Milne v Partington
[2021] NZHC 1640
•5 July 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-0820
[2021] NZHC 1640
BETWEEN ALLISON MILNE
Plaintiff
AND
BARBARA ELLEN PARTINGTON and WARREN JOHN PARTINGTON as
executors and administrators of the ESTATE OF DONALD GEORGE MILNE (deceased)
Defendants
Hearing: 22 – 25 February 2021 Appearances:
J Turner and V Harris for the Plaintiff
J Armstrong and J Daly for the Defendants
Judgment:
5 July 2021
JUDGMENT OF HARLAND J
Solicitors:
McVeagh Fleming Lawyers, Albany, Auckland Armstrong Murray, Takapuna, Auckland
MILNE v PARTINGTON [2021] NZHC 1640 [5 July 2021]
Overview of the case
[1] On 8 July 2019, at 92 years of age, and after a period of declining health, Donald Milne1 died. Less than a fortnight before he died and without legal advice, he entered into what appears to be an unconditional private agreement to sell his house at 224 Molesworth Drive, Mangawhai to his niece and goddaughter, Allison Milne, for the sum of $470,000, when the market value of the property was $645,000. Allison now applies for specific performance of that purported agreement.
[2] Barbara and Warren Partington are Don’s sister and brother-in-law by marriage and are his executors under his last will. Neither they nor Allison benefit from this will. The beneficiaries of the will are Barbara’s nieces and nephews and Don’s stepchildren, receiving half of his estate, with the remaining half being left to charities. Don’s house is the main asset in his estate.
[3] As executors, Barbara and Warren oppose Allison’s claim of specific performance of the agreement. They say that the agreement was conditional on Don securing a unit in the Summerset Falls retirement village in Warkworth, an event which did not eventuate due to the level of care he required. If I agree, they say that the agreement should be rectified to record this condition or that the plea of non est factum applies to the agreement. They also say that the agreement was in all the circumstances an unconscionable bargain. If they are successful, the agreement would be at an end; however, Barbara and Warren do not object to Allison purchasing the house at market value.
[4] Although Don’s capacity to enter the agreement was not challenged, whether he suffered from a significant disability because of his general state of health at the time he signed the agreement is in issue. Barbara and Warren’s case is that because of his health challenges at the time, Don’s ability to assess his own interests was diminished, making him susceptible or vulnerable to being taken advantage of, which they say is what Allison did.
1 Donald was known by all as “Don”. During the hearing the parties and most of the witnesses preferred to be called by their first names. I reflect this preference by adopting it in my judgment.
[5] Allison says Don was fully cognisant of what he was doing and that he freely and rationally chose to enter the agreement with her. She says the price followed an enquiry by Don about what she could afford, and it was based on what other properties were listed for around the area at the time, the condition of the house and its rateable value. Significantly, she says it was based on the understanding that Don would be able to stay at his home for the rest of his life if he was able to, but if not, it was made knowing that he would need funds to buy a unit at a retirement home. Although Allison says she suggested that Don may want to consult a lawyer about the agreement, she says he chose not to because he did not like lawyers.
[6]The issues for me to determine are:
(a)Was there a binding agreement for sale and purchase of Don’s house and/or;
(i)was the agreement conditional upon Don being able to secure a care unit at Summerset Falls; and
(ii)if it was conditional, should the agreement be rectified?
(b)If the agreement was binding, not conditional:
(i)was the agreement nonetheless an unconscionable bargain; or
(ii)does the doctrine of non est factum apply?
The facts
Background
[7] Don was the second husband of Betty, Barbara’s sister. Don and Betty married in 1983, when Don was 56. Don did not have any children of his own, but Betty had five children from a previous relationship. After Don and Betty married, Don went to live with Betty in a house she owned at Waterview in Auckland.
[8] In 1990, Betty and Don moved to Mangawhai to be closer to Barbara, who had been living there since 1985. They purchased the property at 224 Molesworth Drive. Although the property was originally registered as a 5/6th share in Betty’s name and a 1/6th share in Don’s name, in 2003, after entering into a relationship property agreement, Betty transferred a further 2/6th share of the property to Don so that they both then owned a half share of it.
[9] Warren met Barbara in 1994 and they married in September 1996. After that they lived in Barbara’s home at Mangawhai, which was near to Betty’s and Don’s house.
[10] Betty died in 2006 and left her half share in the property to Don in her will. From 2006 onwards, therefore, Don owned the entire property.
Don
[11] Don was described as a friendly, polite and kind man who could be staunch and stubborn and was not particularly practical or self-sufficient. He was a man with simple needs and not at all materialistic. Don was also profoundly deaf. I was told he was likely to have worn hearing aids since he was in his twenties but was not inclined to use them in his later years. This meant that communicating with Don could be difficult. Those who saw him most regularly, his caregivers and Warren and Barbara, described having to stand in front of him and speak very loudly. In his later years, there was a need to communicate with him by writing notes, which he would read and then answer, more typically orally rather than in writing.
[12] Don was described as a creature of habit; a particular man who became heavily dependent on other people, particularly after his leg was amputated in 2009. It seems he was reluctant to ask for help, especially in relation to his medical needs. He was described as a person who did not like to be told what to do by others.
Don’s relationship with Barbara, Warren and caregivers
[13] Barbara and Warren were regular visitors to Don and Betty’s home and the reverse was also true.
[14] Before Betty’s death, Lynn Heath, a neighbour and caregiver, helped Don and Betty with cleaning three times a week. After Betty died, this stopped for a short period, during which Lynn continued to have a close neighbourly relationship with Don.
[15] After Don’s leg was amputated in 2009, he was fitted with a prosthetic leg. Although this afforded him some mobility, understandably he needed more help with daily tasks. Don asked Lynn if she could take over cleaning his home, which she did. She also provided some personal care. Lynn then arranged for Sherryl Schofield, a caregiver and a Mangawhai resident, to provide personal care for Don, which she did from 2010 until July 2019.
[16] Both Lynn and Sherryl developed close relationships with Don, which meant that he spoke openly to them about his personal affairs.
[17] After Betty’s death and after his leg was amputated, Warren and Barbara also visited Don more regularly, providing practical and social support to him.
[18] In September 2018, Don’s doctor decided Don was no longer capable of driving. His driver’s licence was revoked. Despite this, Barbara, Warren, Sherryl and Lynn observed that he continued to drive for about seven months without a licence. This behaviour confirms the evidence that Don was at times stubborn, particularly when he did not want to follow advice.
Don’s relationship with Allison
[19] Allison’s working background includes nursing and working in convalescent homes with the elderly. Although not working in paid employment in 2019, she had also previously worked for an import company and had owned a business.
[20] Allison told me that she had known Don for her entire life and considered herself to be one of his closest living relatives. She also said she had been close to Betty when she was alive. Allison’s partner, Lex, also said he knew Don.
[21] Allison said Don kept her up to date with general matters and she would be informed when he needed help or assistance. For example, he told her that he had been unable to renew his driver’s licence due to hearing and eye-sight difficulties. Allison also visited Don from time to time. She would check to see that he was getting the care he needed. He would show her his fridge with meals inside that he had cooked himself and sometimes she brought him meals as well.
[22] In 2014, Allison’s mother was living in a two-bedroom unit at Summerset Falls, a retirement village in Warkworth. When Allison visited her mother, she would often visit Don as well. During one of these visits, Allison said she asked Don what he was planning in relation to his future living arrangements if he required more help. She said he told her that he wanted to stay in his home and to be “wheeled out of it” only after he had died.
[23] In about February 2017, Allison said she discussed the possibility of buying Don’s property from him if he needed the funds or wanted to sell. She says that Don told her that he was prepared to sell the property to her, but there was no urgent need for him to sell at that time.
[24] I accept that Allison had the discussions with Don I have referred to in the previous two paragraphs and that she did so out of concern for his future care arrangements.
[25] Neither Barbara, Warren, Sherryl or Lynn recall Allison visiting Don very often or him talking to them about her visiting him. They considered this unusual, given that Don talked with them all about the minutiae of his life. They inferred from this that Allison did not visit as often as she said she did.
[26] I accept that Allison did visit Don from time to time and provide him with familial support as would be appropriate for a niece. Her involvement with Don was understandably considerably less than that of Barbara, Warren, Sherryl and Lynn because of the regularity of their interactions with him on an almost daily basis.
Events in early 2019
[27] In early 2019, Warren contacted Allison and told her that Don was in bad shape and was being difficult with his caregivers; however, when she and Lex visited, they found Don to be in fine form, healthy and in good spirits. I place little weight on this in terms of assessing Don’s general frame of mind at the time because it is not unusual for those closest to a person to bear the brunt of their frustrations and for that same person to present a very different picture to those with whom their interactions are less frequent.
[28]Don had two falls in early 2019, one on 27 March and the other on 7 April.
[29] The second fall was attended by St John’s Ambulance. Warren attended, and Allison was advised of the fall. The paramedics were satisfied that Don did not require urgent medical attention and, after helping him inside, they left. It transpired that Don had hurt the leg that was not amputated in the second fall and the wound from the fall became infected, although neither his carers, nor Barbara and Warren realised this at first because Don did not tell them.
[30] In April 2019, after returning from the South Island, Allison visited Don with her mother and brother to see how he was. Don told her that he had not hurt himself that much physically when he fell, but his ego and confidence in his physical ability had been affected. This was not actually true, as Don’s leg had become infected.
[31] Also, in April 2019, Don crashed his car into a block wall at the front of his property and he finally accepted that he should no longer drive. This increased his dependence on Warren and Barbara. Warren started doing Don’s food shopping for him. Don gave Warren his cashflow card to pay for the groceries, which was returned to him after the shopping had been completed.
[32] At some point around this time, Don stopped wearing his prosthetic leg. This reduced his mobility and increased his dependence upon Warren, Barbara and his caregivers.
Summary
[33] The picture I have of Don from September 2018 when he lost his driver’s licence to early 2019 is of a man whose physical health was declining, who was selective about who he told about his physical ailments and who was struggling to accept the level of care he needed to remain living independently in his home.
[34] Allison provided the level of support appropriate for a niece, but this was more in the form of the occasional visit, enquiries about how Don was doing and providing him with some meals when she called by. Barbara and Warren, Sherryl and Lynn provided significantly more practical and emotional support to Don because they lived nearby and visited and cared for him far more frequently. However, as the events of 2019 evolved, all the people I have referred to cooperated to help and care for Don. He was fortunate to have their love and support.
Events in June and July 2019
[35] In late May or early June 2019, Don’s caregivers became increasingly concerned about his welfare.
[36] Don’s hearing had deteriorated significantly even when he was using his hearing aids. Lynn said that in order to talk to him, she had to get close to his face and shout, often using hand signals. By the time Lynn went on holiday overseas on 12 June 2019, she had resorted to communicating with Don almost exclusively via notes. This state of affairs was echoed by Barbara and Warren.
[37] Lynn also noticed that Don was having “vacant” spells. She said he would gaze into the distance and was very difficult to engage with when this happened.
[38] Sherryl’s evidence was that Don’s health deteriorated about a month before he was assessed on 27 June 2019 for admission into Summerset Falls. Sherryl also described Don as becoming more difficult and distant over this time. She noticed a change in his habits such as not putting the music on when she was doing the cleaning. Although a small change, she was concerned about it because Don was very particular about every small detail and routine in his life.
[39] Sherryl described Don’s heath deteriorating drastically in mid-late June 2019. At this point, she had taken over Don’s personal care from Lynn because Lynn was overseas.
21 June 2019
[40] On Friday 21 June 2019, when Sherryl arrived to provide Don with his personal care, it was apparent that he was not well. His bed sheets and mattress were very badly soiled to such an extent that Sherryl was concerned that he may be very unwell. When she asked him how he was feeling, Don said “I don’t know”. Sherryl was not able to shower Don because he was so weak. She contacted Warren who then contacted Allison.
[41] Allison travelled to visit Don at his home. Warren and Barbara were present. Warren told Allison that they were struggling with Don and that he had become increasingly difficult with his carers and Warren. There was a discussion about why Don had not gone to the doctor, with Warren expressing the view that Don would not go and Don saying that he was “alright”.
[42] Warren drove Barbara and Allison to Coast to Coast Medical Centre at Mangawhai to discuss Don’s care and try to come up with a plan. Barbara and Allison saw the doctor and were advised that Don could not be made to do anything, and they were unable to help him unless he asked for help.
[43] It was at this point that Allison said she became aware that “the Partingtons had control over Don’s finances because one of them mentioned that they had Don’s cheque book.” This is not correct. I am satisfied that neither Warren nor Barbara had “control” over Don’s finances, rather Don gave Warren his cash card when Warren was asked to do shopping for Don, and it was returned immediately afterwards.
24 and 25 June 2019
[44] On 24 June 2019, when Sherryl arrived to provide Don with personal care, she discovered he had soiled the bed again. She observed that Don’s hearing was even worse than normal.
[45] Allison said that Warren contacted her by phone to tell her that Don was “in a mess”. Warren cannot recall this, and neither can Barbara, but I accept that this is what happened.
[46]Warren visited Don the next day. He was still in a very bad way.
[47] On 25 June 2019, Allison began investigating residential care options for Don in the area. There is a note to this effect in Allison’s diary. There is also an entry by Allison on this day headed “Don’s house”. This lists all of the things it appears Allison thought needed replacing or fixing.
26 June 2019
[48] On 26 June 2019, when she visited, Sherryl observed that Don was still in a very bad way. She noticed that his leg was infected. When Barbara arrived, Sherryl spoke to her about these matters and showed Barbara Don’s leg. It was obvious that Don needed to see a doctor.
[49] Sherryl remembers Barbara trying to explain to Don that he needed to see a doctor, however she could tell he could not hear or understand much of what Barbara was saying, even though she was yelling at him. Sherryl described Don as sitting there with “a sad and confused expression on his face”.
[50]Barbara says she made an appointment for Don to see the doctor the next day.
[51] On 26 June 2019, Allison also called in to see Don on her way home from a trip up north. She told Don that he should consider looking at different options for his ongoing care and that he could try The Heritage at Wellsford, Warkworth Hospital or Summerset Falls. Don said he had no preference. Allison told Don that her mother had paid around $1,000 per week for care at Summerset Falls, but if he was thinking about it as an option, then he would need to purchase a care unit.
[52] On the way back home, Allison called into The Heritage, found they had a room available and took a photo of it.
[53] Allison also spoke with Cherry Phillips of Scope (a care provider), who was involved in Don’s care arrangements. Because of this discussion, Allison formed the view that taking prompt action to increase the level of Don’s care would be in his best interests.
[54] Allison’s evidence is that she returned to see Don and they booked an appointment for him to see his doctor the next day. If correct, this would mean that both Barbara and Allison booked Don in to see the doctor the following day, which may have happened.
[55] Allison said that after speaking with Cherry, Don appeared more receptive to the idea that his level of care would need to increase. He admitted to her that he was ready to look at alternatives and had been giving Warren “a big run around”. When they discussed the Heritage as an option, however, Allison says Don was adamant that he did not want to go there, rather he wanted to go to Summerset Falls. It was at this point knowing how much it cost her mother to stay at Summerset Falls, Allison said, that she became concerned about Don’s ability to pay for the additional care that he needed; however, she did not ask him about this.
[56] After this, Allison went to see Stephen Sundvick, Don’s lawyer, about care plans for Don. During this visit she found out that powers of attorney for Don in favour of Warren and Barbara had not been activated, so she could do what she needed to get him extra care.
[57] Allison then met with the Sales Manager at Summerset Falls and was shown two one-bedroom units she thought might be suitable for Don. She took photos of the rooms. She found out that Don would have to purchase a unit if he wanted live there, and that such a transaction could happen relatively quickly if Don had the money readily available.
[58] That evening, at Allison’s request, Lex downloaded and printed out a copy of the standard agreement for sale and purchase of real estate. Lex told me he had sold seven or eight properties over the years and knew that this was normal procedure if an agent was not to be involved in the sale and purchase of real estate. He also told me
that as Allison had recently sold her property, he assumed she would have been aware of the contents of the agreement, even though they did not discuss the document itself on that occasion.
27 June 2019
[59] Sherryl checked on Don on 27 June 2019, even though she was not scheduled to provide him with care that day. Don’s mobility was such that she had to call another caregiver in the area to help her to move him. Sherryl noted that Don’s leg was very infected. Sherryl described Don’s hearing being so bad that she was communicating with him via notes. She remembers writing to say that he needed to get help. She made a note about this in his care book.
[60] Later that morning, Allison met Warren and Barbara at Don’s house. Allison said she told Don via a note that Summerset Falls had no vacancies in their hospital facility, but there were two single bedroom units available which could provide rest home care and meals at a cost of between $300,000 and $340,000. There is no evidence that Warren or Barbara saw this note and I accept that they did not.
[61] The doctor’s appointment was at 11 am. Don saw Dr Top with Allison, Barbara and Warren. Respite care was discussed, with Allison voicing her concern that she thought Don needed additional care. Don was however resistant to go into respite care. Given Don’s physical condition, Dr Top provided a certificate recommending that he would need 24-hour respite care for two weeks and possibly permanent care after that. Dr Top’s notes record “Donald is not diagnosed with any form of dementia, but his [sic] physical limitations.” This notation was addressed by the two medical experts who provided evidence to the Court, both reaching different views about its significance. I return to this shortly.
[62] Neither Barbara nor Warren recall talking in detail about Don’s long term-care needs with Dr Top; however, Warren conceded that it may have come up briefly and it may have been mentioned that Don would need to sell his property to afford fulltime, long-term care. Warren however maintained that specific details were not discussed at this medical appointment and I accept this would have been the case given the nature of the appointment.
[63] After the doctor’s appointment, everyone went back to Don’s house. Don sat in the lounge in his wheelchair. Allison showed Don photos or pamphlets of different rest homes in the area. These options were outlined by Allison in a note to Don. Allison showed Don the photo of the room at The Heritage she had taken the day before. Don said he did not want to go there. Allison then showed him photos of Summerset Falls. She said, “he was far more accepting of that”, saying, “I’d like to have the one facing the river.” Warren and Barbara recall this discussion; however, both say they thought it was a discussion about options for respite rather than permanent care.
[64] There is then a difference in the evidence about whether Warren remained in the room while Allison continued her discussion with Don in which she says she told Don that he would have to purchase a unit at Summerset Falls if he wanted to go there. She says she wrote notes to Don but also spoke out loud what she was writing. She maintains that Warren would have heard this interaction. The note that refers to Summerset Falls records that two single bedroom units were available which could provide homecare and needs for $320,000 to $340,000.
[65] Allison’s evidence is that she then said to Don that if he wanted to sell the property to her, she would be willing to buy it and he could then use money to acquire a unit at Summerset Falls. Allison also says she told Don that he may want to see his lawyer. She wrote on a note “I will pop down the road for lunch back 1.30pm. Grant Davies. Coast to Coast lawyer.” The note does not record anything about advising Don to see his lawyer, nor does it refer to Stephen Sundvick who was the lawyer she had seen the day before about Don’s power of attorney at the same law firm.
[66] Warren does not recall this discussion taking place. He cannot recall leaving the lounge at any stage; however, if he did, he said he would have been able to hear Allison talking to Don, because if she was talking to him as well as writing notes, she would have had to talk loudly to him so he could hear her. Warren’s evidence was that he did not hear such a discussion. I am not required to make a finding on this point, as the fact that Allison made an offer to purchase the house on 27 June is not disputed.
[67] Allison then went to lunch with Lex, and Warren stayed with Don until she returned at about 1:30 pm.
[68] While she was out at lunch, Allison said she looked in the windows of several real estate agency offices to see what price properties were selling for in Mangawhai. She thought comparable properties were selling for between $540,000 and $560,000. Allison said she was also aware that Don had received a real estate agent’s appraisal in 2016 that the property was worth $436,000.
[69] When Allison returned from lunch, Don and Warren were still in the lounge. Don was sitting in his wheelchair and Allison sat on the sofa. Warren said Allison had a document in her hands when she walked in and that she said something about Don selling the property to her. This was the agreement for sale and purchase Lex had printed out the night before although Warren did not know this at the time.
[70] Warren said Allison intimated that she had looked at the price of houses in Mangawhai and she noted that they were very expensive. Warren said this was the first time he had heard anything about Don selling the property to Allison and he was surprised because that day they had only started discussing Don going into respite care.
[71] The matter of price was then discussed. This appears to have been done via the note set out below. The key point is that the price was set at an amount that Allison could afford. The order in which the discussions about price progressed is not especially clear; however, at some point Allison says Don went into the bedroom and retrieved the rates notice for the property, which she was shown. This recorded that the rateable value of the property was $650,000, a price she could not afford to pay. Don then asked Allison what she could afford. Allison said she made a quick assessment of the repairs and renovations needed which she valued at about $50,000. She thought that $470,000 was a fair price given these matters, the fact that a real estate agent’s commission would not apply and that there would be some urgency if a unit in Summerset Falls became available.
[72] Allison says she told Don she could buy the property for $470,000. She wrote a note to him as follows:
You may need to check with your lawyers.
I have $300K cash and $150(K) credit line - - - …
Can raise another $20K so $470K but all available for transfer straight off private sale …
No agent
[73] When the figure of $470,000 as a purchase price was mentioned to Don, Allison says Warren “piped up to say, ‘if that’ to us both”. Warren disputes that this is what he said. Whether this was said or not, is not in my view critical to the issues I need to determine.
[74] Allison then says she said to Don, “Is that enough?” and she says he replied, “Yes dear”.
[75] It was at this point that Allison says she handed over the agreement for sale and purchase and completed it in front of Don. She says Don signed the agreement and placed his initials next to the figure of $470,000.
[76] Allison says Warren was present when she and Don signed the agreement, after which she turned to Warren and said, “See, no coercion?” This is an unusual comment to make. I return to this later; however, Allison said she was simply making a quip and that Warren didn’t say anything in response but raised his eyebrow at her.
[77] The settlement date was not included in the agreement at that point because there was still a need to view the unit at Summerset Falls and Allison said, “I did not want Don to feel anxious about the whole thing before we visited”.
[78] Allison booked an appointment for Don to view the unit at Summerset Falls later that day at 3.00pm. Afterwards, Warren said he would take Don to Summerset that afternoon. He then left to pick up a prescription for Don. After Warren left, Allison inserted an occupancy clause into the agreement under “Further terms of sale”. She says this was at Don’s request. The clause provides “Don to retain possession of
house in caretakers role for a long as he requires.” Don signed and Allison initialled this further term.
[79] At this point Allison says she considered there was a binding agreement in place for Don to sell and her to buy his home.
[80] Warren rejects any suggestion that he was present for or privy to any conversations between Allison and Don about the purchase price for the property or its condition on 27 June. He said that had he been made aware at that time that the purchase price was $470,000, he would have been alarmed as he understood this to be significantly less than the value of the property at the time, which, in fact, is true. He said he would have raised this with Don at the time, despite knowing that Don would not have appreciated being questioned about it. It is unnecessary for me to make a finding on this point. Whether Warren knew about the purchase price is not relevant to my determination as to whether Allison and Don reached a binding agreement.
[81] Warren took Don to see the unit overlooking the river at Summerset Falls at about 3.00pm that day and Allison met them there. Prior to Don’s care requirements being assessed, Don, Allison and Warren went to the café on site. While there, Don mentioned he had $95,000 in a bank account. This was news to both Allison and Warren. It meant that there would be plenty of money for Don to pay for his respite care and to pay for some care in the future should he need it. At this time Warren said he thought that the Summerset Falls option was being looked at as an option for respite care only.
[82] After this, Don was interviewed and a care assessment was undertaken. Don did not meet the assessment criteria necessary for him to be eligible to purchase a unit at Summerset Falls, I infer because his needs for care were too high. He was also told that there were no vacancies at the hospital there at that time, although Allison had known this from her earlier enquiries.
[83] After the interview, Allison told Warren that she would investigate the respite care options for Don.
[84]Warren took Don back to the property, noting that he was exhausted.
28 June 2019
[85] On 28 June 2019, Allison made enquiries about respite care for Don. She managed to arrange a bed for him at Amberlea for a period of two weeks.
[86]Warren transported Don to Amberlea.
[87] Allison also sent an email to Mr Sundvick advising him that Don had not been able to secure a care unit at Summerset Falls and that she and Don had agreed a price for the sale of his house. She advised that Don had signed the paperwork and said, “subject to if/when he comes out of Amberlea he is able to stay in the house, pay rates and insurance. I will also get him to initial all pages.”
29 and 30 June 2019
[88] There is then a slight conflict on the evidence about whether a TV was taken to Don at Amberlea on 29 or 30 June (a Saturday or Sunday). The date is not particularly significant as the general outline of what happened was agreed. I am satisfied that the date was 29 June 2019.
[89] Allison and Lex met Warren and Barbara at Don’s property, I infer because Warren had a key. Allison, Lex and Warren walked around the property.
[90] Various issues to do with the property were pointed out by Warren. Some were self-evident but others such as the roof needing repairs, and some issues with pipes and gutters rusting were not. Allison described the property inside as tired and badly needing a repaint and wallpapering; Warren and Barbara accepted that some work needed to be done but noted Don’s preference for functionality and his lack of interest in such things. I am satisfied that the property did need a “tidy up” and that some external work would have needed to have been done on the roof and the deck. All of this is said to be relevant to the purchase price, although by that time according to Allison the purchase price had been agreed and there was a binding agreement in place for her to buy the property, and there is also Allison’s diary note of 25 June listing the
things she thought needed replacing or fixing before then. I find the walk-around on 29 June to be of no relevance to the purchase price which had been included in the agreement on 27 June.
[91] Warren, Barbara, Lex and Allison then went to Amberlea. Allison said she brought the agreement with her as she was going to give it to Don’s lawyer. She said she checked with Don that he was still happy to proceed with the sale and he said he was. She said she suggested the settlement date of 1 October 2019 to Don and he agreed.
[92] Allison says she talked with Warren about paying a deposit into Don’s bank account. Warren does not recall this conversation, but he agreed that if Allison did say this, he may well have said, as she contends, that she could not do so, because he thought a payment like that had to go through lawyers.
[93] At this point, Warren was aware of the proposed purchase by Allison of Don’s house. I accept that he was concerned about the fact of the agreement because he did not think it was necessary for the property to be sold, as Don had not been assessed as meeting the criteria to be eligible for a unit at Summerset Falls and Warren was aware of the money Don had in the bank to cover care costs be they for respite or fulltime care.
[94] Barbara was also aware of the agreement. She contacted Allison by phone and told her she was doing a disservice to the family by offering $470,000 for the property.
1, 2 and 5 July 2019
[95] Warren thought he should meet with Stephen Sundvick, Don’s lawyer, to discuss matters. From his discussion with Mr Sundvick, Warren understood that Don should have legal advice before signing any documentation to sell his house to Allison. Warren said that he understood following the meeting Mr Sundvick would visit Don at Amberlea for that purpose. Mr Sundvick also acknowledged Allison’s email of 28 June to him on 1 July and asked her to send through a copy of the agreement.
[96] On 3 July 2019, Don was admitted to hospital for treatment for the infection of his leg and Lex took the agreement to Mr Sundvick.
[97] On 4 July 2019, Don was discharged from hospital and returned to Amberlea. Allison saw him that day. She recalls Don saying he was only staying in Amberlea for one more week and then he was going to return home.
[98] That day, there were further written notes passed from Allison to Don. On one note Allison said, “how’s – anything you want to say further to our agreement?” She said this note was given to Don because she wanted to be clear and check whether he was sure about the agreement. She says Don’s oral reply to her was that he was very sure, and that the agreement should proceed. Even though she considered the agreement was binding at this point, Allison said if Don had not wanted to go ahead with it, she would have “torn it up”.
[99] On 5 July 2019, Warren says he and Barbara visited Mr Sundvick. By this time Mr Sundvick had the agreement because it had been given to him two days before by Lex. Warren and Barbara were very concerned about the price.
[100] After this meeting, Warren and Barbara visited Don at Amberlea. Notes were passed to Don as follows “Don, do you still want to sell the house” and “she is paying half of what it is worth valued at $700,000, she will only pay $470,000”. Warren says that Don read the note and replied orally “no I don’t need to”. Warren made a note of this in his diary.
[101] Barbara then wrote a note to Don that said, “don’t sign any papers without the lawyer there Steve – Coast to Coast Law.” After reading that note, Warren says Don nodded and said “okay”.
[102] During this period, Allison was organising an assessment of Don’s needs to be undertaken when he returned home after his respite care stay at Amberlea. From the emails it appears that this was a possibility at least in terms of service providers being able to assist with his care at his home.
[103] Allison also emailed Mr Sundvick updating him about Don’s care arrangements. In this email she also said:
He [Don] was happy for me to proceed with the purchase of his house and I have now actioned this with my lawyer…He didn’t think that it was necessary to set up a meeting at this stage.
7 July 2019
[104] On 7 July 2019, Warren received a call from Amberlea. Don had been asking if Barbara and he were going to be visiting that day. Warren and Barbara travelled to see Don in the afternoon. Don said he wanted to be closer to Mangawhai. Warren made a note of this in his diary and made enquiries to see if there was a vacancy at Ranburn, a rest home closer to Mangawhai.
8 July 2019
[105] On 8 July 2019, Warren rang Ranburn and was advised that they did not have any beds available for Don. This information had previously been relayed to Allison, but may not have been imparted to Warren and there is no reason why it ought to have been.
[106] Allison visited Don at Amberlea again. She says Don told her that Warren had told him to contact his lawyers and not to sign any papers without doing so. Allison says Don said, “he’s confused me”. Allison said she was also confused given that in her view, Warren had been present when Don and she had talked about the sale of the property for $470,000 and when the agreement was signed.
[107] Allison said she decided not to discuss this further with Don mainly because it was impractical to write everything down on paper to communicate with him. She also said she was not too concerned about what Don had said because settlement was not until 1 October 2019 and Don was able to choose whether he wanted to continue to live at the property (health permitting) or to use the funds. Allison says Don did not tell her he wanted to end the agreement.
[108] Allison also emailed Mr Sundvick requesting his trust account details for the deposits, but Mr Sundvick replied saying he needed to get instructions and asking for
an update about Don’s whereabouts. Allison responded with an email via the Manager at Amberlea.
[109] A letter to Don was prepared by Mr Sundvick. It is not clear if it was sent. The letter notes Mr Sundvick’s concern about the price and gives the reasons for this, as well as noting Mr Sundvick’s view that the agreement was unconditional.
[110] At some point, Allison paid a sum of $50,000 as the deposit under the agreement into her lawyer’s trust account.
[111] Later that evening, one of the nurses at Amberlea called Warren and Barbara to say that Don had started to deteriorate and that it did not look as if he would last the night. Warren and Barbara left home and went straight to Amberlea to be with him. Unfortunately, Don died before they arrived.
[112] Allison was advised by Amberlea that Don had passed away. She says she was shocked as she had not anticipated it.
Settlement
[113] On 25 September 2019, the solicitors for Allison advised that she was willing to settle as per the agreement on 1 October 2019. A caveat was lodged over the title to the property. A notice of sale and settlement was served by Allison’s lawyers on Mr Sundvick on 1 October 2019.
Was there a binding agreement for sale and purchase and/or was it conditional upon Don being able to secure the care unit at Summerset Falls?
[114] For an agreement to be enforceable as a contract, the parties must have intended to enter into a legally enforceable relationship and create formal legal obligations.2 Whether or not there was such an intention is to be ascertained
2 Fleming v Beevers [1994] 1 NZLR 385 (CA) at 389–390.
objectively.3 The essential question is one of inference.4 The Court of Appeal said in
Fleming v Beevers:5
Each case will turn on its own facts and there is no substitute for a careful examination of those facts. The subject matter and attendant circumstances might well suggest that the parties had no intention of creating a legally enforceable obligation. The converse might equally be true.
[115] As held by the Court of Appeal in Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd, the Court may look beyond the words of the agreement to the background circumstances, including oral or written statements made in the course of negotiations.6 The Court may also consider the conduct of the parties after execution.7 The position is “by no means so clear” in connection with internal memoranda, communications of one party with a third party or statements of subjective intention made by individuals in the course of giving evidence.8 This is particularly so in relation to direct expressions of subjective intent.9 In Fletcher these types of materials were admissible but proved to be contradictory and largely unhelpful.
[116] If the Court finds an intention to be bound, it will do its best to give effect to that intention and, if possible, uphold the contract despite any omissions or ambiguities.10
[117] The party seeking to enforce the agreement (Allison, in this case) has the onus of satisfying the Court on the balance of probabilities that it is proper to infer that the parties intended to create formal legal obligations.11
[118] Mr Armstrong submitted that the agreement is not binding because the parties only intended to enter binding legal relations if Don met the applicable criteria to
3 Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433 (CA) at [54].
4 Fleming, above n 2, at 390.
5 At 389.
6 Fletcher Challenge Energy, above n 3, at [54].
7 At [56].
8 At [56].
9 At [56] citing Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 (CA).
10 Fletcher Challenge Energy, above n 3, at [58]. Mr Turner relies on this point.
11 Fleming, above n 2, at 390.
purchase a care unit at Summerset Falls and needed the funds to do so. Mr Turner, however, submitted that Don and Allison intended to be bound by the agreement and that it was unconditional as no conditions were stated in it, apart from in relation to the continued right for Don to occupy the house if he could.
Analysis
[119] The starting point is that Don and Allison signed an agreement purporting to create binding legal obligations, in which the parties, the property and the price were clearly identified. Both signed at the designated places for vendor and purchaser and Don signed next to the price, a material term. The occupancy condition was included later, on 27 June, and the settlement date was inserted on 29 June. The settlement date was not a material term, but the right to occupy was a material term. Other than the occupancy right, the agreement was on its face unconditional. Allison considered herself bound by the agreement as of 27 June, when the occupancy right was inserted.
[120] Allison’s evidence was that she asked Don twice after 27 June whether he wanted to proceed with the agreement. Mr Armstrong submitted this suggests that Allison thought the agreement was not finalised and that Don could still resile from it. Mr Turner submitted that Allison’s comments should be seen in light of her evidence that she would have torn the agreement up had Don not wished to proceed with it. I accept that Allison’s comments after 27 June do not detract from the inference that Don and Allison intended to be bound by the agreement after it was signed on 27 June.
[121] In addition, the fact that the parties inserted an occupancy right suggests the agreement was not conditional on Don purchasing a care unit at Summerset Falls. This is because, if Don went to live at Summerset Falls, he would have no need for a right to occupy the house at Molesworth Drive. I accept Allison’s evidence that she added the clause at Don’s request. It is consistent with Don’s strong wish to retain whatever independence he could and to be wheeled out of his home only after he died.
[122] I also accept Mr Armstrong’s submission that it was unlikely that Don could have used the right for any significant period of time because of the state of his health and his care needs. This was confirmed by Allison in cross-examination. I consider Don’s need for additional care was evident on the morning of 27 June, when Don,
Allison, Warren and Barbara saw Don’s GP, who recommended that Don receive two weeks of 24-hour respite care and possible permanent housing. However, this does not change my conclusion that the parties added the clause with a view to Don staying in his home if possible. Don’s preference was to stay in his home, although he admitted on 26 June that he might need additional care.
[123] Furthermore, while I consider Allison knew the extent of Don’s ill health and in particular that he needed additional care at the time the occupancy right was inserted, I accept that Don’s situation was nevertheless evolving. At that point in time, it had not yet become clear that Don would be ineligible for a care unit at Summerset Falls. As Allison said in cross-examination, there are “always alternatives”. This comment should be seen in light of Allison’s considerable efforts to investigate care options for Don. I accept that as things stood on the morning of 27 June, there might have been other options available which would have allowed Don to stay in his home, even with his increased care needs. Indeed, on 5 July when Allison sent an email to Don at Amberlea, the prospect of a high level of home care support for him was at least a possibility.
[124] The next question is whether anything happened between the execution date and Don’s death that derogates from the inference that Don and Allison intended to be bound on 27 June.12 This depends on:
(a)whether I accept Warren’s evidence that on 5 July 2019 Don said, “no I don’t need to” in response to Warren and Barbara asking him via notes whether he wanted to sell his house to Allison, the notes having further indicated “she is paying half of what it is worth”;
(b)if I accept those words were said by Don, what they mean.
[125]Mr Turner submitted that I should treat Warren’s evidence with caution.
[126] It is true that at times Warren did not recall aspects of what was said, whereas Allison expressed a clear memory of events. However, Warren was in my view a
12 See Coughlan v Cox [2014] NZCA 617, (2014) 16 NZCPR 66 at [50].
truthful and persuasive witness who was prepared to concede points when he considered he may have been mistaken. He was also clear about what he recalled and on occasion gave a credible explanation that supported his version of events.
[127] I accept Warren’s evidence that Don said “no I don’t need to” in response to the notes referred to above.
[128] The next question is what Don meant when he said, “no I don’t need to”. Warren and Barbara say he said it in response to them asking whether he wanted to proceed with the sale. Mr Turner submitted it is unclear what Don was responding to because Don may have been referring to the occupancy right; however, Mr Turner did not elaborate further on this point.
[129] In my view, it is more probable that Don was referring to the need to sell his house rather than the occupancy right. This is because the notes and interactions between Don, Warren and Barbara at the time related to the price for which Don had agreed to sell the house to Allison, which Warren and Barbara pointed out was well below market value. The occupancy right was of little relevance to the price: as Mr Armstrong submits, the right was of little value given the unlikelihood of Don using the right for any significant period of time because of the state of his health and his care needs, which Allison knew about.
[130] Even though I have found that Don was referring to the need to sell his house when he said “no I don’t need to”, I consider only limited weight can be given to this statement in light of Don’s other comments to Allison after the agreement was executed. Allison’s evidence is that she asked Don twice after 27 June whether he wanted to proceed with the sale and both times he confirmed that he did. In this context, Don’s comment “no I don’t need to” indicates a level of confusion consistent with his declining health. It is not, in my view, clear evidence that he thought he was not bound by the agreement. In addition, Don’s statement is a comment to a third party after the agreement was signed, which, as outlined in Fletcher Challenge Forests, should be treated with caution. Ultimately, I am not persuaded that Don’s statement derogates from the inference that he intended to be bound by the agreement on 27 June.
[131] For these reasons, I find that the agreement was not conditional on Don obtaining a care unit at Summerset Falls.
[132] Given this finding, I am not required to determine whether the agreement should be rectified. Don and Allison’s agreement was not conditional on anything apart from an occupancy right. As the agreement Don and Allison signed accurately records these terms, there is nothing for me to rectify.
If the agreement was binding, not conditional, was it an unconscionable bargain?
Relevant law
[133] In West v West, Downs J summarised the doctrine of unconscionable bargains as follows:13
[18] The learned authors of Butler’s Equity and Trusts in New Zealand observe the law of unconscionable bargains seeks to “protect those who, through poverty, infirmity, need, ignorance, or some such disadvantage, are unable to determine whether particular transactions are in their own best interests”.14 Equity will set aside a transaction when a party knew, or ought to have known, of the other’s disadvantage and the stronger party has “actively exploited or passively accepted, a contractual benefit or advantage from the disadvantaged party”.15
[19] Curial assessment of whether the stronger party has obtained an unconscionable bargain is referable to totality of circumstance.16 The Court will examine the respective positions of the parties, the conduct of the stronger party and the substantive fairness of the resulting transaction.17 Inability of the disadvantaged party to make proper judgments as to what is in his or her own best interests is important.18
[134] Rather than formulating strict criteria to apply to the doctrine, the Courts have tended to identify factors which are said to be relevant to the unconscionability inquiry.19
13 West v West [2017] NZHC 3110 at [18] and [19].
14 James Every-Palmer “Unconscionable Bargains” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [23.1.1].
15 At [23.1.1].
16 Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 (CA) at 174.
17 Every-Palmer, above n 14, at [23.1.1].
18 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462.
19 Willis v Thompson [2017] NZHC 1645, [2017] NZAR 1448 at [48], citing Bowkett v Action Finance Ltd [1992] 1 NZLR 449 (HC) at 460; and Gustav & Co Ltd v Macfield Ltd [2007] NZCA 205 at [30].
[135] In Gustav & Co v Macfield Ltd, the Court of Appeal identified a number of (non-exhaustive) principles it regarded as relevant to that case:20
1 Equity will intervene to relieve a party from the rigours of the common law in respect of an unconscionable bargain.
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, [passive acceptance] 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.
20 Gustav, above n 19, at [30].
[136] On appeal, the Supreme Court clarified that whether the contract was unconscionable should be assessed at the time it was entered into.21
[137] Factors such as inadequate consideration and failure to receive independent legal advice will usually be present in an unconscionable bargain, although they are not a prerequisite for relief.22 In Bowkett v Action Finance Ltd, Tipping J emphasised that “[i]t is the cumulative weight of all relevant points which is important”.23 He observed:24
… the inadequacy of consideration may be so startling as to justify a presumption of procedural impropriety and the more startling the inadequacy the less substantial the disability may need to be.
[138] In Willis v Thompson, the Court was satisfied that the weaker party, a frail and elderly man, was under a special disadvantage due to his physical illness when he transferred funds to the defendant for little or no consideration.25 His health had deteriorated to the point he required full-time care. He had terminal cancer, muscular dystrophy, a broken leg, and was reliant on his wheelchair and mobility scooter. He was also incontinent, had undergone major surgery (the removal of malignant lymph tumour from his neck) and was on morphine to reduce pain. He died three weeks after signing the contract. The Court ultimately held that unconscionability had been made out.
[139] In Sayers v Burton, Venning J held that age itself is not a qualifying disadvantage unless it affects the party’s ability to protect their own interests.26
The expert evidence
[140] Dr Wood, a geriatrician, and Dr Casey, a consultant psychiatrist specialising in old-age psychiatry, provided expert opinion evidence about the degree to which Don was under a significant disability and particularly vulnerable to being taken advantage
21 Gustav & Co Ltd v Macfield Ltd [2008] NZSC 47, [2008] 2 NZLR 735 at [5]. The Supreme Court also endorsed the principles identified by the Court of Appeal.
22 Gustav, above n 19, at [30]–[31].
23 Bowkett, above n 19, at 461.
24 At 461.
25 Willis, above n 19.
26 Sayers v Burton (2009) 11 NZCPR 39 (HC) at [24].
of. Both prepared desktop assessments based on the available clinical records, home caregiver records and documents filed in this proceeding, including the briefs of evidence.27
[141] Dr Wood’s opinion was that Don was sufficiently able to assess his own interests, including whether to sell the property to Allison at the time the agreement was signed. On a review of the evidence, Dr Wood considered it was more likely than not that on 27 June 2019 Don understood what an agreement of sale and purchase for property was, knew that Allison was a close relative, and knew the consequences of executing the agreement. Dr Wood concluded that Don was likely in possession of a sound mind at the time he signed the agreement, and was not so weak or vulnerable that he was unable to assess his own interests.
[142] On the other hand, Dr Casey’s opinion was that Don suffered a significant disability as a result of his general state of health at the time he signed the agreement on 27 June 2019. Given this significant disability, Dr Casey’s opinion was that Don would have had a diminished ability to assess his own interests and that this rendered him weak and vulnerable to being taken advantage of by Allison.
[143] Although the experts’ final opinions differed, they both agreed that Don suffered a number of health conditions including long-standing peripheral vascular disease (leading to his amputation and in his final illness a similar prospect for his right lower leg), profound deafness, visual impairment without corrective lenses and declining physical health generally.
[144] Dr Wood, however, placed more weight on the primary care notes from 21 June onwards, which he noted contained no specific mention of Don’s cognitive state, for example whether he was confused or disoriented. Dr Wood noted that the records refer to Don “refusing a shower” and other care, and he also noted a mention in one of the preliminary care notes on 26 June to Don being “not demented”. Dr Wood also had regard to Dr Top’s letter of 27 June 2019 recording “Donald is not diagnosed with any form of dementia”. He also relied on the notes from Amberlea, which although
27 Although Dr Casey did not read the briefs of Allison and Lex when she prepared her written report, she had read them by the time of the hearing, and it did not change her opinion.
referring to profound deafness at admission, recorded that communication was possible through notes, and importantly, in Dr Wood’s view, did not refer to any concerns about Don’s cognitive state.
[145] Dr Wood also said the impression he gained from reading descriptions of Don’s personality and behaviours emphasised Don’s strong wish to retain whatever independence he could, and the fact Don was ‘particular’ and held to a routine and way of doing things.
[146] Dr Wood’s opinion was that Don was physically vulnerable, yet he was still able to influence his situation, and was also rational enough to agree to respite care and agreeable to obtaining a second opinion about the need to amputate his infected leg. Although Don did not accept the second opinion, Dr Wood said this suggested that he was at least open to discussion. Accordingly, Dr Wood considered Don was able to assess his own interests including whether he accepted selling the property to Allison, although I note that the second opinion about amputation was made after the agreement had been concluded. Dr Wood however accepted in cross-examination that Don’s response to Warren “no I don’t need to” was a real cause for concern.
[147] By comparison, Dr Casey did not place much weight at all on the notes which recorded Don to not be suffering from dementia. In her view, such a statement had no validity as no proper assessment of cognition had been undertaken. After noting that no comprehensive physical or mental status examination was undertaken by Dr Top, Dr Casey said:
On 27 June 2019, Mr Milne was acutely unwell and the situation for him in his home was unsustainable. Mr Milne was physically incapacitated. There may have been a super imposed delirium, as is often seen in such acute illnesses and in older person, however, this was not considered or assessed.
[148] Dr Casey referred to Don’s marked visual and hearing impairment, the fact he was acutely unwell on 27 June 2019, the fact he lived alone, his decreased mobility and his dependence on carers. Having regard to these factors, she said:
Given the significant disability and situation, it is difficult to imagine how Mr Milne would have been able to understand the contents of the S&P agreement, and then use and weight the relevant material facts, and appreciate the implications of the same. The day of 27 June 2019 was frantic organising
medical review, then admission to residential care. The evidence in the available clinical records is that Mr Milne wished to stay out of hospital, gain some benefit from respite and residential care, then to return and remain in his own home for the rest of his days.
[149] Dr Casey did not resile from her opinion when cross-examined. With reference to delirium, she noted that it is a spectrum, stating that:
Some people can have what we call sub-acute or sub-clinical delirium, that people may not be floridly confused, but can be quite subtly confused… and when people have delirium, in a subtle form, they can have impairment in attention and that’s probably one of the key or the core deficit that’s happening in the brain, is impairment in attention and people aren’t able to attend or concentrate, then they are unable to retain… there can be fluctuation, so it’s another hallmark of delirium. So, people can appear to be with it and focused one minute, and a few minutes later, they are fluctuating and not attending and not focused.
[150] In relation to vulnerability, Dr Casey explained that it is assessed by looking at multiple factors in relation to the person including their physical and cognitive states, where they live, their age and dynamics. She noted that all sorts of factors play into a person’s vulnerability. Dr Casey’s opinion was that Don had “diminished ability” rather than “diminished capacity” to consider his interests. So, in relation to the evidence about Don obtaining the rates notice during the discussions about the agreement on 27 June 2019, although she accepted that he had the ability to discuss such things, she was clear that he was nonetheless compromised on the day and was acutely medically unwell. Dr Casey noted that “sensory impairment in relation to vision and hearing impacts on communication and that … can be a factor in what makes somebody vulnerable”.
[151] In relation to Dr Top’s notes recording that Don was not suffering from dementia, Dr Casey did not think this statement could be relied upon in the absence of clinical testing or assessment being undertaken, because she said impaired cognition could be subtle, it could relate to more than just memory, and it could be deceptive if preservation of language or effective dialogue might still be present. As she said, “the absence of evidence doesn’t equate to the evidence of absence”.
[152] In relation to Don’s ability to make decisions about his medical care, including the decision to be resuscitated and not to have his leg amputated, Dr Casey explained that decision making is task-specific. The thrust of her evidence on this point was
even if Don was able to make decisions about medical care (about which she was not convinced), that did not mean he was able to make an informed decision about selling his property. Neither did Dr Casey consider that from a clinical perspective, the fact that Don signed the agreement with Allison was to his advantage. This was because her view was that Don required hospital-level care. As well, Dr Casey did not consider that Don “knowing his own mind meant” that he had the ability to “weigh things up”.
[153] I have carefully considered the evidence of Dr Wood and Dr Casey. In the end, I prefer the evidence of Dr Casey who carefully outlined the subtleties associated with cognitive impairment that challenge the statement by Dr Top that Don was “not suffering from dementia”. But even if Dr Top was correct about this, the issue in this case is not to do with Don’s capacity, rather the question is whether the combination of Don’s physical disabilities (relating to hearing, visual impairment and mobility) as well as his medical condition meant that he suffered a significant disability as a result of his general state of health at the time he signed the sale and purchase agreement on 27 June 2019.
Analysis
Did Don have a disability or disadvantage which significantly diminished his ability to assess and act in his own interests?
[154] In my view, Don had a qualifying disability due to his poor health, which significantly diminished his ability to assess and act in his own interests. I accept that age is not, by itself, a qualifying disadvantage, and that Don was evidently stubborn and wanted to be independent. However, both experts accepted that Don was an elderly man with significant health issues, and he was therefore vulnerable.
[155] Added to this is the independent evidence of Don’s carers who describe his worsening health, mobility, demeanour, and ability generally to care for himself in the days leading up to him signing the agreement. I have referred to the increasing level of help he required in the house, the fact that he had suffered several falls, including one leading to his hospitalisation and his worsening hearing – facts which emphasise his increasing frailty during 2019. It seems that Don was struggling to face the reality
that he needed more support, evidenced by his reluctance to see the doctor about his infected leg.
[156] The experts did not agree on whether these physical challenges would have meant Don could not act in his best interests; however, the expert evidence on this point is only part of the picture. In many respects the facts of this case are similar to those in Willis where the Court found that Mr Willis, who like Don had mobility issues, was incontinent and on long term medication, was so disadvantaged that he could not act in his own best interests.28 Unlike Mr Willis, Don did not have terminal cancer, but he did have a serious infection in his leg, which contributed to his death.
[157] In terms of mental disability, the evidence is not entirely clear. Don’s GP, who knew Don well, did not think he had dementia and Dr Wood placed considerable weight on this observation. Mr Turner submitted Don was not so vulnerable that “mentally” he could not make decisions in his best interests. But Dr Casey’s opinion was that the GP’s opinion had “no validity” because no appropriate tests had been done to enable such a conclusion to be reached. I prefer the evidence of Dr Casey on this issue, with the result that I give Dr Top’s note about Don’s capacity little weight.
[158] There is also the discussion Don had with Warren and Barbara on 7 July when he said “no I don’t need to [sell the property]” after signing the agreement. This suggests Don was confused or muddled about the effect of the agreement. Dr Wood accepted this was a “real cause for concern” and I agree.
[159] I conclude that at the time he signed the agreement on 27 June Don was suffering from a qualifying disability and/or disadvantage which significantly diminished his ability to assess his best interests.
Did Allison know about this disability or disadvantage?
[160] In my view, the evidence establishes that Allison clearly knew the extent of Don’s ill health from at least 21 June 2019, when Warren and Barbara told her Don was deteriorating. As well, Allison explicitly acknowledged Don was weak and
28 Willis, above n 19.
vulnerable at the time the agreement was signed. Allison’s background in nursing and care of the elderly also provided her with insights others may not have about such situations. In my view it is abundantly clear that Allison knew Don was disadvantaged by his declining health.
Did Allison actively extract or passively accept the benefit of the agreement?
[161] I accept that Allison did not actively extract the benefit of the agreement; she cared for Don and wanted to ensure he was looked after. I also accept that she wanted to help Don financially and give him a sense of security about his living situation.
[162] Allison received a significant benefit from the agreement: the purchase of Don’s property for $470,000. This figure was well less than its market value of
$645,000 – a difference of $175,000 or a benefit of close to 27 per cent of the market value. The question is whether Allison passively accepted this benefit in circumstances which equity deems unconscionable.
[163]Tipping J in Bowkett said passive acceptance occurs where there are:29
… 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.
[164] The words “obligation in equity” suggest the Court should look objectively at whether the stronger party’s conscience should have been engaged in the circumstances, not whether it was engaged. This is supported by the fact the party does not need actual knowledge of the circumstances of the bargain for it to be unconscionable; constructive knowledge is sufficient.
[165] In this case, the evidence establishes that Don was weak, frail and vulnerable. He relied on and trusted Allison. There is evidence to suggest she was keen to purchase the house as far back as 2017 and that even before discussing matters with Don, she was assessing the value of the home. She came to the discussion with Don, having an agreement of sale and purchase at the ready.
29 Bowkett, above n 19, at 457 as cited in Gustav, above n 19, at [30].
[166] Allison did not help Don to obtain legal advice apart from asking him whether he wanted to obtain such advice and providing a name (even though it was incorrect). She did not give him a number to call. It is also hard to see how given Don’s physical frailty and hearing issues he could have independently contacted his lawyer without someone else organising it for him.
[167] Even though I accept Allison’s evidence that Don asked her “What can you afford?” in relation to the purchase price, in my view Don’s disability affected his ability to act in his best interests, so that it does not matter particularly what his intentions were.
[168] The time frame over which the agreement was signed is also concerning. Allison knew on the morning of 27 June that Dr Top had recommended respite care for two weeks and possibly permanent care after that, having attended the appointment along with Don, Warren and Barbara. Given this, there was no need for urgency in finalising the agreement, as Don would need respite care for two weeks before other permanent options could be pursued. In spite of this, the agreement was finalised that same day, with Allison telling Don she would be willing to buy the property, looking at the prices of comparable properties in Mangawhai, discussing the price with Don, signing the agreement and inserting the occupancy right at Don’s request, all within 24 hours and, as I have said, without helping him obtain legal advice.
[169] In the circumstances of this case, Allison had an obligation in equity to ensure that Don received legal advice before entering into the agreement. I do not consider her suggestion “You may need to check with your lawyers” went far enough, neither did accepting Don’s answer that he did not need to see a lawyer, given the extent of the benefit she was receiving.
[170] And then there is the comment Allison made to Warren “See, no coercion”. Allison says this was said in jest. Nevertheless, it is an odd and potentially revealing comment. It suggests Allison knew at the time the agreement was signed that there might be a suggestion of her taking advantage of Don, by facilitating him signing the agreement at that time.
[171] I find that Allison passively accepted the benefit of her agreement with Don, in circumstances when she had an obligation to equity to ensure Don received proper and full independent legal advice about the implications of entering into the agreement.
[172] Accordingly, the burden shifts to Allison to prove the bargain was fair and reasonable. I have little difficulty in concluding that the bargain was not fair and reasonable, because the price was well less than market value, even taking into account the condition of the property and the possible value of the occupancy right (which in my view was limited).
Conclusion
[173] I find that the agreement was an unconscionable bargain. In summary, Don’s health was a qualifying disadvantage, Allison knew about this disadvantage, and she passively accepted the benefit of the agreement in circumstances where she had an obligation in equity to say “no” or at least “speak to a lawyer first”.
[174] The plaintiff’s claim therefore fails and the defendant’s first affirmative defence succeeds.
[175] It is not necessary for me to go on to consider the remaining affirmative defence of non est factum. However, had I been required to consider this defence, in relation to the five essential ingredients of the doctrine,30 I would have found that they had not been made out. This is because I have found that Don knew he was signing the agreement to sell his home to Allison when he signed it, and the agreement was not conditional on anything apart from an occupancy right.
Result
[176]The plaintiff’s claim for specific performance is dismissed.
[177] The defendants succeed in their defence that the agreement is an unconscionable bargain.
30 Bradley West Solicitors Nominee Co Ltd v Keeman [1994] 2 NZLR 111 (HC) at 120–121.
[178] The defendants are entitled to costs. If costs cannot be agreed, the defendants are to file and serve a memorandum on costs within 28 days, and the plaintiff is to file and serve a memorandum in response within a further 14 days (memoranda not to exceed 5 pages).
Harland J
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