Hingston v Hingston
[2021] NZHC 3621
•23 December 2021
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2012-470-918
[2021] NZHC 3621
BETWEEN KEITH HAMILTON HINGSTON
First Plaintiff
GWENDOLINE MYRA HINGSTON
Second Plaintiff (DISCONTINUED)AND
DAVID LEWIS HINGSTON
First Defendant
DAVID LEWIS HINGSTON AS A TRUSTEE OF THE HINGSTON HOUSE TRUST
Second Defendant
ANTHONY RICHARDSON AS A TRUSTEE OF THE HINGSTON HOUSE TRUST
Third Defendant
Continued…
Hearing: 21-25 June 2021 Appearances:
J W Howell for the First Plaintiff
D G Dewar and J J Pietras for the Defendants
Judgment:
23 December 2021
JUDGMENT OF GWYN J
HINGSTON v HINGSTON [2021] NZHC 3621 [23 December 2021]
Continued…
CIV-2017-485-952 BETWEEN
KEITH HAMILTON HINGSTON
PlaintiffAND
DAVID LEWIS HINGSTON and ANTHONY MURRAY RICHARDSON as
trustees of the Hingston House Trust Defendants
Table of Contents
Introduction [1]
The proceedings [5]
Background [7]
Keith’s separation from Shona [8]
Sale of the house to the Trust [16]
Dispute between Keith and David [22]
Current position [33]
The 2017 proceeding [38]
Privilege [39]
Was a settlement reached? [42]
Discussion [49]
The 2012 proceeding [54]
Undue influence [63]
Was there a relationship of trust and confidence between Keith and David? [70] Does the transaction call for explanation? [76]
Has David rebutted the presumption that the transaction was brought about because of that influence? [86]
Unconscionable bargain [95]
Was Keith under a significant disability? [100]
Breach of fiduciary duty [101]
Did David owe Keith a fiduciary duty? [106]
Did David act in breach of that duty, and instead act in his own interests, in the way he conducted himself during the 2009 Family Court proceedings? [107]
Unjust enrichment [110]
Breach of contract and affirmative defences [114] Discussion [118]
Misrepresentation [127]
Result [132]
Relief [133]
Introduction
[1] This is a dispute between Keith Hingston and his son David Hingston. They have been in dispute since 2010 and in litigation since 2012.
[2] In 2007, when he was in his early 70s, Keith’s second marriage, to Shona, ended. At the time of separation they owned a house together in Welcome Bay, Tauranga (the house). Following relationship property proceedings, a Family Court order made by consent on 8 September 2009 required Keith to pay Shona $295,000 by 23 October 2009, failing which the house was to be marketed for sale and Shona to receive $295,000 of the sale proceeds.
[3] However, Keith was unable to raise the money to pay Shona her entitlement and he turned to David for assistance. Keith, by then in his mid-70s, and the Hingston House Trust (a trust set up by David for the purpose) (the Trust) entered into a series of agreements on 19 October 2009 which provided, among other things for the sale of the house to the Trust, payment of the monies owing to Shona, and a right for Keith to occupy the house for life, on certain terms.
[4] The relationship between Keith and David subsequently broke down. Keith left the house on 2 February 2011 and has not lived there since. The Trust sold the house in September 2015. The parties have been engaged in a bitter dispute since that time. This litigation is the culmination of that dispute.
The proceedings
[5] There are two sets of proceedings. In November 2012, Keith filed proceeding CIV-2012-470-918, a substantive claim against David and the Trust (the 2012 proceeding).
[6] The second proceeding, CIV-2017-485-952, relates to a judicial settlement conference convened before Clifford J on 1 September 2015 (the 2017 proceeding). The purpose of the conference was to attempt to settle the issues in the 2012 proceeding. Keith contends that settlement was reached at the September 2015
conference. The defendants say there was no binding agreement. Keith has brought the 2017 proceeding to enforce what he says was the agreement reached on that day.
Background
[7] Keith’s attachment to the house is an important part of the context to this dispute. Keith had designed and built the house himself. He wished to remain living there for the rest of his life, subsequently saying he would only leave the house “in a pine box”.
Keith’s separation from Shona
[8] Keith’s marriage to Shona ended in 2007, when Keith was in his early 70s. In September 2007 the house was valued at $580,000. Shona brought proceedings in the Tauranga Family Court seeking a division of relationship property under the Property (Relationships) Act 1976. Under a consent order dated 8 September 2008 (the original consent order), Keith was to pay Shona $306,000 by a specified date. Failing that, the house was to be sold and Shona’s entitlement paid out of the proceeds. Keith was to keep the chattels. Keith’s legal fees with Holland Beckett relating to this proceeding totalled $12,882.02 and remain unpaid.
[9] In the meantime, in mid-2007 Keith had reconciled with his first wife (David’s mother), Gwen Hingston, and they were living together in the house.
[10] Keith obtained an updated valuation for the house on 15 September 2008, which valued the house at $530,000.
[11] Keith attempted to borrow money to pay the amount owing to Shona but was not able to do so. He turned to David for assistance. David’s view was that Shona was receiving more under the consent order than she was entitled to, and at his instigation lawyers (Maude & Miller and Mr Laurenson) were engaged in October 2008 to take steps to set aside the consent order.
[12] On 13 October 2008 Keith signed two enduring powers of attorney (EPoAs), one in relation to property and the other in relation to personal care and welfare,
appointing David to be his attorney. On 23 October 2008 Keith wrote to Holland Beckett advising that he authorised David to act on his behalf and noting that all instructions would come from David without further reference to Keith.
[13] An updated valuation of the house was obtained in March 2009. It put the market value of the house at $505,000, to which it then applied a “forced sale” discount (to reflect factors which contribute to discounts often applicable to properties sold under mortgagee sale conditions) of 15 per cent, resulting in a forced sale valuation of
$430,000.
[14] After some 10 months of litigation, on 8 September 2009 the Family Court made an order varying the original consent order (the varied consent order) which required Keith to pay Shona $295,000 (that is, a reduction of $11,000 from the consent order) on or before 23 October 2009, failing which the house was to be sold and Shona paid out of the proceeds of sale. Approximately $40,000 in legal and accounting fees had been incurred on Keith’s behalf in the process of arriving at the second order.
[15] Keith was still unable to raise the money to pay Shona her entitlement under the varied consent order.
Sale of the house to the Trust
[16] On 15 October 2009 David settled the Trust, with himself and Anthony Richardson as trustees. The principal discretionary beneficiaries of the Trust are David, his partner Wendy, and their daughter. The Trust was established for the purpose of purchasing the house from Keith and thus enabling him to pay Shona her entitlement under the varied consent order.
[17] On 19 October 2009, when Keith was 75 years old, three documents were executed by the Trust and Keith (collectively, the transaction). Both Keith and the Trust received independent legal advice.
[18] First, an agreement for sale and purchase recording the sale of the house by Keith to the Trust for a purchase price of $375,000. The proceeds of the sale went to meeting the $295,000 owed by Keith to Shona, discharging a mortgage over the house
of approximately $35,000, and the legal and accountancy fees associated with the second Family Court proceedings.
[19] Second, an agreement providing a right for Keith to occupy the house for life (agreement to occupy). There was to be no rent payable, and the stated consideration was the transfer of the house, a sum of $115,729,1 the transfer of Keith’s superannuation entitlement, and transfer (or sale proceeds) of various chattels and vehicles. The salient terms of the agreement to occupy were:
2.Keith is currently living in the Property and it is intended that he will remain in occupation of the Property as his principal place of residence for the remainder of his life or until such time that the Trust deems it appropriate for him to be found alternative accommodation of a suitable standard.
3.Keith will share the Property with his partner, Gwendoline Myra Hingston (“Gwen”), and they shall endeavour to live in a peaceful and harmonious manner. In the event their relationship deteriorates then the Trust will be able to exercise its discretion under the terms of this Agreement to Occupy (“the Agreement”) as to the best manner to resolve alternative living arrangements for Keith.
…
NOW AND THEREFORE THE PARTIES AGREE AS FOLLOWS:
1.The Trust agrees that Keith can continue to occupy the Property as he has previously enjoyed prior to the sale of the Property by him to the Trust.
2.There shall be no rental payable in respect of the Agreement, however, consideration for this Agreement is provided as follows:
2.1The transfer of the Property to the Trust.
2.2A payment of $115,729.00 being made in respect of his right to occupy the Property for life as recorded in the Agreement.
2.3A Deed of Acknowledgement of Debt for $115,729.00 being entered into by Keith in favour of the Trust.
2.4The transfer (or sale proceeds thereof) of Keith’s Isuzu Journey motor home to the Trust.
2.5The transfer (or sale proceeds thereof) of Keith’s Stabicraft boat, outboard motor and trailer to the Trust.
1 This figure was calculated as the cost of a “lease for life” based on the house purchase price of
$375,000 and Keith’s life expectancy.
2.6The transfer of Keith’s current and all future Jacques Martin superannuation entitlement (to a bank account nominated by the Trust) to the Trust.
2.7The transfer of (or sale proceeds thereof) of the following assets (at the agreed value) to the Trust:
(a) Small outboard boat, fishing gear $500.00 (b) Suzuki Vitara
$10,000.00
(c) Trailer
$400.00
(d) Tools and Workshop items
$1,000.00
(e) Kitchen and household furniture
$5,000.00
(f) Home appliances
$1,000.00
(g) Electronic items and TVs etc
$2,000.00
(h) Garden tools
$500.00
Total
$20,400.00
3.Keith will be jointly responsible with Gwen for all maintenance and upkeep of the Property together with any associated costs.
…
5.Keith together with Gwen will be responsible for the following payments in respect of the Property:
5.1All insurance policies
5.2Rates
5.3Utilities (including power and phone)
The costs incurred in respect of clauses 5.1 and 5.2 are to be paid directly by Keith and Gwen to a Bank account nominated by the Trust who will pay these costs on Keith and Gwen’s behalf.
6.The Agreement will remain in force for 30 years or until such time as this Agreement is dissolved or Keith dies.
7.In respect of the Agreement the Trust has a right to sell at any time at its sole discretion the Property, but the Trust acknowledges that it must provide suitable alternative accommodation in consideration of this Agreement.
…
12. Keith acknowledges that should Gwen’s behaviour impact adversely upon his cohabitation with Gwen that the Trust shall be entitled to review and alter the terms of the Agreement on its own account.
Further, Keith agrees that should his behaviour impact adversely upon their cohabitation that the Trust shall be entitled to review and alter the terms of the Agreement on its own account.
…
[20] Third, a deed of acknowledgment of debt in respect of the sum of $115,729.00 for the right to occupy.
[21] Also on 19 October 2009 the Trust and Gwen signed an agreement providing a right for Gwen to occupy the house. The provisions of that agreement were substantially the same as the agreement entered into with Keith, except for the provision as to consideration, which was in the following terms:
2.There shall be no rental payable in respect of the Agreement, however, consideration for his Agreement is provided as follows:
2.1The transfer of $158,989.50 from Gwen to the Trust.
2.2A payment of $147,195.00 being made in respect of her right to occupy the Property for her life as recorded in the Agreement.
2.3A Deed of Acknowledgement of Debt for $11,787.50 being entered into by Gwen in favour of her.
2.4The transfer of fifty percent of Gwen’s current and all future Jacque Martin superannuation entitlement (to a bank account nominated by the Trust) to the Trust.
Dispute between Keith and David
[22] In January 2010, Gwen moved out of the house, returning to live in Palmerston North. The parties do not agree as to why she did so. Keith then entered into a domestic relationship with Petra, who began living with Keith in the house in April 2010.
[23] David considered that Keith and Gwen’s separation, and Keith’s allowing Petra to live in the house, amounted to a breach of the terms of the agreement to occupy. Keith and David fell out. After Petra had moved in, David travelled to Tauranga in April 2010. Keith and Petra were out when he arrived at the house. When they arrived home David jumped out of a cupboard where he had been hiding. David remained in
the house, uninvited. While he was staying there David used a camcorder to record Keith and Petra as they went about their daily lives.
[24] It also appears that around this time the motorhome was listed for sale, but Keith terminated the sales and listing agreement for the motorhome on 13 April 2010.
[25] During July and August 2010 David told Keith and Petra that Petra had no right to live in the house. On 6 September 2010 David wrote to Petra requiring payment from her of what he termed rental arrears, together with a bond, totalling $9,735 (calculated based on a weekly rental of $295).
[26] On 13 September 2010 Keith’s lawyer, Lynne Coker, wrote to David revoking his authority under the EPoAs. On 14 September 2010 Keith advised David by letter that he was also cancelling the automatic payment from his superannuation fund to the Trust.
[27] On 13 September 2010 Ms Coker also wrote to David seeking information about the amount paid to Shona on Keith’s behalf and the date of payment, confirmation of amounts paid for Keith’s legal fees and any unpaid legal debts, and a full breakdown of the amount claimed by David to remain owing by Keith for the licence to occupy the house.
[28] Ms Coker’s letter also responded to David’s letter of 6 September 2010 to Petra and asked, on Keith’s behalf, for an indication of a settlement figure that would enable the agreement between Keith and the Trust to be terminated, all financial matters between the parties cleared, and the house and other property to be transferred back to Keith.
[29] On 27 September 2010 David responded to Ms Coker with a settlement figure of $1,015,000, on the basis of which the assets listed in the agreement to occupy (the house, Keith’s superannuation, the vehicles, and the chattels) would be transferred back to Keith.
[30] On 19 January 2011 David handed Keith a notice evicting Keith and Petra from the house and stating an intention to alter Keith’s agreement to occupy the house, pursuant to cl 12 of the agreement. The notice also stated that Keith would be advised of temporary alternative accommodation “for the coming night”. On returning to the house, Keith discovered the locks had been changed and two security guards were posted outside the house.
[31] The police subsequently assisted Keith and Petra to regain entry to the house. David barricaded himself in a room in the house and moved into the house against Keith’s wishes, at times recording what occurred in the house and again locking Keith and Petra out of the house. David advised Keith he would remain living in the house for six weeks. Throughout this time, David issued numerous trespass notices on Keith. Keith describes this behaviour as “incredibly intrusive”.
[32] On 2 February 2011, just under 16 months after the agreement to occupy was signed, Keith and Petra left the house and entered into a tenancy for a property in Te Puke. David retained most of the chattels, including the Suzuki Vitara motor vehicle, the Stabicraft boat, televisions and Keith’s tools. Keith took the motorhome. Keith has remained in rented accommodation, or his now partner’s house, since then.
Current position
[33]The Trust sold the Stabicraft boat in April 2011 for $24,000.
[34]The Trust sold the Suzuki Vitara motor vehicle in November 2011.
[35]The Trust sold the house in September 2015 for $610,000.
[36] Before he ceased his superannuation payment, the Trust received $9,986.34 of Keith’s superannuation.
[37]Keith retained the motor home, but has since sold it.
The 2017 proceeding
[38] I consider the 2017 proceeding first, since if I conclude that there was a binding agreement at the 2015 settlement conference, then the 2012 proceeding will fall away.
Privilege
[39] There is a preliminary issue about the admissibility of the evidence of Genevieve Haszard and John Tizard, the lawyers who attended at the settlement conference on behalf of Keith and David, respectively. Section 57 of the Evidence Act 2006 provides for communications occurring during settlement negotiations to be privileged. The privilege under s 57 applies in the context of judicial settlement conferences.2 Rule 7.79(6) of the High Court Rules 2016 also applies.
[40] The difference between the parties is that Keith says that a binding oral agreement was reached at the conclusion of the judicial settlement conference and any further steps required were only to implement that agreement. The agreement was not conditional on, for example, execution of the documentation discussed by the parties. David, on the other hand, says that the intention of the parties was not to reach a binding agreement unless and until some further details were agreed on and all of the terms of the agreement were recorded in a signed deed of settlement and draft Tomlin Order. Keith wishes to refer to what happened at the settlement conference to establish his contention.
[41] Section 57(3)(b) of the Evidence Act means that in this case Keith is entitled to lead evidence from Ms Haszard of what occurred at the settlement conference to support his contention that a settlement agreement was reached.3
2 Elisabeth McDonald and Scott Optican (eds) Mahoney on Evidence (4th ed, Thomson Reuters, Wellington, 2018) at [57.02(8)]; Russell v Commissioner of Inland Revenue [2015] NZCA 351, (2015) 27 NZTC 22-018 at [11]-[12].
3 Sheppard Industries Ltd v Specialized Bicycle Components Inc [2011] NZCA 346, [2011] 3 NZLR 620.
Was a settlement reached?
[42] Keith says that a concluded and enforceable agreement was reached by the end of the settlement conference, the terms of which were:
(a)Keith was to settle a trust to be called the Keith Hingston Trust (Keith’s Trust).
(b)The trust deed was to record that the date of final distribution from Keith’s Trust would be at Keith’s death, at which time 60 per cent of the remaining capital would be distributed to David and the remaining 40 per cent to be distributed to Guy Hingston, Keith’s other son and David’s brother.
(c)Upon settlement of sale of the house, the sum of $110,000 was to be distributed to Keith’s Trust for Keith’s benefit, with $10,000 of that sum to be paid to Holland Beckett to settle their fees.
(d)The Trust would return all chattels to Keith, including the motorhome.
(e)The 2012 proceeding would be discontinued.
(f)Costs were to lie where they fall.
[43] Ms Haszard produced in evidence the notes she had taken during the course of the settlement conference. She said that during the course of the settlement conference, she telephoned a partner at Holland Beckett to negotiate settlement of the outstanding fees owed to that firm. John MacKay, on behalf of the firm, advised that Holland Beckett would accept a lump sum payment of $10,000 in satisfaction of all outstanding amounts. That information was relayed by Ms Haszard to Mr Tizard during the settlement conference.
[44] Ms Haszard recorded in her notes: “settlement reached – 5.25 pm” and also recorded the essence of the settlement reached (as outlined above at [42]). Ms Haszard’s evidence was that while it was agreed between the parties that Keith
would receive all of the chattels, a list of the chattels still needed to be prepared. Ms Haszard says that she advised the Judge, in the presence of Keith, David and Mr Tizard, that settlement had been reached between the parties. She explained the detail of the agreement to the Judge, in the terms set out above. Mr Tizard confirmed the detail of the agreement.
[45] Ms Haszard’s evidence was that all that was left to finalise was the list of chattels and matters of implementation. No settlement agreement was signed on the day because of the time at which settlement was reached and Ms Haszard’s impending return flight to Tauranga. It was agreed between Ms Haszard and Mr Tizard that she would prepare the settlement deed.
[46] The day after the settlement conference, Mr Tizard emailed to Ms Haszard a draft Tomlin Order, a draft trust deed and a list of chattels. Ms Haszard’s evidence is that it was intended that she would use those documents reflecting the terms of the settlement reached on 1 September as a basis to draft a settlement deed and to finalise the documents. As part of that exercise, she began considering who might be considered for appointment as trustees of Keith’s Trust. Because Keith had recently moved to Whangārei, she considered that trustees who were Whangārei-based would be appropriate.
[47] On 5 September 2016, Ms Haszard received a telephone call from Keith who advised he was at David’s house and the police had become involved to assist him with the collection of his chattels.
[48] Both Ms Haszard and Mr Tizard acknowledged in the course of their evidence that the question of what was to happen to the motorhome was an issue that was discussed during the course of the settlement conference. It is clear that both parties felt strongly about the motorhome and who should take ownership of it. Ms Haszard’s view was that, by the time the settlement conference concluded, the parties had agreed that Keith personally would take ownership of the motorhome. Mr Tizard’s recollection was that Keith was to have possession, but not ownership, of the motorhome. That is reflected in the draft Tomlin Order that Mr Tizard sent to Ms Haszard the following day, which recorded:
4. The Second and Third Defendants, as Trustees of the Hingston House Trust, will transfer to the trustees of the Keith Hingston Trust the Isuzu Journey motor home referred to in the Occupation Agreement described in paragraph 1.
Discussion
[49] For there to be an enforceable contract the parties must have reached consensus on all essential terms, or at least on objective means of sufficient certainty by which those terms may be determined.4
[50] The submission for Keith is that all the essential terms were agreed and what remained was to implement that agreement by finalising the documents for his Trust, appointment of trustees, and then transfer of the money and chattels as agreed.
[51] For a range of reasons, implementation of the agreement which Ms Haszard thought had been reached did not occur in the short term. Keith says that the first he knew that David did not accept that a settlement had been reached was at a judicial telephone conference in the 2012 proceeding on 24 May 2016.
[52] The defendants point to the fact that a trust deed was not drawn up until some 26 months after the settlement conference and was in unacceptable terms because it named Keith as settlor, appointor and trustee. While Mr Tizard acknowledged in evidence that it was not intended that David have a right of veto over the trustees of Keith’s Trust, the defendants emphasise that it was intended that the trustees be independent.
[53] Because the further anticipated steps did not happen in the short term it appears that the fact that the parties were not ad idem on what should happen to the motorhome did not immediately become clear. That was an essential term of any settlement. For that reason I conclude that, regrettably, no final and enforceable agreement was reached on 1 September 2015.
4 Wellington City Council v Body Corporate 51702 [2002] 3 NZLR 486 (CA) at [30].
The 2012 proceeding
[54] Keith brings six causes of action in total. Four claims are in equity: undue influence, unconscionable bargain, breach of fiduciary duty, and unjust enrichment. Keith also alleges that he was induced to enter into the contractual arrangements with the Trust as the result of a misrepresentation by David about the basis on which he, Keith, could remain in the house. Finally, he says that the defendants breached the contractual arrangements in that, when the relationship between Keith and Gwen broke down and they could no longer cohabit in the house, the defendants were required to provide suitable alternative living arrangements for either or both of Keith and Gwen. They did not do so.
[55] David pleads three defences: that Keith repudiated the agreement to occupy, entitling the Trust to cancel the agreement; that the Trust had the right to alter the agreement to occupy in the manner it did; and that Keith’s conduct towards Gwen and the defendants, and in refusing to comply with the agreed terms of the occupancy, means he is disentitled to any relief and equity. David also relies on largely the same matters in a counterclaim for setoff.
[56]I turn first to the equitable claims.
[57] Mr Howell pointed to a number of factors that have some relevance to each of the equitable claims.
[58] First, Keith was elderly at the time of the transaction – 74 at the time of the consent order, 75 when the varied consent order was made and the documents transferring his assets to David were signed.
[59] Second, Keith was under stress at the time. Keith’s ten-year relationship with Shona had come to an end, with emotional as well as legal and financial consequences. He was particularly attached to the house, having designed and built it himself, with an intention that he remain in it for the rest of his life. Given that, he was in a state of high anxiety about the prospect of possibly having to sell the house to meet his obligations to Shona. The alternative scenario, where he had to find $305,000 to pay her out, was also very stressful.
[60] Keith had resumed a relationship with Gwen in June 2007. In December 2008, Gwen had to have a quadruple heart bypass operation. Subsequently, in mid-2009, she had a double knee replacement. Both of these were major operations and the double knee replacement, in particular, limited Gwen’s mobility and increased her reliance on Keith. This placed further stress on Keith.
[61] Third, there was a disparity between Keith and David in terms of education, intellect, and relevant legal or business experience. Keith described himself as having spent most of his life as a blue-collar worker with little formal education. He had no experience of the litigation process. David is a well-educated and experienced doctor. David had previously been involved in other, unrelated litigation.
[62] Finally, although it was Keith who, in 2008, suggested the possibility of transferring all his assets to David, by 2009, from his perspective, any such arrangement was to involve only the house. David acknowledged in cross-examination that it was his idea that the house and assets be transferred to the Trust.
Undue influence
[63] Although undue influence and unconscionable bargain were pleaded together, conceptually they are different.5 As the Court of Appeal put it in Contractors Bonding Ltd v Snee:6
… the doctrines are separate and distinct: a plea of undue influence attacks the sufficiency of consent; a plea that a bargain is unconscionable invokes relief against an unfair advantage gained by an unconscientious use of power by a stronger party against a weaker.
[64] I turn first to undue influence, which concentrates on the status of the plaintiff’s consent.
5 Stephen Kós “Undue Influence” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 679 at [22.4.5(2)].
6 Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 (CA) at 165 per Richardson J.
[65] The essence of the undue influence doctrine is impairment of free will.7 It is the overbearing of the will that makes the influence “undue”. The focus is on the mind of the person consenting to the transaction that is challenged, not on the motives of the person exerting the pressure or influence. It is not a prerequisite that there was impropriety or unconscionability on the part of the person allegedly exerting the undue influence.8
[66] The principles of undue influence were set out by the High Court (and endorsed by the Court of Appeal) in Green v Green:9
(a)The overall burden of proof rests on the person seeking to establish undue influence.
(b)The burden of proof is the balance of probabilities. … where the allegation made is serious (such as an allegation of dishonesty or criminal offending), the Court will require strong evidence to be satisfied on the balance of probabilities that that occurred.
(c)The person asserting undue influence must show that the alleged influence led to the making of the impugned transaction, and that the influence was undue in the sense that the transaction was not the result of the free exercise of an independent will on the part of the person at whose expense the transaction was made.
(d)The question of whether a transaction was brought about by undue influence is a question of fact. A party can succeed in establishing this either directly by proving “actual undue influence” or recourse to an evidential presumption which arises where it is established that:
(i)the person said to have been subject to undue influence placed trust and confidence in the other; and
(ii)the transaction called for explanation.
(e)Whether there is a relationship of trust and confidence can either be established factually or by reference to a class of specific relationships such as lawyer/client; parent/child; doctor/patient. In the latter category the law presumes irrebutably that one party had influence over the other. The presumption is only as to proof of influence. The person alleging undue influence will still need to establish a transaction calling for an explanation.
(f)Whether a transaction calls for an explanation depends on the circumstances of the case. The question is simply whether “failing proof to the contrary, [the transaction] was explicable only on the basis that undue influence had been exercised to procure it”.
7 Green v Green [2016] NZCA 486, [2017] 2 NZLR 321 at [40].
8 At [39] and [44].
9 Green v Green [2015] NZHC 1218 at [100] (footnotes omitted); Green v Green, above n 7, at [35].
(g)Once the person claiming undue influence has established both the relationship of trust and confidence and a transaction calling for explanation, the evidential burden shifts to the person seeking to uphold the transaction to show that the transaction was not the result of undue influence. This however should not obscure the position that the overall burden of proof will always rest on the person alleging undue influence.
(h)The presence of independent advice is one of many factors that may be taken into account in determining whether undue influence is proved. Whether the independent advice helps to establish that the transaction was the result of a person’s free will depends on the facts of the case. Independent advice can help establish that a person understood the decision they were making. But establishing that a person fully understood the act is not the same as establishing that the act was not brought about by undue influence. A person can fully understand an act and still be subject to undue influence.
(i)Allegations of undue influence may succeed in relation to the exercise of powers not just the transfer of property.
[67] Keith says he placed trust and confidence in David to act in his best interests – he was elderly, under financial and emotional pressure, and experiencing obvious stress, meaning he was in a vulnerable position where he could be subject to the influence of his son. Keith says despite the fact he received independent legal advice, the agreements entered into call for further explanation on the basis they were to the detriment of him and to the betterment of David and the Trust.
[68] David accepted that an evidential presumption of undue influence applied, based on the parent/child relationship. However, as I note below, the Court of Appeal has held that the parent/child relationship does not give rise to a presumption. In any event, David says that his influence was not undue, and any influence he exerted did not lead to the impugned transaction. David says the transaction does not call for explanation, noting it is not accepted the market would have yielded a different result.
[69] Keith must therefore establish that David’s influence led to the transaction on 19 October 2009, and that transaction was not the result of the free exercise of Keith’s independent will. The specific issues that arise are as follows:
(a)Was there a relationship of trust and confidence between Keith and David?
(b)Does the transaction call for explanation?
(c)If yes, has David rebutted the presumption that the transaction was brought about because of that influence?
Was there a relationship of trust and confidence between Keith and David?
[70] The High Court in Green held that the relationship of presumed influence flows only from parent to child in the parent/child category.10 In the absence of an evidential presumption I therefore consider whether in fact Keith placed his trust and confidence in David.
[71] Keith himself says he had a “very close and trusting relationship” with David at the time of the transaction.
[72] At the time of the transaction, David was appointed as Keith’s attorney under the two EPoAs, suggesting that Keith generally placed trust and confidence in David in relation to issues concerning both his property and his welfare.11 The fact Keith allowed David to communicate extensively with his solicitors in relation to his separation from Shona also shows he placed trust in David.
[73] Although Keith was not particularly elderly, nor suffering any medical condition affecting his capacity at the time of the transaction, I do consider him to have been vulnerable at the time. It is plain from the documentary evidence and from hearing Keith give evidence in person that he is not at all financially astute. In addition, he explains he was “stressed and anxious” after his separation from Shona, and, as he says:
There was a lot going on for me. Not only was I dealing with the stress of everything, but I was getting older, my marriage was over, and I was extremely worried about losing my home. David was providing instructions to my lawyers at various times and to the point where I handed him complete control over dealings with the lawyers and decision-making on the direction and strategy. I did this because of the trust I placed in David at the time, and because I thought he was doing everything he could to help me.
…
10 At [236]; citing Hogan v Commercial Factors Ltd [2006] 3 NZLR 618 at [39].
11 Sinclair v Sinclair [2019] NZHC 2640 at [63].
David also made me believe that he would not only do things in my best interest, but would do it right. I really wanted to keep the home for the rest of my life and it therefore made sense for me to hand everything over to David to sort it out.
[74] Caring for Gwen following her surgeries would also have put pressure on Keith.
[75] I find that Keith placed trust and confidence in David, as his son, and believed he would act in his best interests. Keith was therefore vulnerable to David’s influence.
Does the transaction call for explanation?
[76] Turning to whether the transaction calls for an explanation, the question is, as posed in Green, whether, failing proof to the contrary the transaction was explicable only on the basis that undue influence had been exercised to procure it.12 The authors of Equity and Trusts in New Zealand explain:13
… the requirement that the transaction also “call for explanation” should not be invested with too much mystique. It simply defines a modest threshold of scepticism that must be crossed before the onus shifts. All that is required is that the transaction “is not readily explicable by the relationship of the parties”. Something must seem to be amiss, calling for explanation.
[77] The agreement purported to give Keith a right to occupy the house for life. The purchase price for that occupancy was $115,729.00. This amount was calculated by Tony Richardson (an accountant, who was also a trustee of the Trust) as the cost of a “lease for life”, based on the house purchase price of $375,000 and calculating Keith’s life expectancy using the tables in Schedule 2 to the Estate and Gift Duties Act 1968. On the face of it Keith’s full payment obligation was satisfied by his deed of acknowledgment of debt.
[78] However, the agreement could be construed as requiring additional consideration from Keith for his occupancy rights. Clauses 2.4, 2.5 and 2.7 require the transfer by Keith to the Trust of various chattels (or the sales proceeds thereof) and
12 Green v Green, above n [4], at [100(f)] (footnotes omitted); Green v Green, above n 7, at [35].
13 Kós, above n 5, at 696.
cl 2.6 requires the transfer of Keith’s current and all future superannuation entitlements. The agreement included essentially everything Keith had.
[79] David’s evidence appeared to be that the assets listed at cls 2.4. 2.5 and 2.7 of the Agreement were to be treated as part repayments of the debt or as security for payment of the debt. This is consistent with Keith’s evidence that David told him that while the assets would be transferred into the name of the Trust, Keith would remain free to deal with them as he wished.
[80] However on the face of the agreement they appear to comprise additional consideration for the agreement to occupy.
[81] Similarly, it is unclear whether the value of the superannuation entitlement was part of the purchase price for Keith’s occupancy rights or merely to be paid on an ongoing basis to cover insurance, rates and utilities in terms of cl 5 of the agreement.
[82]The objective effect of the agreement to occupy was that:
(a)Keith was indebted to the Trust for $115,729
(b)Keith was also required to transfer ownership of the chattels and vehicles to the Trust. The chattels listed in the agreement to occupy were valued at $20,4000, the Stabicraft boat was sold shortly after for
$24,000, and, although the value of the motorhome was hotly contested, it appears it was valued around at least $40,000; meaning, as well as the value of the house, the agreement to occupy gave the Trust the right to receive approximately $84,400 in chattels and vehicles.
(c)In addition, the Trust was to receive Keith’s superannuation of $200 per week (and before he ceased his payments, the Trust received a total of
$9,986.34).
[83] Nor did the agreement to occupy provide certainty for Keith in terms of his ongoing occupation of the house. His ability to live in the house became almost entirely dependent on David. William Patterson, a lawyer who works in estate
planning and trust structuring, gave expert evidence for David in 2017 in a proceeding he was defending against Maude & Miller, in relation to unpaid legal fees for the preparation of the agreement to occupy. Mr Patterson described cl 12,14 which provided that the Trust was entitled to review and alter the terms of the agreement should Keith’s behaviour “impact adversely” upon his cohabitation with Gwen, as “deficient … so far as the ability of the Trust to change the agreement unilaterally is concerned.” There was no attempt to clarify who might be the judge of what constituted such behaviour and there was no adequate dispute resolution process. Mr Patterson also gave evidence that it is “very difficult” to see how cl 7,15 which provided that the Trust had a right to sell at any time so long as it provided suitable alternative accommodation, was capable of working; Mr Patterson explained the ability of the Trust to act unilaterally was “unlikely to ever be workable”.
[84] In return, the Trust paid $375,000 for the house. According to the valuation obtained seven months prior, that was $130,000 less than the market valuation, or
$55,000 less than the forced sale valuation. That sale price was $235,000 less than the price achieved by the Trust when it sold the house six years later. Even leaving aside the value of the chattels and Keith’s superannuation, it is clear that the Trust purchased the house under value.
[85]On its face, the transaction plainly calls for an explanation.
Has David rebutted the presumption that the transaction was brought about because of that influence?
[86] The evidential burden then shifts to David to show that the transaction was not the result of undue influence. As Ellis J explained in Sinclair v Sinclair:16
[82] … Importantly, full understanding of the transaction by [the plaintiff] is necessary but is by no means sufficient. The fact that [the plaintiff] intended what he did and understood what he did, is not the end of the matter. The question is not “whether [he] knew what [he] was doing, had done, or proposed to do, but how the intention [to do the thing in question] was produced”.
14 As set out above at [19].
15 As set out above at [19].
16 Sinclair v Sinclair, above n 11 (footnotes omitted).
[83] If the intention has arisen independently of the exercise of any presumed, or actual, undue influence then the transaction will stand. If, however, it is not, “affirmatively established that the donor’s trust and confidence in the donee has not been betrayed or abused” then the transaction, or gift, will fail.
[84] In many cases, including the present, the principal evidence advanced to rebut a presumption of undue influence is that of the solicitor who acted on the transaction … But it is also clear from the authorities that, while the presumption may be rebutted by evidence showing that the transaction was entered into only “after the nature and effect of the transaction had been fully explained to the donor by some independent qualified person”, the participation of a solicitor is also not a failsafe precaution.
[87]Justice Ellis went on to cite the English High Court in Paull v Paull:17
[111] It is in this context of a willing, even enthusiastic, participant in a dangerously damaging transaction that the court must be satisfied, if the transfer is to stand, that [the donor’s] willing participation was not a reflection, or consequence, of the presumed exercise of undue influence by [the donee] and of the effects of the trust [the donor] reposed in [the donee], but was [the donor’s] own independent and fully understood decision.
[112] In such a case, the donor’s trust in the donee and, in consequence, his uncritical willingness to enter into the transaction in question, is likely to require the clearest exposition of the dangers involved in the relevant arrangement before a court can be satisfied that the donor’s decision to implement the transaction was genuinely independent and did not reflect the trust reposed in the donee and the influence, actual, or presumed, emanating from that trust. The greater the trust reposed by donor in donee the greater the clarity that will be required before the court can be satisfied that the influence emanating from that trust has been negated.
[88] Keith was advised by Ms Coker on the transaction. However, it is not clear from the evidence what Ms Coker’s advice to Keith was, and whether he fully understood the consequences of the transaction. It follows that the independent advice provided to Keith was not sufficient in the circumstances. Although the transaction in the present case differs from Paull, in that the Trust did provide consideration and the transaction was not a gift from Keith, I nonetheless consider the quote from Paull to be apt in the present case, given how insufficient that consideration was; in particular, it would need to be established that Keith received a clear explanation of the risks involved in the transaction before the Court could be satisfied that Keith’s decision was genuinely independent and did not reflect the trust reposed in David and the presumed arising emanating from that trust.
17 At [84]; citing Paull v Paull [2018] EWHC 2520 (Ch) at [111].
[89] There is some dispute as to how the transaction was actually negotiated. Keith says that David made an offer to him, in September/October 2009, to purchase the house for $375,000, and in return Keith could live in the house rent free. Then, just before the agreements were signed (and just days before Keith was required by the varied consent order to make payment to Shona), David told Keith that he would also have to transfer the chattels and vehicles, pay his superannuation to David, and pay the sum of $115,729. Mr Howell says this created a situation whereby Keith was left with no choice but to sign the agreements as drafted, given the time pressure on Keith was acute. David and his partner Wendy say that Keith offered to give everything, in order to be able to stay in the house. A letter from David to Keith and Gwen dated 10 October 2009 suggests that if the option of the house being transferred to the Trust, rather than marketed for sale, was pursued, David would be “arranging for purchasing of assets” and that the agreement would include “soaking up most of your future income”, but does not mention the lump sum payment or the specific assets.
[90] David disputes that Keith was under any special disadvantage. He points to the fact that Keith was an electrical inspector for the Power Board, reaching senior electrical inspector status. Keith maintained his registration for many years after his retirement. He had also owned commercial property in Feilding and Tauranga and developed residential property in the Manawatu and Tauranga. David also did not agree that nursing Gwen would have imposed any additional burden on Keith. He referred to him as having been as fit as a 20 year old, and said caring for Gwen while she was bedbound was not a “particularly onerous task.”
[91] There was no evidence, other than from Keith himself and from David, about Keith’s health. Although he was 75 years old at the time, there is no evidence that he was in physical ill health, or that his cognitive abilities were impaired. My impression of Keith, 87 at the time of the hearing, is that he remains alert, with full cognition, although with a hearing impairment. However, as I have already found, I do consider that the stress of Keith’s separation, the anxiety about potentially losing his home, all while caring for Gwen, would have contributed to making Keith vulnerable.
[92] In his evidence, David also explained that Shona had agreed that if the house were sold, she would concede the fixed sum of $295,000 contained in the varied
consent order and accept 50 per cent of the sale price. It is clear from the evidence that Keith was stubborn, to the point of unreasonableness, in his insistence that he stay in the house. But, notwithstanding that, David could ultimately have declined to purchase the house if that was not a financially viable proposition.
[93] One final complicating factor is the need to acknowledge Gwen’s interests. David’s evidence is that Keith made it impossible for Gwen to stay in the house (which she also had a right to occupy.18 Keith’s evidence is that Gwen herself made the decision to leave. While I have sympathy for the fact that David felt a sense of responsibility to ensure his mother was safely housed following her separation from Keith, that is not relevant to the question of whether the transaction between the Trust and Keith in October was the result of undue influence.
[94] Accordingly, I find that the claim of undue influence by David of Keith is made out.
Unconscionable bargain
[95] The Supreme Court in Gustav & Co Ltd v Macfield Ltd explained the basis of the doctrine of unconscionable bargain:19
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.
[96] The Supreme Court also endorsed the principles of unconscionable bargain that had been set out by the Court of Appeal in Gustav:20
1 Equity will intervene to relieve a party from the rigours of the common law in respect of an unconscionable bargain.
18 Gwen had also earlier lent David close to $167,000.
19 Gustav & Co Ltd v Macfield Ltd [2008] NZSC 47, [2008] 2 NZLR 735 at [6].
20 At [6]; Gustav & Co Ltd v Macfield Ltd [2007] NZCA 205 at [30].
2 This equitable jurisdiction is not intended to relieve parties from “hard” bargains or to save the foolish from their foolishness. Rather, the jurisdiction operates to protect those who enter into bargains when they are under a significant disability or disadvantage from exploitation.
3 A qualifying disability or disadvantage does not arise simply from an inequality of bargaining power. Rather, it is a condition or characteristic which significantly diminishes a party's ability to assess his or her best interests. It is an open-ended concept. Characteristics that are likely to constitute a qualifying disability or disadvantage are ignorance, lack of education, illness, age, mental or physical infirmity, stress or anxiety, but other characteristics may also qualify depending upon the circumstances of the case.
4 If one party is under a qualifying disability or disadvantage (the weaker party), the focus shifts to the conduct of the other party (the stronger party). The essential question is whether in the particular circumstances it is unconscionable to permit the stronger party to take the benefit of the bargain.
5 Before a finding of unconscionability will be made, the stronger party must know of the weaker party's disability or disadvantage and must “take advantage of” that disability or disadvantage.
6 The requisite knowledge may be that of the principal or an agent, and may be actual or constructive. Factors associated with the substance of a transaction (for example, a marked imbalance in consideration) or the way in which a transaction was concluded (for example, the failure of one party to receive independent advice in relation to a significant transaction) may lead to a finding that the stronger party had constructive knowledge. So, in the particular circumstances the stronger party may be put on enquiry, and in the absence of such enquiry, may be treated as if he or she knew of the disability or disadvantage.
7 “Taking advantage of” (or victimisation) in this context encompasses both the active extraction and the passive acceptance of a benefit. Accordingly, as Tipping J said in Bowkett at 457, an unconscionable victimisation will occur where there are:
“ … circumstances which are either known or which ought to be known to the stronger party in which he has an obligation in equity to say to the weaker party: no, I cannot in all good conscience accept the benefit of this transaction in these circumstances either at all or unless you have full independent advice.”
8 If these conditions are met, the burden falls on the stronger party to show that the transaction was a fair and reasonable one and should therefore be upheld.
[97] Keith says he was vulnerable due to his age (75 at the time of the transaction), he had limited experience and knowledge of legal matters, he was under stress as a result of his separation from Shona and caring for Gwen, and he expected to live in the house for the rest of his life. Keith says David knew of his position and
vulnerabilities, and used that, together with the time pressure Keith was under, to create a situation where Keith had no choice but to sign the agreements.
[98] David says there is no evidence Keith was suffering from a disadvantage at the time of the transaction – although he was worried about losing the house, he was not suffering from any known illness or mental incapacity. David also says there was no evidence that David or the Trust received a benefit from purchasing the house.
[99]The specific issues that arise are as follows:21
(a)Was Keith under a significant disability?
(b)If so, did David know or ought he to have known of that disability?
(c)Has David victimised Keith in the sense of taking advantage of Keith’s disability, either by active extortion of the bargain or passive acceptance of it in circumstances where it is contrary to conscience that the bargain should be accepted?
Was Keith under a significant disability?
[100] It is well established that Keith’s age alone (75 at the time of the transaction) is insufficient to constitute a significant disability.22 Although I have found Keith was vulnerable to David’s influence, largely due to the stress of his separation from Shona, the anxiety about potentially losing his home, and the stress associated with caring for Gwen, I have also found that he appears to remain alert, with full cognition. I therefore find Keith was not operating under a significant disability, and the claim of unconscionable bargain is not made out.
21 Bowkett v Action Finance Ltd [1992] 1 NZLR 449 at 460.
22 Harvey v DBR Ltd HC Auckland CIV 2010-404-7052, 2 December 2010 at [90]; Sayers v Burton
(2009) 11 NZCPR 39 at [24]; West v West [2017] NZHC 3110 at [48].
Breach of fiduciary duty
[101] The Supreme Court in Chirnside v Fay confirmed there are two broad circumstances in which the courts will categorise a relationship as fiduciary:23
(a)Certain relationships are recognised by the law as inherently fiduciary because of the very nature of the relationship itself (for example, solicitor and client), and the law imposes fiduciary obligations unless the circumstances dictate otherwise. This is referred to as an “inherently fiduciary relationship”.
(b)Outside those recognised categories, the law will impose fiduciary obligations on one party to a relationship where the particular circumstances justify doing so. This is referred to as a “particular fiduciary relationship”.
[102] In Chirnside,24 Tipping J referred to Estate Realties Ltd v Wignall where the Judge observed:25
The word “fiduciary” derives from the Latin word “fiducia”, the primary meaning of which is trust. Important secondary meanings are confidence and reliance. The cases demonstrate that a fiduciary relationship will arise where one party is reasonably entitled to repose and does repose trust and confidence in the other, either generally or in the particular transaction …
[103] Keith says that David was acting under the EPoAs during the course of the engagement with Maude & Miller and Mr Laurenson, and therefore owed him a fiduciary duty to act solely in his best interests. Keith says David breached that duty, by using the 2009 Family Court proceeding to advance his own interests – purposely delaying the proceedings in order to reduce the value of the house.
[104] David says there is no evidence that he exercised his power under the EPoA in a way that adversely impacted on Keith’s property rights.
23 Chirnside v Fay [2006] NZSC 68, [2007] 1 NZLR 433 at [73]-[75].
24 At [77].
25 Estate Realties Ltd v Wignall [1991] 3 NZLR 482 at 492.
[105]The questions that arise are:
(a)Did David owe Keith a fiduciary duty?
(b)Did David act in breach of that duty, and instead act in his own interests, in the way he conducted himself during the 2009 Family Court proceedings?
Did David owe Keith a fiduciary duty?
[106] I am satisfied that David owed Keith fiduciary duties, to act only in Keith’s best interests, when exercising his powers under the EPoA.26
Did David act in breach of that duty, and instead act in his own interests, in the way he conducted himself during the 2009 Family Court proceedings?
[107] However, it is less clear that David actually breached those duties, in relation to the 2009 Family Court proceedings. Keith points to an email from David to Mr Laurenson dated 27 November 2008, and says it is evidence that David had already decided then that he would purchase the house.
[108] Although it is clear that David took the lead in the 2009 Family Court proceedings, and was the main point of contact for Maude & Miller and Mr Laurenson, the evidence does not establish that he was acting purposely to Keith’s detriment and to his own benefit. In particular, the email to which Keith refers is part of a lengthy exchange of correspondence about the options open to Keith. It is clear from Mr Laurenson’s email that Keith was adamant the house was not to be sold, and options were limited by that very strong preference. Indeed, a letter from David to Keith as late as 10 October 2009 still included the alternative option of the house being marketed rather than transferred to the Trust.27 While I accept David later tried to make the transaction as favourable to himself as possible, and did ultimately benefit from the drop in value of the house, I cannot attribute that possibility as his motivation.
26 Vernon v Public Trust [2016] NZCA 388, [2016] NZFLR 578 at [42].
27 As referred to above at [89].
It was only on Keith’s insistence that this course (the sale of the house to the Trust, rather than being put on the market) was adopted.
[109] I reject Keith’s claim that David acted in breach of the fiduciary duties he owed when acting on Keith’s behalf under the EPoA in the Family Court proceedings.
Unjust enrichment
[110] The authors of Equity and Trusts in New Zealand describe the concept of unjust enrichment as follows:28
Unjust enrichment refers to an event whereby a defendant is unjustly enriched at the plaintiff s expense, the response to which is restitution of the enrichment to the plaintiff. What makes an enrichment unjust, in the sense that it requires restitution, has been the subject of much debate and disagreement. Traditionally accepted instances of unjust enrichment include a mistake made by the plaintiff, a lack of capacity on the part of the plaintiff, compulsion of the plaintiff, and a failure of consideration for which the transfer is made. All of these grounds suggest that unjust enrichment is concerned with otherwise effective transfers that should nevertheless be reversed because the plaintiff’s consent was, although objectively manifest, in some way substantively defective or absent.
Liability for unjust enrichment does not depend on the commission of a wrong. It is not concerned with the quality of the defendant’s conscience or his conduct. The right to restitution is triggered by the receipt of an enrichment in circumstances that put it within one of the unjust categories. Liability to make restitution is therefore strict.
[111] Keith says the Trust has received an enrichment by way of receipt of the house, for which he has not received his full benefit – in particular, Keith has not received the benefit of his right to occupy the house in accordance with the occupancy agreement, and has had to incur the costs of renting alternative accommodation.
[112] David says in response that the Trust has not received payment of the $115,729 secured by Keith’s deed of acknowledgment of debt. Nor has he received the motorhome (or the proceeds of its sale) or the benefit of the chattels referred to at cl 2.7 of the agreement to occupy, which had an agreed value of $20,400.29 Nor did
28 Jessica Palmer “Restitution” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) 1227 at 1229.
29 As set out above at [19].
he receive Keith’s superannuation payments after 23 September 2010. In his submission he has not been enriched by receipt of a benefit.
[113] Of the traditional unjust enrichment situations described in Equity and Trusts in New Zealand,30 only the fourth, a failure of consideration for which the transfer is made, is relevant to this case. Ultimately, I am not satisfied that the unjust enrichment claim is sufficiently clear, at least in relation to quantum, to find for Keith under this head. Given I have already found that Keith’s claim of undue influence is made out, I do not think it is necessary to consider unjust enrichment further.
Breach of contract and affirmative defences
[114] Keith says he performed his obligations under the agreements by transferring all his property to the Trust, but the Trust did not satisfy its obligations by allowing him to occupy the house for life or by finding alternative accommodation for him.
[115] David says that Keith's own breaches of the agreement, including terminating the sales and listing agreement for the motorhome on 13 April 2010 and not transferring it to the Trust; interfering with Gwen’s ability to live in the house, and then allowing Petra to live in the house in April 2010; and cancelling the authority to transfer his monthly superannuation payments to the Trust, constituted earlier breaches by Keith of the occupancy agreement. David pleads an affirmative defence of repudiation and cancellation, saying Keith repudiated the agreement to occupy, entitling the Trust to cancel, and the Trust, in issuing the trespass notice, communicated cancellation to Keith. In terms of Keith’s right to occupy the house,
[116] In evidence, David also submitted various records he has produced of the losses considers he has suffered (for example, lost earnings as a result of the time he has invested in his father’s affairs), but his counsel responsibly conceded in written submissions that this is not recoverable.
30 Palmer, above n 28, at 1229.
[117] David also pleads as a defence that the agreement to occupy, cl 12 in particular, permitted the Trust to alter the terms of Keith’s occupancy should his behaviour impact adversely on Gwen.
Discussion
[118] It is not in dispute that David served Keith with a notice of eviction from the house and, while Keith did not initially leave, he did so eventually, in early February 2011. I find that Keith's departure from the house was a direct consequence of David's egregious behaviour as detailed at [23]-[31] above.
[119] The defendants failed to provide Keith with suitable alternative accommodation. David says he did offer to provide alternative accommodation but, the notice to evict dated 19 January 2011 states31 the offer was only for one night. No alternative accommodation was in fact provided.
[120] The key question is whether this failure to allow Keith to occupy the house for the rest of his life, or provide alternative accommodation, amounted to a breach of the occupancy agreement.
[121] The very purpose of the transaction was to allow Keith to remain in the house to which he was so attached for the rest of his life. Relevantly, the agreement to occupy provided:
(a)“Keith is currently living in the Property and it is intended that he will remain in occupation of the Property as his principal place of residence for the remainder of his life …” (Preamble, at [2]);
(b)“The Trust agrees that Keith can continue to occupy the Property as he has previously enjoyed prior to the sale of the Property by him to the Trust” (cl 1);
31 See above at [30].
(c)“The Agreement will remain in force for 30 years or until such time as this Agreement is dissolved or Keith dies” (cl 6).
[122] Several provisions provided that the Trust would be entitled to review and alter the terms of the Agreement in the event of disharmony between Keith and Gwen ([3] of the Preamble and operative cl 12) and provided a right to the Trust to sell the property but only on provision of suitable alternative accommodation (cl 7).
[123] I do not think there is a tenable argument that by allowing Petra to live in the house, Keith was breaching the agreement to occupy. The agreement to occupy did not include a provision that Keith’s right to occupy the house was personal and that he could not assign or sublet or permit a new partner to occupy the house with him. Petra moved in after Keith and Gwen had parted company and Gwen had moved out of the house, so it was not behaviour that impacted adversely on Keith and Gwen's cohabitation, which might have triggered the trustees' right under cl 12 of the agreement to review and alter the terms of the agreement. Nor do I think it is a breach of cl 1, which is framed very broadly (“The Trust agrees that Keith can continue to occupy the Property as he has previously enjoyed prior to the sale of the Property by him to the Trust”) and on its face confers a right on Keith, rather than imposing a limitation.
[124] Nor is it clear that Keith's termination of the sales and listing agreement for the motorhome amounted to a breach of the occupancy agreement. As David acknowledges, his intention (albeit that it is not reflected in the actual terms of the agreement to occupy) was that Keith was to pay the $115,729 occupancy fee, and the chattels were merely security for, or part payment of, that amount, rather than additional security.
[125] Given that the superannuation payments were, apparently, to cover outgoings on the house, it is arguable that once Keith was no longer living in the house, his obligation to make the payments fell away. While Keith cancelled the payments on 14 September 2010 and did not move out until early February 2011, the cancellation followed the behaviour by David that I have detailed at [23]-[31] above.
[126] I conclude that the Trust, through David, was in breach of the agreement to occupy.
Misrepresentation
[127]Section 35 of the Contract and Commercial Law Act 2017 provides:
35 Damages for misrepresentation
(1) If a party to a contract (A) has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to A by or on behalf of another party to that contract (B),—
(a)A is entitled to damages from B in the same manner and to the same extent as if the representation were a term of the contract that has been breached; and
(b)A is not, in the case of a fraudulent misrepresentation, or of an innocent misrepresentation made negligently, entitled to damages from B for deceit or negligence in respect of the misrepresentation.
…
[128]The Court of Appeal in Southern Response Earthquake Services Ltd v Dodds
explained:32
[129] It is often said that a representation must be a statement of fact. The leading New Zealand contract text notes that the term “misrepresentation” is not defined in the CCLA, and the courts have proceeded on the basis that it has the same meaning that it had at common law:
This means that a misrepresentation is a representation of past or present fact that is false or misleading, and excludes statements of intention, opinion and law.
[130] However this proposition requires qualification in two respects for present purposes.
[131] First, the courts have tended to regard statements about the effect of documents as representations. In cases of this kind it is difficult to distinguish between representations of fact and law.
[132] Second, we doubt that the old common law rule that statements of law could not amount to misrepresentations remains good law. The position that has been reached in recent years by the English courts is helpfully summarised in Chitty on Contracts as follows:
32 Southern Response Earthquake Services Ltd v Dodds [2020] NZCA 395, [2020] 3 NZLR 383 (footnotes omitted).
… in the law of restitution the distinction between a payment made under a mistake of fact and one made under a mistake of law has been held by the House of Lords not to be part of English law, and, in the light of this, it was held in Pankhania v Hackney LBC that the “misrepresentation of law” rule is no longer good law. Thus, for the purposes of the law of misrepresentation, the distinction between statements of law and statements of fact is no longer maintainable and that even an incorrect statement of an abstract proposition of law may amount to a misrepresentation unless it is apparent that all that is being offered is an opinion without implication that the speaker has reasonable grounds for that opinion. It is submitted that the underlying principle here is the same as that suggested in the previous paragraph, viz that even a statement as to the law may be a misrepresentation if it was reasonable, in all the circumstances, for the representee to rely upon it. …
[133] There is a strong argument that the approach outlined in Chitty should also be adopted in New Zealand in the context of the CCLA. For present purposes, however, it is sufficient for us to say that the statements made by Southern Response about entitlements under policies issued by it, in circumstances where it is not apparent that all that is being offered is an opinion, and where it is reasonable for the representee to rely upon the correctness of the statement, qualify as representations for the purposes of s 35 of the CCLA.
[129] The misrepresentation alleged by Keith is that he was led to believe that the right to occupy entitled him to remain in occupation of the house for life. His evidence was that David told him “no way will we ever put you out of the house” and “we will never evict you”. It is consistent with Keith’s stubborn insistence on remaining in the house that he would have sought that assurance. I accept Keith’s evidence on that point. Counsel submitted that the agreements do not allow Keith to be evicted in the event Gwen no longer lived in the house.
[130]David says none of Keith’s allegations are supported by the evidence.
[131] It is arguable whether the alleged misrepresentation fits within the categories referred to in the Southern Response case. The facts of the case are more appropriately analysed as a breach of contract and, given my findings above that the Trust breached the occupancy agreement, it is not necessary for me to reach a conclusion on this cause of action.
Result
[132]I have found for Keith in respect of two of his claims:
(a)the transaction in 2009 was the result of undue influence by David of Keith; and
(b)the Trust is liable for breach of contract in relation to the agreement to occupy.
Relief
[133] At the parties' request, this judgment deals only with liability. They seek the opportunity to make further submissions on remedies. Accordingly, the Court will convene a telephone conference in the new year to determine what those further submissions should cover and a timetable for filing and service.
Gwyn J
2
8
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