’s reaction to Mr McDonnell’s correspondence is consistent with this and that is how I view it. I also note also he was willing subsequently to make a formal
complaint to the Law Society about Mr McDonnell. This suggests a capacity to make complaint when he wishes to.
[29] The third planning aspect was arranging finance against the property. Although ownership had transferred to the Strangwicks, it had been agreed between Mrs Strangwick and Mr Ford that Mr Ford would remain informed and would receive documents. He was to act as property manager and receive the rents from the property. It was therefore not a case of Mr Ford transferring the property and ceasing involvement. This ongoing “role” was to prove problematic as the differing perceptions of the terms of the transfer played out.
[30] Mr Ford contends, and Mrs Strangwick denies, that it was agreed any borrowing would be capped at $100,000. It is not easy to resolve this. There was certainly talk of both $75,000 and $100,000, but that was more in the context of what would be borrowed rather than as a ceiling on what could be borrowed. It is clear there was a lack of precision in this aspect of the arrangements. Some money was going to the business, and more than was required for that was going to be borrowed so there would be some surplus for Mr Ford. Beyond that, it is difficult to discern the precise plans. I consider this lack of clarity was a product of lack of focus, and some cross-purposes.
[31] As it happens, $69,500 was borrowed. Consistent with the unusual arrangements, the loan money was paid into an account controlled by Mr Ford. He transferred AUD $50,000 to Mrs Strangwick. The balance was left in the account. Mr Ford says it almost all eventually found its way to Mrs Strangwick. She accepts some did, but not as much as Mr Ford thinks. Nothing really turns on it for the purposes of the case.
[32] Matters progressed relatively well for three years. The Strangwicks were to put money into the New Zealand account managed by Mr Ford out of which the mortgage payments were drawn. They did so initially, and then regularly with intermittent misses, before falling behind more significantly. Eventually the lender initiated a mortgagee sale process.
[33] Mr Ford became alarmed at this and set about seeking to raise finance. The Strangwicks were doing the same. They were not, however, acting as one and at the trial the real source of the split between them seemed to emerge. From Mr Ford’s viewpoint the Strangwicks had jeopardised the property and his rental income. He pressured them to take action and he engaged with lenders himself. Eventually he arranged a second mortgage facility which the Strangwicks would not sign up to. This was a refusal that was too much for Mr Ford to accept.
[34] Mrs Strangwick testified they were working hard to arrange alternative finance. She felt bad about the situation with the house and wanted to get it sorted. From their viewpoint, Mr Ford was harassing them to an intolerable level and interfering with their refinancing endeavours. They felt he was subverting them although Mrs Strangwick acknowledged at trial Mr Ford was trying to help as he saw fit. The refinancing did not happen.
[35] Eventually Mr Ford filed the proceedings earlier detailed. He was successful on an unopposed basis and avoided the forced sale by making a payment to the existing mortgagee. The mortgage was transferred to his name on the title. Pursuant to the original court order, Mr Ford then had ownership transferred to him, where it remains.
Issue one – the basis of the transfer
[36] It is common ground that Mr Ford transferred the house to enable Mr and Mrs Strangwick to borrow against it. Mr Ford, however, says there was an oral agreement that the house would be transferred back to him once the borrowing was no longer needed. The other party to the alleged oral agreement, Mrs Strangwick, denies there was ever such an arrangement.
[37] There is no contemporary documentary evidence supporting Mr Ford. The best other evidence in his favour is an offer made by Mr Strangwick during a discussion in 2017. This was three years after the transfer. The Strangwicks were feeling pressured by the circumstances and by Mr Ford. Mr Strangwick emailed saying that his preference was to have the loan sourced in Australia. If this was done, “Alyssa and I can then gift back number 36 to you without any mortgage”. Mr Ford
submits the idea of gifting back is consistent with the oral agreement he says was in place.
[38] No evidence was available from Mr Strangwick. I accept he was going to testify and was prevented by ill-health. I do not therefore draw any adverse inference from his failure to explain this.
[39] Mrs Strangwick commented on it to the extent she could, although I bear in mind she cannot speak for her husband. Mrs Strangwick is, however, in a position to comment on the context existing at the time, and I accept it was a time of stress and the couple was feeling both pressured and bad about the situation. I take it no further than this because Mrs Strangwick herself explained she had opted out of dealing with her father around this time. She found it too stressful and oppressive and was leaving it to her husband.
[40] There are numerous pointers away from the suggestion of an oral agreement that the property would be transferred back to Mr Ford once the borrowings were no longer needed. First, it is mentioned nowhere, and Mr McDonnell was not told of it when he was instructed about the transaction. Second, the inference that this was a testamentary disposition, albeit during Mr Ford’s lifetime, is overwhelming and irresistible. All contemporary correspondence, both casual and initiated by Mr Ford, and formal and initiated by the lawyer, says as much. As an example of the latter, Mr McDonnell asked Mr Ford to record his reasoning for his proposed will. The explanation Mr Ford wrote is that the property transfer was giving Alyssa her share during her lifetime, and this is why she is not mentioned in the will.
[41] As an example of the former, it was Mr Ford who first raised this possibility of an early bequest with Mrs Strangwick. In the original emails and in all correspondence thereafter, he links the gift to his will and how he intends to dispose of his property. That never changed. It is also significant that the will theme was played out across all affected parties. It was not just a gift in isolation to the Strangwicks but plans were made in relation to all potential beneficiaries. Already noted is the agreement provided to Mr McDonnell by Shane concerning the money contained in his account. This agreement was to give effect to another part of the process which was to immediately
gift the third son a smaller inheritance. He had a debt it would discharge, and he was otherwise omitted from the will.
[42] I have noted also that Mr McDonnell was not advised of any side arrangement. Mr McDonnell testified that initially Mr Ford thought the previous gifting limit of
$27,000 a year was still in place. Mr McDonnell informed him there were now no limits. Of this Mr McDonnell testified:
You [Mr Ford] were quite relieved about that and were happy then on that basis to transfer the property to Alyssa.
[43] My conclusion is that Mr Ford has failed to prove any oral agreement or conditions attaching to the gift other than those that are common ground – namely he was to be property manager and receive the benefit of rents.
[44] I have not found the assessment to be finely balanced. The objective evidence suggests overwhelmingly it was to be an unconditional gift permanently transferring ownership in lieu of taking under the will, or indeed in anticipation of what Mrs Strangwick would have received under the will.
[45] I am conscious I have made no general credibility findings. Mr Ford in his evidence and questioning sought to establish Mrs Strangwick was not telling the truth.
There is also the finding of Churchman J in an interlocutory proceeding.12
[46] My assessment of Mrs Strangwick’s evidence is different. She was genuine and unscripted in a way that can occur when an estranged father (acting for himself) is questioning his daughter about family events. The emotions were real and raw. This is not to mean, of course, that the basic evidence-in-chief, prepared at a different time in a different environment, cannot be a product of untruth. However, here Mrs Strangwick’s evidence was grounded in the written contemporaneous record, and I accept it.
[47] The credibility/veracity challenges during the trial which Mr Ford advanced were not supported by evidence. He sought to advance the proposition that the
12 Ford v Strangwick, above n 7, at [58]-[59].
Strangwicks were lying to Australian authorities about their income, and to legal aid in New Zealand. He pointed to indicia of greater business success than was being disclosed, and to living in a house that was inconsistent with their disclosed means. Mrs Strangwick explained both, and Mr Ford had no real evidence to support his allegations. His propositions about the Strangwick’s business success were based on Facebook pages associated with the business. They suggested an active successful business. Mrs Strangwick explained that was the purpose, but if one looked carefully the images were from the same few weddings. It was a presentation designed to drum up business. Likewise, they were renting the particular house because they had struggled to find anywhere to live. It seems clear they are struggling to meet the rent.
[48] I have commented on these matters to explain why I differ from the earlier finding as to Mrs Strangwick’s credibility, and why Mr Ford’s suspicions about her credibility did not alter that assessment. In the final analysis the propositions put to her were not backed up by actual evidence and were satisfactorily answered.
[49] I accordingly conclude there was no oral agreement to transfer the house back to Mr Ford once the borrowings against it were no longer required. The transfer of the property to the Strangwicks was intended as, and was, a gift.
A life interest?
[50] It is unclear from the proceedings whether some claim is made in relation to this, but for completeness I find that Mr Ford did not have a life interest. There was an agreement between father and daughter that the property would remain tenanted and he would receive the rents. The participants thought or imagined that this situation would last until Mr Ford died.
[51] However, no thought was given to what would happen if things went wrong. There was no agreement that the Strangwicks could not sell the house, or would have to buy out Mr Ford’s ongoing interest in receiving rents if they wanted to sell. Mr Ford’s will explanation makes it plain he was transferring the house less his share of any initial borrowings and any rent generated. That was the extent of the rather vague plans.
Issue two – undue influence and/or unconscionable bargain
[52] Equity will intervene to set aside, modify or otherwise remedy an obligation entered into by someone acting under the undue influence of another.13 To prove undue influence, Mr Ford needs to show that the Strangwicks had the capacity to influence him, undue influence was exercised to bring about the transaction, and the circumstances are such that equity should intervene.14 Similarly, equity acts to protect those who, because of some disadvantage, are unable to determine whether a particular transaction is in their own best interests – an unconscionable bargain.15 To prove unconscionable bargain, Mr Ford must show he was labouring under a significant disadvantage that the Strangwicks have unconscionably taken advantage of. There is a close relationship between the two equitable doctrines16 and in this instance the evidence Mr Ford relies on to bring these challenges largely overlaps.
[53] Mr Ford says that at the relevant time he was labouring under a disability, namely clinical depression. This, combined with the “complex psychology” associated with the care of Shane, made him susceptible to acting significantly against his own interests. It is submitted the defendants were aware of this and unduly influenced him to make the gift or accepted the benefit of the gift in unconscionable circumstances.
[54]The matters which Mr Ford raises are:
(a)his ill-health;
(b)his status as a superannuant without capacity to earn;
(c)the relationship of trust and confidence given the family context;
(d)the context of him feeling pressured to assist because Mrs Strangwick was seeking access to Shane’s money;
13 R v Attorney General for England and Wales [2004] 2 NZLR 577 (PC) at [21].
14 Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 (CA) at 176.
15 At 174.
16 At 174.
(e)false information by Mrs Strangwick about their financial position which Mr Ford says was better than portrayed, and false information about the prospects of the business which Mr Ford says Mrs Strangwick said could not fail;
(f)Mrs Strangwick making lending inquiries before the house was even transferred;
(g)Mr Ford says the notes he made concerning his intended will were done at the direction of his lawyer and were not what he desired; and
(h)the absence of independent legal advice.
[55] Addressing first Mr Ford’s health, the evidence is self-reported with some medical forms to support it. No professional evidence was called either about his health or its impact on his capacity to exercise judgment. Mr Ford describes a time in 2006 when Shane was particularly unwell. Mr Ford could not cope and asked another son to return home to assist. Unfortunately that son then struggled with the situation and himself became depressed. Mr Ford therefore had two unwell sons to care for. He himself developed depression as a consequence.
[56] Mr Ford therefore became a sickness beneficiary. The stresses continued and in 2010 Mr Ford attempted suicide. Subsequently, he was advised to not climb ladders or scaffolding, due to an “impairment of judgment”, a prohibition which inhibited his ability to build the house on one of the three neighbouring sections he owned. Mr Ford reports ongoing relapses with bouts of depression.
[57] Mr Ford was not on any prescription medicine at the time of the agreement. He had for a number of years taken an over-the-counter supplement, the purpose of which was to boost the body’s production of serotonin. He is on medication for high blood pressure and diabetes.
[58] A medical note produced by Mr Ford records a visit by him to a hospital emergency department in May 2015, so a year after the transfer of property. It notes
Mr Ford as describing a low mood, and refers to a previous similar episode in 2011. The notes suggest the visit was more to obtain advice as to how to re-engage with mental health services. There was a follow-up visit to a general practitioner later in May which was consistent in its record of Mr Ford starting to feel depressed again. That is the extent of the medical evidence. None specifically addresses the relevant time period or the months leading up to it.
[59] The bargain under challenge is the gifting of the house by Mr Ford to his daughter and her husband. I have already noted that the context was a rearrangement of his testamentary dispositions. There is no doubt, however, that Mr Ford was motivated to do this at this particular point in time by a desire to enable Mrs Strangwick to borrow money.
[60] It is very clear that the proposal to gift the house was initiated by Mr Ford, who remained persistent in his desire. When the first lawyer he visited suggested looking at other means of achieving his aims, Mr Ford responded by trying a second lawyer. There can, in my view, be no suggestion of undue influence; the idea was Mr Ford’s and not the Strangwicks’. Although they embraced it enthusiastically, there is nothing in the correspondence that even hints at pressure (as opposed to enthusiasm) from the Strangwicks for Mr Ford to continue with his plan.
[61] Continuing with unconscionable bargain and reviewing the correspondence through a lens that looks for signs of someone not able to look after their own interests, there are very few signs of this. It is Mr Ford who places the gift in a wider context of adjusting his testamentary dispositions, and who gives considerable thought to that topic. He is the owner of three properties so was not giving away his home as such, and he knew to impose a condition of keeping the rents and ensuring he had access to all correspondence and statements. Mr McDonnell, an objective third party participant, was satisfied Mr Ford knew and understood what he was doing and was happy with what he was doing.
[62] Mr McDonnell said that as he understood it from Mr Ford, Mr Ford wanted Mrs Strangwick to have one of the three properties and was content with this because there were two more that could be left to the two sons for whom he wished to provide.
[63] Addressing other matters raised by Mr Ford, I have commented already concerning the proposition that the Strangwicks were misleading Mr Ford as to their position. The evidence does not suggest that is so, and in 2014 the need for funding for the business seems incontrovertible. Likewise, there is nothing improper in the Strangwicks initiating finance discussions prior to getting the house. Mr Ford had told them what he was doing and they wanted the money for their business. The money could not be borrowed until the transfer was done, but setting it up in advance is not unexpected given the firmness of Mr Ford’s intentions.
[64] The absence of independent legal advice is a complaint more available to the Strangwicks than Mr Ford. Mr Ford approached Mr McDonnell, discussed matters with him and accepted his advice about how the gifting could be done. This was independent advice; that Mr McDonnell also acted for Mr and Mrs Strangwick in relation to the mechanics of making the transfer happen does not alter Mr Ford’s situation.
[65]The requirements to establish a bargain is unconscionable were considered in
Gustav and Co Ltd v Macfield Ltd.17 The Court observed:18
… Equity will intervene when one party in entering into a transaction, unconscientiously takes advantage of the other. That will be so when the stronger party knows or ought to be aware, that the weaker party is unable adequately to look after his own interests and is acting to his detriment. Equity will not allow the stronger party to procure or accept a transaction in these circumstances. The remedy is conscience-based and, in qualifying cases, the Court intervenes and says that the stronger party may not take advantage of the rights acquired under the transaction because it would be contrary to good conscience to do so. The conscience of the stronger party must be so affected that equity will restrain that party from exercising its rights at law. All necessary consequential orders may be made in aid of the primary remedy.
Beyond that general statement the Supreme Court endorsed the more detailed statement of the principle found in the Court of Appeal judgment in the same proceeding.19
17 Gustav and Co Ltd v Macfield Ltd [2008] NZSC 47, [2008] 2 NZLR 735.
18 At [6].
19 At [6], referring to Gustav and Co Ltd v Macfield Ltd [2007] NZCA 205.
[66] The opening principle is of some importance. The doctrine does not exist to relieve people of the consequences of poor decisions. It is there only to protect from exploitation of those who were under a significant disability or disadvantage. I consider there is little doubt this was in one respect a poor decision. Mr Ford was using the property to provide income. This was covered by the agreement he would continue to receive the rents, but there seems to have been no thought given to the possibilities down the line. These could include Mr and Mrs Strangwick wanting to sell the property, or needing to (as has transpired). Mrs Strangwick accepts that in 2014 the intention was they would keep the property in a tenanted state while her father was alive so he could have the rent, but it was only an intention. No thinking was done beyond that.
[67] There was no condition formally attached to the transfer and the most that can be said is that there was an agreement that while rent was being earned, Mr Ford would have it. That is the highest it can be put. It is for this reason I consider it a poor decision in that Mr Ford lost control of his income-producing asset. Even this statement needs some qualification. It was a poor decision to that extent, but it was a decision designed to help a loved child by a parent with three properties. It was made at a time when relationships were strong and the future must have seemed hopeful for all. It is always easy with hindsight to say that thought should have been given to all that might go wrong, but it can be a less obvious need at the time.
[68] The evidence does not establish Mr Ford was impaired, let alone under a significant disadvantage. Rather, he emerges from the contemporary events and contemporary documentation as a person able to make his own decision, in control of his faculties and knowing his own mind. Indeed, from these sources he appears to have been in 2014 as he appeared to me in 2020 when representing himself in this case. The medical evidence does not advance matters, and it would have required quite strong opinion evidence from a professional to make the case for there being an operative disadvantage in the face of the clear inferences that flow from the contemporaneous actions and correspondence.
[69] I therefore reject the challenges to the agreement based in equity. There was no undue pressure nor was the bargain unconscionable. The most that can be said is
that insufficient thought was given to what might happen if things did not work out. I have no doubt, however, that Mr Ford was transferring ownership absolutely and wanted to at that time. That he may have repented of that later does not affect the validity of the transfer.
Issue three - Mr Ford’s repayment of the money
[70] Mr Ford claims reimbursement of the money he paid to the original mortgagee. This is the aspect of the case most affected by Mr Ford’s lack of legal training. The evidence is far from satisfactory but the position is assisted by an acknowledgment by Mrs Strangwick that fairness dictates Mr Ford be reimbursed.20
[71]First, a recitation of the relevant facts.
[72] The Strangwicks borrowed money from Southern Cross Finance in mid-2014, secured against the property. They fell behind in their payments and in mid-2017 a Property Law Act forced sale process was commenced.21 At around the same time, the Strangwicks organised for another lender, Wroxton Finance and Curzan Capital to refinance the loan.
[73] In early 2019, Mr Ford obtained judgment declaring him to be the legal owner of the property.22 This occurred because the Strangwicks, who had knowledge of the proceeding,23 chose to take no steps to defend it. Unfortunately, and obviously without the knowledge of Mr Ford, the judgment was given without jurisdiction.24
[74] Armed with a judgment that the property was his, and faced with an imminent mortgagee sale, Mr Ford paid the full sum demanded – $202,543 (plus $1,115 in legal costs for the transfer) to Wroxton Finance. The mortgage over the property, which was still in the name of Mr and Mrs Strangwick, was transferred into Mr Ford’s name.
20 Brief of evidence for Alyssa Ailene Strangwick, filed on 17 July 2020, at [126] and [136]-[137].
21 Property Law Act 2007, s 119.
22 Ford v Strangwick, above n 2.
23 The conclusion of Churchman J in the interlocutory proceeding – Ford v Strangwick, above n 7, at [58].
24 At [38].
[75] Mr Ford then proceeded to transfer the property into his name. The mortgage was discharged. The situation therefore at this point is that Mr Ford has paid off the money owed by Mr and Mrs Strangwick, but at least has title to the house back. He did not consult with the Strangwicks about paying off the mortgage but, to be fair, they had not defended his claim, the Court had said the property was his, and it was about to be sold under an always-to-be-avoided mortgagee sale process.
[76] Now, however, the Court is directing the house be transferred back to the Strangwicks. There is no unfairness in this because Mr Ford gave them the house some years ago. But there is unfairness in him not having the money he paid to discharge the mortgage and the Strangwicks receiving the property unencumbered.
That would be a classic example of unjust enrichment.25
[77] But for one concern, a remedy lies in the imposition of a remedial constructive test.26 The concern is that authority suggests this type of trust, which arises only by dint of court order, should not be used where other remedies are available.27 It would appear, however, that this is an aspect going to discretion rather than jurisdiction.
[78] Mr Ford potentially has remedies here. The evidence is not as clear as one would like but it seems he must have in effect bought the Strangwicks’ debt, and the security came with it. As evidenced by the previous mortgagee sale process, there will undoubtedly be processes under the original loan agreement that Mr Ford could follow.28 However, other factors point strongly towards achieving resolution now.
[79] First, that is what the parties seek. This is a family dispute that has caused what seems at this point to be irreparable harm. Both sides want closure. Second, it is common ground that fairness dictates that Mr Ford should be reimbursed for paying
25 Jessica Palmer “Restitution” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [42.2].
26 Powell v Thompson [1991] NZLR 597 (HC) at 614-615; Fortex Group Ltd (in rec and liq) v Macintosh [1998] 3 NZLR 171 (CA) at 172, and Commonwealth Reserves 1, LC v Chodar [2001] 2 NZLR 374 (HC). See the decisions in Lindsay Breach (ed) Nevill’s Law of Trust, Wills and Administration (12th ed, LexisNexis, Wellington, 2016)at [4.3] and Greg Kelly and Chris Kelly (eds) Garrow and Kelly Law of Trust and Trustees (7th ed, LexisNexis, Wellington, 2013) at [15.180].
27 Chodar, above n 26, at [58].
28 As is apparent from this comment, Mr Ford did not place the loan agreement before the Court. It is not apparent that he has a copy.
off the debt of Mr and Mrs Strangwick. Third, while the property appears to have considerable equity, there are factors that affect its value.29 It is in no-one’s interest to spend more money.
[80] In these circumstances I consider the correct course is to order return of the property subject to a constructive trust. The value of the trust is the amount Mr Ford paid the mortgagee ($202,543 plus $1,115) plus money paid pursuant to the borrowings he undertook to fund paying off the mortgage. Fairness does not require more than this.
[81] I do not award Mr Ford interest on the amount repaid. I consider the better approach is that he be reimbursed his direct outgoings on servicing the money I understand he borrowed to pay off the Strangwicks’ mortgage. I take the approach because:
(a)Mr Ford paid off the money without reference to Mr and Mrs Strangwick;
(b)Mr and Mrs Strangwick were seeking to refinance the sum to avoid the mortgagee sale and lost the opportunity to do so on their own terms, or negotiate the amount required to discharge; and
(c)although Mr Ford believed the house would be his at the time he paid, this was because he initiated litigation claiming a right to the property which the Court considers did not exist.
[82] There will be a condition that Mr and Mrs Strangwick pay Mr Ford the money within six months of the date of judgment. Whether they sell or refinance is a matter for them. It may be they wish first to regularise access. An extension for that reason will only be granted if it is supported by a detailed proposal prepared with professional assistance. Mr Ford as current owner should not take steps to impede the sale.
29 As explained to me for the purposes of this case, the property would appear to be landlocked.
Conclusion
[83] The CIV-2018-485-557 applications are dismissed. The CIV-2019-096-262 application to recover the money Mr Ford spent to pay off the loan succeeds, though in a different manner than pleaded.
[84] In the normal course of events, the Strangwicks would be entitled to costs on a 2B basis. I would suggest a 25 per cent discount to reflect the success on the loan repayment proceeding. If agreement cannot be reached, memoranda can be filed.
[85] The outcome of the proceeding is that failing some alternative private agreement, the property should be transferred back into the name of Mr and Mrs Strangwick who are the legal owners.
[86]The transfer is subject to a trust in favour of Mr Ford on the terms set out in
[81] and [82].
Simon France J
Solicitors:
Chris Nicholls, Lower Hutt for Defendants
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