Round v Round
[2017] NZHC 428
•14 March 2017
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2015-409-000804 [2017] NZHC 428
BETWEEN ERIC CHARLES ROUND
Plaintiff
AND
MARTIN CHARLES ROUND Defendant
Hearing: 20-24 November 2016 Appearances:
G M Brodie for the plaintiff
Defendant in personJudgment:
14 March 2017
JUDGMENT OF PALMER J
This judgment is delivered by me on 14 March 2017 at 2 pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
Solicitors/Counsel:
G M Brodie, Barrister, Christchurch
Purnell Creighton, Christchurch
Defendant in person
M C Round, Christchurch
ROUND v ROUND [2017] NZHC 428 [14 March 2017]
Summary
[1] Mr Eric Round is 94 years old. In November 2012 he transferred ownership of his house to his youngest son, Mr Martin Round. Martin had been living with his father from the middle of 2011, receiving $300 per week to take care of him. Eric says he transferred the house to Martin at Martin’s suggestion because he was frightened that, otherwise, Martin would leave him. There is independent evidence Martin did threaten that. Since September 2015 Eric has been in a rest home because Martin could not cope with his father’s care. Martin appears to have spent most of his father’s savings. Eric is now in debt and does not have enough money to meet the cost of his rest home. Eric, through his oldest son Mr David Round exercising his power of attorney, wants his house and money back.
[2] I find the house was transferred to Martin Round as a result of Martin’s undue influence on Eric and was an unconscionable bargain. The transfer was not the result of the free exercise of the independent will of Eric. Eric was vulnerable to Martin’s pressure. I consider a middle-aged man or woman living with, and caring for, their elderly blind parent is a class of relationships that raises a presumption of trust and confidence. I find Martin’s actions in arranging for his father to meet a lawyer of Martin’s choosing, with him present, to enter a transaction at Martin’s suggestion, under the threat that Martin would otherwise leave, constitutes the transfer as an unconscionable bargain. I set aside the transaction and re-vest the Redcliffs home in Eric Round.
The factual context
The evidence at trial
[3] Martin and David Round gave evidence and were cross-examined in court, as were other witnesses in relation to the substantive issues, namely:
(a) Ms Monica Palmer, Eric’s carer, and Ms Heather McLean, a Nurse
Maude Support Worker;
(b) Mrs Moira Lockington, Eric’s niece;
(c) Ms Irene Gallagher and Mr Robert Gallagher, friends of Eric’s;
(d) Mr Colin Peebles, a psychiatrist instructed by Eric; and
(e) Mr Ian Scott, a solicitor who advised Eric on the property transfer.
Eric Round’s evidence
[4] In March 2016 Eric Round was assessed by Dr Simon Thomas as “not medically fit to appear in court to give evidence”.1 Both parties agreed Eric’s evidence would be given by way of affidavit, due to his frail health. That was directed by Associate Judge Matthews on 1 June 2016. Eric’s evidence was originally in the form of one affidavit sworn in June 2016.
[5] The brief of evidence of Dr Colin Peebles, an expert witness for Eric at the trial, was dated 3 August 2016 and disclosed before trial. He based his evidence on medical records and an interview with Eric on 23 and 27 July 2016. In his opinion, Eric was, by then, suffering from “a dementing illness of moderate severity”, possibly Alzheimer’s disease and cerebrovascular disease.2 He noted there are records of Eric having periods of confusion from June 2015. Dr Peebles’ opinion was that Eric was not wholly competent to manage his own affairs in relation to his property, lacked the capacity to foresee the consequences of decisions in relation to
personal care and welfare and to foresee the consequences of any failure to make such decisions and lacked the capacity to give evidence in Court.3
[6] Martin’s counsel relied on Dr Peebles’ brief of evidence to submit, before trial, there were serious questions regarding Eric’s mental capacity at the time his June 2016 affidavit was made. Counsel submitted there was a question as to whether the affidavit was a “personal statement” as required by s 83(2) of the Evidence Act
2006. In response, Eric’s counsel submitted the judge at trial could assess whether
the statement could be admitted under s 18 of the Act on the basis Eric was unavailable as a witness and the circumstances relating to the statement provide
1 Brief of Evidence of Colin Mark Peebles, at [16].
2 At [50]-[51].
3 At [53]-[54].
reasonable assurance that the statement is reliable. Mander J observed the admissibility of the affidavit would no doubt need to be argued at trial and ruled it could be dealt with then. On 9 November 2016, with the agreement of both parties, Mander J appointed a litigation guardian for Eric, Mr Garry Thompson.
[7] On Friday 18 November 2016, just before the trial was to start on Monday, Eric’s counsel, Mr Brodie, disclosed to Martin’s counsel the existence of another affidavit sworn in June 2013 that was substantially similar, but not identical, to the
2016 affidavit.
[8] At the start of the trial Mr Brodie submitted the 2016 affidavit had already been admitted by Associate Judge Matthews, by consent. In a Minute of
21 November 2016 I agreed that appeared to be the intention but indicated there would need to be evidence that the circumstances relating to the statement provided reasonable assurance the statement is reliable. Mr Brodie indicated he would seek to adduce such evidence during the course of trial. He did so by calling evidence from Miss Taiaroa who took Mr Round’s affidavit. I am satisfied the circumstances of the taking of the June 2016 affidavit do not call its reliability into question.
[9] I consider Dr Peeble’s expert opinion on Eric’s mental capacity based on interviews in late July 2016 do cast some doubt on the reliability of the affidavit. I also agree with his view under cross-examination that there was consistency between the comments Eric made to him and the comments in the affidavit.4 I do not consider its admission would have an unfairly prejudicial effect on the proceeding as long as its weight is assessed alongside all the other evidence, including the 2013
affidavit and Dr Peebles’ evidence. It is admissible and relevant. I assess the totality of the evidence and would have come to the same factual findings in this judgment whether or not I had regard to the 2016 affidavit.
[10] At the start of trial, Mr Brodie also sought to adduce the 2013 affidavit as evidence and called Mr Garry Thompson to give evidence of the circumstances relating to the statement. I admitted it on the basis that the circumstances relating to
the statements provided reasonable assurance that the statement is reliable. It is
4 Notes of Evidence at 124.
directly relevant and there is no basis on which to impugn its reliability and it
responds to Martin’s challenge to the 2016 affidavit.
[11] Martin applied for an adjournment of the trial on the basis he had only received the 2013 affidavit on 18 November 2016. His former counsel, Ms Smith, submitted his case must change significantly in light of the 2013 affidavit. She suggested, as an example, that he might call his own medical expert. As recorded in my Minute of 21 November 2016, I declined the application:
The very late disclosure of the 2013 affidavit is unfortunate and that may go to the question of costs. However, I do not consider it is grounds for adjourning the trial. The evidence supports the reliability of the 2016 affidavit. It also provides some additional statements helpful to Mr Martin Round. It is difficult to see how additional evidence of a medical expert would change the situation. Mr Martin Round still has to meet Mr Eric Round’s case on the basis of evidence that is essentially the same in substance or perhaps slightly more helpful to him. He only loses strength in his argument that the weight to be given to the 2016 affidavit is affected by mental capacity problems.
[12] I also indicated in the Minute that, at the end of the trial in light of the circumstances, I would consider whether Martin had been so disadvantaged by the lack of an opportunity to call a medical expert a further such opportunity should be offered to him, if he still wished it then. He did not indicate he did. In any case, I do not consider Martin’s case was prejudiced by not having an equivalent expert.
David Scott’s evidence
[13] Mr David Scott gave evidence as a witness for Martin. He explained he had considered whether it was appropriate to do that without Eric’s consent and waiver of confidentiality. He considered it was because he thought an initial request by Eric’s solicitors to give evidence constituted consent and waiver and he did not consider Eric’s 2016 affidavit disagreed with the essence of his own evidence. I find this surprising. The communications are clearly privileged and Eric had the right to refuse to disclose them under ss 53 and 54 of the Evidence Act 2006. It seems unlikely that the request by Eric’s solicitors constitutes a waiver of privilege under s 65. However, Mr Brodie did not ask me to rule out Mr Scott’s evidence. And, as the only independent evidence of Eric’s intentions in entering into the property
transfer, I consider it is in the interests of justice for me to assess Mr Scott’s evidence
alongside all other admissible evidence.
Eric and the property
[14] Eric Round, aged 94, was married for more than 60 years until his wife, Eileen, died in 2009. They had four children, three of whom survived to adulthood and two of whom are still alive now. The oldest, David Round, is a lecturer in law, and the youngest, Martin Round, is a trained lawyer with a PhD in ancient history from Columbia University. Another son, Gerard, died in 2010, leaving two children. Eric served in World War II in Italy and Japan. He worked for the New Zealand Post Office for the rest of his working life, including as an Inspector. He retired at 60.
[15] Eric is now registered as blind. He has lost the ability to read or see television, but his hearing is still good. He does not drive, having given up around
2010. His June 2016 affidavit states he could then “walk only very slowly and most of the time am in a wheel chair”.5
[16] On 12 October 2007 Eric and Eileen purchased a house in Redcliffs, Christchurch. Eric became the sole registered proprietor when she died in 2009. Its current rateable value is $405,000.
Eric and Martin
[17] After completing Masters and Doctoral degrees in the United States, where he also worked as a para-legal, Martin moved back to New Zealand in 1997 with ongoing mental health problems including depression and anxiety. He worked for, and was dismissed from, an intellectual property law firm but succeeded comprehensively in a claim for unjustified dismissal.6 He worked in Malaysia and Singapore before returning again to New Zealand in 2003. He had various jobs until he moved to Christchurch in January 2010 to spend time with his brother Gerard
who died in May 2010. He then moved back to Wellington.
5 Affidavit of Eric Round of 10 June 2016 at [11] (Eric’s 2016 Affidavit).
6 Hardie v Round [2009] NZCA 421.
[18] In November 2010 Eric had a fall and suffered injuries. Martin moved from Wellington to Christchurch to care for him temporarily – cooking for him, taking him on walks, inviting his friends around. In the 22 February 2011 earthquake Eric was thrown to the ground and broke his leg from which he still has pain. Martin cared for Eric at that time and arranged for Eric to go to hospital the following morning. After three weeks in hospital Eric returned to his home, not wanting to move to another city and not wanting to move into a rest home.
[19] Martin moved to Christchurch permanently around May 2011 to care for Eric. Eric’s evidence in his 2013 affidavit was that Martin was his “principal caregiver” and that Eric had become “completely reliant upon him”.7 Eric’s
evidence, substantially repeated in his 2016 affidavit,8 was:9
[Martin] keeps the house warm, always provides meals for me, and looks after all of my needs. He take me shopping and for outings, and provides company and support. He is prone to bouts of withdrawal and depression and sometimes this affects his ability to look after me, but otherwise, he is very good to me and I acknowledge that I could not cope without him.
I believe that if he stopped looking after me now I would have no alternative but to go into a rest home which is something I am not at all keen on doing.
[20] Martin’s evidence is that, until February 2014, he single-handedly cared for Eric, assisting with cooking, gardening and taking Eric out for walks. Martin says Eric was still reasonably independent, driving and doing his own banking.
[21] Martin’s evidence is that he took Eric on holiday every summer except for
2013, arranged for grandchildren visits, sent out Christmas cards, rang friends for him. Martin says his friend, Ms Elizabeth Harre, arranged for respite care in November and December 2013 for Eric to relieve Martin who became depressed. Martin’s evidence is that Eric hated the respite care in December 2013.
Concerns about care
[22] David Round’s evidence is that Martin has had significant problems with alcohol since before he moved back to Christchurch. He says that, by 2012 if not
7 Affidavit of Eric Round of 26 June 2013 at [15] (Eric’s 2013 Affidavit).
8 Eric’s 2016 Affidavit at [13]-[14].
9 Eric’s 2013 Affidavit at [15]-[16].
earlier, it was “becoming very clear” the arrangement of Martin living with and taking care of Eric “was unsatisfactory”. He says from the beginning of 2013 “it was also apparent that Dad was being neglected at home”.10
[23] David’s evidence is that in March 2013 Martin was “very hostile” when David and another relative, Mr Tony Lockington, talked to him about Eric going into care.11 David’s evidence is that Eric wanted to stay in the respite care in November
2013 but Martin opposed that. David says, when he visited on 28 December 2013 he found squalid conditions and “the house was just beginning to look as if it were inhabited by derelicts”.12 David provides details of an escalating series of arguments with Martin over whether Eric would go into care or not, during which David says Martin was usually drunk.
[24] In January 2014, Ms Moira Lockington, Martin’s cousin, was concerned at the “dank squalor” in which Eric was living, with Martin, and arranged for him to have short term respite care. From February 2014 it was also arranged that Eric would be visited by Nurse Maude carers three times a day, to help Eric with washing, dressing, eating and drinking and getting ready for bed.
[25] Ms Heather McLean worked as a Nurse Maude Support Worker with Eric
from February 2014. She also described Martin as “heavily addicted to alcohol”.13
She provides evidence, backed up by the Nurse Maude care plan notes record, of Eric requiring assistance and Martin being unreliable and not providing it. She also says she witnessed Martin repeatedly intervening to frustrate Eric going in to respite care.14 She says:
I took part in a number of discussions where Eric, perhaps David, and others discussed going into full time care at a rest home. Martin would always intervene to prevent this from happening. I would hear Martin speaking to his father in a domineering almost bullying tone to the effect that he did not need to go into care, he was not going into care, he had adequate support from Nurse Maude and generally in an overbearing manner dissuading his father from the rest home care which he obviously needed.
10 At [29].
11 At [40].
12 At [52].
13 At [7].
14 At [11]-[12].
[26] The Nurse Maude care plan notes also record:
(a) On 31 January 2014:15
Eric was referred for Social Work by his GP in April 2013. Eric was subsequently seen at home and is vulnerable due to very poor vision and his reliance on his son Martin who has significant physical and mental health issues. Eric resolved to remain at home. Eric was also concerned about the impact on Martin if he went into care. Other son David was very concerned about living arrangements but was unable effect any influence.
(b)In February 2014 a care visit was cancelled by Martin not by Eric and it was noted that instructions were not to be accepted from Martin.
(c) On 10 September 2015 a scuffle broke out between Martin and David, and Martin screamed at Eric “you are not going to respite”.
[27] Ms Monica Palmer was paid by Martin and then David. She would visit between 1.00 pm and 3.00 pm and characterised Martin as “habitually drunk”, providing minimal care and companionship.16 She provides further examples of Eric requiring assistance and Martin not providing it.
[28] Martin acknowledged there were occasions when he was drunk. He denied being an alcoholic. He made no substantive response to the allegations about negligence in his father’s care.
Money
[29] Eric’s evidence from 2013 was that Martin received the unemployment benefit and a supplementary benefit of $150. Eric’s evidence of 2016 added that he had also agreed to pay Martin $300 per week. Martin says Eric paid Martin $300 per week to look after him and Martin’s recollection is this was Eric’s suggestion.
[30] Eric’s evidence from 2013 is he paid all the bills, including rates, insurance and groceries. Eric receives government superannuation and national
15 Canterbury DHB Care Plan Report for Eric Charles Round, NXE7107 (31 January 2014).
16 Brief of Evidence of Monica Palmer, at [8] and [9].
superannuation. From 2011 Eric received a number of payments including the following:
(a) A contents insurance payout of just over $4,000 in November 2011 by the Earthquake Commission (EQC). A further payment of $68,310 for an EQC claim for the 22 February 2011 earthquake in September
2014 was made into Martin’s account. He says he put $65,000 into term deposits.
(b)A legacy of $1,500 from Gerard’s estate which Martin says Eric decided to give to him.
(c) Grants totalling some $41,300 from the NZ Red Cross Canterbury Earthquake Appeal or Canterbury Earthquake Appeal Trust. Martin’s evidence is that Eric gave him the grants because Eric thought he deserved them.
(d)A grant of $5,000 from the RSA in March 2016. Martin says that was paid into his bank account because he was the contact person for Eric and made the application on his behalf and he did not pay it into Eric’s account because David had frozen it.
[31] Eric’s estimate of his assets in June 2013 included “some cash and investments worth not more than $40,000. His June 2016 affidavit says “I now understand that most of my cash has been spent without my authority by my son Martin.”17 There are some detailed accusations and responses about a variety of transfers of funds from Eric’s account to Martin’s account and about Martin buying antique furniture from the United Kingdom. In his evidence in chief, Martin denies wrongdoing.
[32] David’s evidence is that there had been very large withdrawals from Eric’s
bank accounts and his funds were declining rapidly. There was a confrontation over
it, between David, Eric and Martin, in June 2015, which led to Eric’s bank account
17 Eric’s 2016 Affidavit at [6].
being frozen by the bank. David’s evidence is that there is little money now
remaining in Eric’s bank accounts. He understands the house is not currently insured.
[33] Martin vehemently denies he spent Eric’s money without authority.18 He says he would regularly tell Eric how much money he had in his bank accounts and Eric “never expressed any concern about the handling of his financial affairs”.19
Martin’s evidence is:
(a) Eric gave him signing authority over his bank accounts but Eric continued to do his own banking until April 2011.20
(b) Payment of $68,310 was made by the EQC into his account on
23 September 2014.
(c) $65,000 of the payment from EQC, that had been placed on term deposit, was spent on repairs and on legal fees for this case.
(d) The $5,000 from the Red Cross has all been spent.
(e) The house is no longer insured. Martin says the insurance company is currently alleging he had made a fraudulent claim for a car accident (which he denies), so they will not insure the house and he can’t get other insurance.
(f) Martin has a minimal amount of money left in his bank account for which there is evidence. The rest has been spent, including on day to day living expenses and legal fees. In particular there were withdrawals of around $60,000 during March 2016 and there are more fees still owing. This evidence was given after Martin was given the opportunity to consult his online banking records which were
produced in evidence.
18 Brief of Evidence of Martin Round, at [60].
19 At [60].
20 At [68].
[34] It is not necessary for me to rehearse the details of the financial transactions since, in closing submissions, Mr Brodie made clear that the transactions are no longer challenged, since there is little or no money left. It suffices to outline the decline in Eric’s bank balance and the state of Martin’s bank balance.
[35] Bank statements for Eric’s two accounts provided in evidence show that, as at
31 October 2012, Eric had over $45,000. Throughout 2013 Eric’s term deposit remained at around $30,000 then rapidly decreased over 2014. The most recent statements provided, dated 23 and 31 July 2015, show Eric has about $15,000 in his two accounts.
[36] Some of Martin’s ANZ Serious Saver bank statements were also provided in
evidence. The earliest of these, dated 10 May 2015, show a balance just under
$68,000. On 10 February 2016 Martin had $84,650.84 in his Serious Saver account. By 9 November 2016 the balance was just $129.40.
Permanent rest home care
[37] David’s evidence is that there was a major scene on 10 September 2015 with Martin, drunk, shouting that Eric did not want to go into care. David’s evidence is there was a physical altercation. Eric did not go into care that day. The following day, a woman from the RSA who saw Eric in relation to a grant took Eric to Edith Cavill at Eric’s request. This ended up being a permanent arrangement. David is paying the rest home fees himself when there is insufficient in Eric’s account. There is generally a shortfall of $1,000 per month between the income into Eric’s bank account and the rest home fees.
[38] On 11 November 2015 Work and Income denied Eric’s application for a
Residential Care subsidy because he was not eligible. A further letter dated 6 April
2016 refers to Eric having gifted his home to Martin.
[39] On Christmas Eve 2015 David’s evidence is that the Edith Cavell Rest Home called him saying Martin was asking Eric to sign a power of attorney. The staff refused to act as a witness and it was not signed.
[40] On 26 January 2016 Martin asked friends Ms Irene and Mr Robert Gallagher, a former JP, to visit Eric with him to act as witnesses for Eric’s signature. Ms Gallagher’s evidence is that Martin feigned surprise at them being there. She says Martin explained to Eric that Martin needed to withdraw money from Eric’s bank account and told him he had to sign an authority to that effect. Martin asked Eric to sign a power of attorney. The Gallaghers objected and Eric refused to sign. Mr Gallagher’s evidence is that he noticed the document was a Power of Attorney which revoked all other Powers of Attorney and specifically mentioned two gifts of
money Eric had made. His evidence is:21
I was concerned about the way in which Eric Round was being pressured into signing this document by his son on this occasion. It was apparent to me that Martin was endeavouring to put a good deal of pressure on his father to sign a document which his father couldn’t even see or read, let alone understand and I have to say that Martin was employing what I would describe as stand-over tactics to get him to sign it. He kept thrusting the paper in front of him, standing very close to him in an overbearing manner, stabbing at the piece of paper with a pen, raising his voice and insisting that his father should sign the document.
[41] Martin’s explanation is that Eric was receiving dishonour notices from the bank because David had frozen the bank account and Martin wanted to stop those penalties. Under cross-examination Martin agreed the draft Power of Attorney included authority to discontinue these court proceedings.
The property transfer at issue
Eric’s evidence
[42] Eric’s June 2013 affidavit outlined the circumstances of him transferring his property to Martin in November 2012. It states it was made in case, following his death, the executors of Eric’s estate wished to challenge the transfer of Eric’s property to Martin on the grounds of undue influence:
Transfer of my home to Martin Round Trust
18Martin has persuaded me to transfer this property to the Martin Round Trust. He raised the subject with me in the context of telling me that he was not prepared to continue to look after me only to find that on my death he, Martin, was thrown out on the street. He said
21 Brief of Evidence of Robert Gallagher, at [3].
that he wanted the house transferred to his name. One day we were driving along Ferry Road and Martin told me that he had arranged for a man who he described as “my solicitor” to call and see him. Shortly after, David Scott called and visited me at my home.
19I was not advised to obtain independent advice and I did not go to see my own solicitor, Gary Thompson, even though Gary Thompson has acted for me since the war. Fred Shaw, who died recently aged
86, had been my lifelong solicitor and his firm holds my will and he administered the estate of my late wife. That firm has routinely
acted for me over the years. David Scott did not suggest to me that I
should go and see my lawyer.
20When David Scott called, Martin was present throughout. Martin wanted me to sign the papers and was pretty insistent about this. I am told that Mr Scott’s handwritten notes on the file are dated 24
October and the documents are signed on 21 November. I think that when the documents were signed on 21 November this took place at my home. I think that David Scott called to my home twice, although I do have a recollection of climbing up the stairs to David Scott’s office on one occasion. However, I think that was only for a preliminary introduction.
21I did not read the documents before I signed them. I cannot read them. I understand that there is an Agreement for Sale and Purchase, a Deed of Acknowledgement of Debt for the unpaid purchase price, a Deed of Forgiveness of Debt, and a trust called the Martin Round Trust. I am aware that the effect of these documents was to transfer ownership of my home to Martin. I do not understand why it was necessary to have an acknowledgement of debt and a subsequent forgiveness. I am not familiar with the terms of the Martin Round Trust. I do not know what beneficiaries have been appointed. Martin does not have any children.
22I am not at all happy about the transfer of this property. I understand that the result is that my home is transferred completely to Martin or his trust. My only remaining assets consist of furniture and my cash investments which could be $40,000 or less. I do not consider it is fair that Martin should effectively inherit ten times as much as my son David.
23 I do consider that there should be an imbalance in favour of Martin.
He is not as well off financially as David. He does not have a career. He has no assets of his own. David on the other hand is reasonably
well set up with a home in Port Levy worth somewhere between
$800,000 and $1,000,000, a salaried role at the university which he has held for many years, the prospect of a redundancy payment, and
no dependents.
24I do not consider that the arrangements now made are appropriate. I am aware that this evidence might be used to support an application to set aside the transfer of the trust and I agree that that application would be appropriate.
25I do not consider that I could possibly contemplate taking any kind of steps to set aside the transactions at the present time. I am quite sure that if I instruct Gary Thompson to write a letter to Martin requesting that the documents be torn up and otherwise threatening court action, Martin would make life miserable for me. It is most likely that he would leave me with the result that I would then end up in a rest home. I consider that I am powerless to instruct my solicitors to try and do anything about these documents. That would be disastrous. In my view, Martin would be likely to go off on an extended holiday and leave me in the lurch. I am therefore swearing this affidavit in the expectation that it might be used after my death to support an application to set aside the transactions which were entered into on 21 November 2012.
[43] The equivalent part of Eric’s second affidavit, of 10 June 2016, is virtually identical except:
(a) It adds, in the middle of the equivalent of paragraph 18:
He said to me words to the effect that if the house is not in his name, what have I got to stay for, what have I got left, I’ve got no stake anywhere. David’s got a big ranch over at Port Levy and I’ve got nothing. He said to me that he wouldn’t be obliged to stay with me anymore and he could go off to Australia or anywhere for a job and I would just have to go into a home, and he had his own future to think of. I recall him using the words “he would leave me to it”.
(b)It omits putting a figure on the cash assets in the equivalent of paragraph 22.
(c) It adds, at the equivalent of paragraph 22 the sentence “I was not advised to consider the terms of my will and I am now unable to make any provision for my grandchildren.”
(d) It omits the equivalent of paragraph 23.
(e) It omits the second sentence in the equivalent of paragraph 24 and instead states “However, I believed at the time that I had no alternative but to go along with what Martin demanded.”
(f) It omits the first and last sentences of the equivalent of paragraph 25 and puts the paragraph in the past tense.
Martin’s evidence
[44] Martin’s account is consistent with the essential facts related by Eric but differs as to whether the arrangement reflected Eric’s wishes. Martin’s evidence is that sometime in the middle of 2012 Eric started telling him he wanted Martin to have the flat when he died, because Martin had put his life and career on hold in order to move down from Wellington to look after him.22 Martin says, after a while, he pointed out the property would be divided equally. He says Eric asked how to overcome that at which point Martin suggested using Saunders & Co because Purnell Creighton (Fred Shaw’s firm) no longer operated in its CBD premises
because of the earthquake.
[45] Martin says Eric met with Mr Scott, the solicitor, in his office on 29 October
2012. In his evidence in chief Martin was not certain whether he was present but, under cross-examination, he agreed he was present for the whole interview. He says he did not participate in the conversation. He does not recall having any conversations with Eric about the meeting but recalls Eric was happy with the arrangement. Martin says Mr Scott came to Eric’s home on 21 November 2012 and Martin sat with them for some of the time while Mr Scott explained the effect and was there when Eric signed them. Martin says Eric told him he could see no reason
why it might have been advisable for him to see another lawyer. His evidence is:23
There was never a threat that I would leave Dad if he didn’t transfer the flat to me. At the time Dad was the one who wanted to transfer the property to my name and it was his suggestion to do so.
[46] Under cross-examination, Martin reiterated he never told Eric he would leave him in the lurch. His evidence is that Eric’s evidence to the contrary was because he had been fed that line and Mrs Gallagher’s evidence to the contrary was incorrect.
David’s evidence
[47] David’s evidence is that, in late February 2013, Eric told David about his
interactions with David Scott. David’s evidence in chief, which he reiterated under
cross-examination, was:
22 Brief of Evidence of Martin Round, at [44].
23 Brief of Evidence of Martin Round, at [52].
34.On Wednesday evening, very irritated by Martin’s neglect, Dad revealed that some months before Martin had brought a strange lawyer to the house one afternoon, one whom Dad had never met before, and that Dad had signed the house over to Martin. This lawyer was a certain David Scott, then a partner in Saunders & Co, but who retired shortly afterwards. Scott acted for both parties, I understood at the time. Dad had no independent legal representation or advice. This transaction followed a prolonged period of nagging by Martin, saying that he had no security and threatening to go to Australia to get a job there and leave Dad high and dry. (Dad said ‘I should have let him.’) Martin had also gone on about how I had property and he had not. Dad added ‘I should have asked him why that was’.
35.Dad had no idea what the new legal arrangement actually was, but did say that Martin had told him that he had a ‘lifelong interest’. He also had the idea that there was a trust somewhere in the arrangement. Martin had sworn Dad to secrecy, saying ‘It’ll be just between the two of us’. Dad then went on to talk about how he wanted to go into care, and could afford to pay for a room in a home with his two superannuations and the ‘forty or fifty thousand’ which he believed he still had in the bank.
[48] David’s evidence is that he took Eric to a solicitor in March 2013 for advice. David did not attend the interview. On 6 March 2013 Eric executed an enduring power of attorney appointing David as his attorney in relation to his person and his property. David’s evidence is that he did not dare exercise it until Eric entered a rest home, otherwise Martin would have “hounded and bullied” Eric into revoking them and executing others in his favour. David took Eric back to sign his first affidavit which is dated 26 June 2013. David did not attend that meeting either and did not know what was in the affidavit. David did not let Martin know he knew about the transfer of the house.
Monica Palmer’s and Irene Gallagher’s evidence
[49] Ms Monica Palmer was employed to provide company and support for Eric as a carer from September 2014. Her evidence is:24
The atmosphere inside the house was poisonous. Eric was completely and utterly dependent upon Martin. He was unable to stand up to him. He told me that he was frightened of him. He explained to me the circumstances in which he had transferred his house to Martin. He said to me that Martin had made it clear to him that unless the house was transferred to Martin, Martin would leave him and return to the United States of America. Eric told me
24 Brief of Evidence of Monica Palmer, at [17].
that he was completely frightened at the prospect that this might happen and felt that he had no alternative but to agree to the transfer of this property.
[50] Ms Irene Gallagher also gives evidence that, in January 2016, when she and her husband objected to Martin’s insistence that Eric give Martin access to his bank accounts, Eric revealed the house transfer. She said:25
On the occasion in January which I have described, we returned to visit Eric after the tea break and it was during the course of this conversation that Eric then revealed to us for the first time that he had signed the house over to Martin because Martin had threatened to go away and leave him to his own devices if he didn’t do so. These are more or less his exact words.
[51] Under cross-examination, Ms Gallagher said she was present one day when she witnessed Martin threatening to leave Eric on his own saying, “Dad, you know… I could get a job and go and you would be by yourself”.
Mr Scott’s evidence
[52] Mr David Scott was the solicitor who arranged the transfer of the property. His evidence is that Martin arranged for him to see Eric on 29 October 2012 and Martin was present for the whole interview. He says he allowed Martin to stay because of the very short time of the interview and because Eric’s instructions were clear. Mr Scott’s evidence is:26
15. Eric was the dominant personality in that meeting. He was driving the topic and nature of the conversation. We talked only about what he wanted to do, he told me what he wanted to do and why. It was he who initiated any deviation from that topic and the extent of that deviation.
…
At a professional level, he was a delight to talk to. This was because he was unequivocal in his grasp and instructions and his understanding of the finer details of things. We had a good, but business-like dialogue throughout our meetings.
17. Eric told me that he wanted Martin to have his home and he didn’t want David to have it. I remember he seemed quite disenchanted with David at the time. He told me that David had nothing to do with him, particularly after the earthquake, hadn’t shown any care of anything like that. This left me with the clear impression that, when it came to
25 Brief of Evidence of Irene Gallagher, at [19].
26 Brief of Evidence of Ian Scott, at [15], [16], [21].
succession, Eric emphatically preferred Martin over David and wished to see that effected during his life-time.
18. As recorded in my file note, Eric’s instructions to me at that meeting
were:
(a) That he wanted to transfer his property at 2/162 Main Road, Redcliffs, to Martin;
(b) That the value of the property was $385,000;
(c) That he wanted to “gift the lot”. This meant the entire purchase price would be funded by way of a forgiveness of debt in Martin’s favour.
[53] Mr Scott’s evidence is that he visited Eric and Martin on 21 November 2012 for them to sign the documents. Mr Scott was not sure, in his evidence in chief, whether Martin was initially present or not. Mr Scott’s evidence is he acted solely for Eric. His engagement letter of 8 November 2012 and the advice is addressed to Eric. His invoice was addressed to Martin and Eric jointly but this is explicable if Mr Scott knew Martin handled Eric’s finances. Mr Scott’s advice is he told Martin he should get independent advice.
[54] Mr Scott’s evidence is that Eric wanted to “gift the lot”. Mr Scott advised Eric to structure the arrangement by way of a loan and deed of forgiveness of the full purchase price. Mr Scott also suggested settling a family trust for Martin. Mr Scott’s evidence is that he advised Eric, at some length, on the likely consequences of forgiveness of the full purchase price in terms of the “clawback” rules of the then Residential Care Subsidy regime.27 Under cross-examination, Mr Scott accepted Eric had not understood why the arrangement was structured as a debt and forgiveness of debt.28
[55] Mr Scott did not know or inquire about how much money Eric had.29 Under cross-examination Mr Scott did not think it was imprudent of Eric to give away his only significant asset.30 Mr Scott’s reasoning for this involved a complex answer
about how the WINZ “clawback” system works in assessing gifts of assets for the
27 At [21] – [22].
28 Notes of Evidence at 177, lines 18-22.
29 Notes of Evidence at 178, lines 14-17.
30 Notes of Evidence at 178, lines 18-20.
purposes of a residential care subsidy.31 But his reasoning appears to come down to relying on Martin selling or borrowing against the house to raise funds and/or not believing a residential care facility is likely to eject Eric for non-payment of fees.32 I found this logic difficult to follow.
[56] Furthermore, Mr Scott considered it was not his role to advise a client on the wisdom of a transaction when the client was really clear what he wanted to do.33 He was not concerned with the rights and wrongs or wisdom of Eric’s actions or whatever had motivated him to do it when there was nothing to raise his suspicion about his motives.34
[57] Mr Scott did not recall, in his evidence in chief, being told Eric was partially blind. His evidence is there was nothing to indicate to him in 2012 that Eric had trouble with his eyesight. Mr Scott’s evidence about undue influence was:
53On the issue of alleged undue influence/coercion by Martin, in any situation such as this, where you get a parent looking to undertake a transfer of property, or write a will, or give a grant of attorney (EPOA or otherwise), to a child or other family member or partner and they turn up with that child, family member, partner, I inwardly squirm and, adopt a more cynical viewpoint, look for signs of anything untoward. Such signs include obvious vulnerability of the benefactor or overbearing personality or anything suggestive of improper or undue influence. As stated, between Eric and Martin my recall is I attended Eric, three times, for one of which I’m reasonably sure in my recollection Martin wasn’t present – at least for part of the meeting. My recall is I saw nothing that caused me any concern in this regard. In essence, I saw a father who had considered, his moral and ethical obligations as between his two sons and made an independent decision he wanted to benefit Martin, by effectively giving him his home and wanted the certainty that would occur by doing it during his (Eric’s) lifetime.
…
55Similarly, I didn’t see any suggestion in Eric’s manner or demeanour that he was being influenced in any way. I would say that it was actually quite the contrary: as I have said, hopefully in a positive way, Eric was the dominant personality in the room when all three of us met. I might have thought differently if Martin was overtalking or putting suggestions to Eric, or if Eric was looking for approval to
31 Notes of Evidence at 178, line 31 to 188, line 13.
32 Notes of Evidence at 183, lines 9 to 31 and 185, line 28 to 186, line 7.
33 Notes of Evidence at 177, lines 11-13.
34 Notes of Evidence at 177, lines 23-34.
Martin, but, as I have said Martin pretty much said nothing of consequence during the meetings he was present at.
[58] In answer to a question from me, followed up by Mr Brodie, Mr Scott acknowledged that, with hindsight, it is possible Martin’s presence may have influenced what Eric was saying to Mr Scott.35 He thinks Eric was very much reliant on Martin’s company.
Dr Peebles’ evidence
[59] Dr Peebles’ interviews with Eric on 23 and 27 July 2016, also touched on the transfer of the property. His account is:36
… He said he bought a property in Redcliffs with [Eileen], and that he still owned this property. He said one of his sons, Martin, was living in it. When asked again if he still owned this property he said he “transferred it out of the goodness of my heart to Martin”. When asked why he transferred the house he said Martin told him “he wanted a bit more security otherwise he might take off overseas and leave me to it”, and that “I did it as a reward for looking after me and promise of continuing to look after me”. When asked if he would have given his house to Martin if he hadn’t said he might go to Australia he said “probably not. I don’t know”. He said the house was worth “$400,000”. He said he made the transfer “a year or so ago”.
Mr Round had little recollection of the legal proceedings concerning the house in Redcliffs, but was aware of a “dispute” regarding this. He said he thinks the transfer of ownership was “really not right legally” and “not very fair”. When asked who it was unfair to he answered “David”. He said he did not talk to David or anybody else prior to the transfer of this house. “I’m surprised I didn’t. It was foolish of me.” He said nobody else (other than Martin) suggested he transfer the house to Martin. He said when he made the transfer he was “more intent on making sure Martin looked after me” and that he did this “without taking everything into account”.
[60] Dr Peebles assessed Eric against the risk factors identified by a subcommittee of the International Psychogeriatric Association Task Force on Testamentary Capacity and Undue Influence.37 He considered Eric’s social environment,
vulnerability and the circumstances surrounding the transfer of the property:38
35 Notes of Evidence at 192, lines 20-27.
36 Brief of Evidence of Dr Colin Peebles, at [27]-[28].
37 Carmelle Peisah and others for the International Psychogeriatric Association Task Force on Wills and Undue Influence "The wills of older people: risk factors for undue influence" International Psychogeriatrics (2009), 21:1, 7-15.
38 Brief of Evidence of Dr Colin Peebles, at [39] and [44].
Mr Round’s comments to me that he was fearful of Martin going to Australia and leaving him on his own suggest that he was psychologically and/or physically dependent on Martin. He appeared to believe the transfer of his property to Martin was necessary to ensure ongoing care from Martin.
…
Accordingly in my opinion he is likely to have had some mild cognitive symptoms at the time he transferred his property even if these weren’t obvious to others. These cognitive symptoms might have affected his memory, such that his perspective on the world was more heavily influenced by the person he saw most often (Martin), and they might have affected his judgment.
[61] Dr Peebles concluded:39
In my opinion there were a number of very significant risk factors for undue influence at the time he transferred ownership of his property, including his social situation including the nature of his relationship with his son Martin, his physical and psychological vulnerability, and the circumstances around the transfer of his property.
[62] Under cross-examination Dr Peebles reiterated his impression that Eric was frightened that if he didn’t transfer the property he would be abandoned and left in a vulnerable state.
The proceedings
[63] These proceedings, brought in the name of Eric Round, allege that the transfer of the property was the result of Martin’s undue influence and was an unconscionable bargain.
[64] The law of equity has developed ways of redressing unfairness in transactions. The doctrines of undue influence and unconscionable bargains are two such ways. While they are closely related they are 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”.40 Undue influence focuses so strongly
on the mind of the person consenting that wrongdoing by the person exerting
39 At [56].
40 Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 (CA) at 165 (Richardson J).
influence is unnecessary.41 Unconscionable bargain focuses on the unconscientious taking of advantage which involves inquiry into the disadvantage, the fairness of the transaction and the defendant’s conduct.42
[65] Mr Brodie, for Eric, asks the Court to vest the property in Eric Round and seeks an order requiring Martin Round to account for any of the EQC money that remains. Martin denies the allegations and opposes the orders.
Undue influence
The law of undue influence
[66] The equitable doctrine of undue influence developed in early eighteenth century England to demand a conscientious consideration of the interests of other people. In 2016 in Green v Green, the most recent New Zealand appellate authority, the Court of Appeal approved of Winkelmann J’s statement of the legal principles:43
[100] The principles I apply as to the law of undue influence are as follows:44
(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. I accept Mr Waalkens’ submission (counsel for the defendant in the probate proceedings) that 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.45
(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.
41 Green v Green [2016] NZCA 486, [2016] NZFLR 987 at [40]. See J Stephen Kós QC “Undue Influence” in Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed Thomson Reuters, Wellington, 2009) at [22.4].
42 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].
43 Green v Green, above n 41, at [48], referring to Green v Green [2015] NZHC 1218, (2015) 4
NZTR 25-017.
44 I adopt here principles from the House of Lords in Royal Bank of Scotland v Etridge [2002] 2
AC 773, [[2001] 4 All ER 449 (HL)] approved by the Court of Appeal in Hogan v Commercial
Factors Ltd [2006] 3 NZLR 618 (CA) at [36].
45 Re H (Minors) [1996] AC 563 (HL); Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1.
(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”.46
(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.47
[101] In relation to the alleged undue influence in the making of a new will
I recognise the following additional points:
…
46 National Westminster Bank Plc v Morgan [1985] AC 686 (HL) at 704, cited in Royal Bank of
Scotland v Etridge (No 2), above n 44 at [25].
47 Harris v Rothery [2013] NSWSC 1275.
(b) Pressure of whatever character can amount to undue influence if it overbears the will of the testator. As Sir JP Wilde recognised:48
To make a good will a man must be a free agent. But all influences are not unlawful. Persuasion, appeals to the affections or ties of kindred, to a sentiment of gratitude for past services, or pity for future destitution, or the like, — these are all legitimate, and may be fairly pressed on a testator. On the other hand, pressure of whatever character, whether acting on the fears or the hopes, if so exerted as to overpower the volition without convincing the judgment, is a species of restraint under which no valid will can be made. Importunity or threats, such as the testator has not the courage to resist, moral command asserted and yielded to for the sake of peace and quiet, or of escaping from distress of mind or social discomfort, these, if carried to a degree in which the free play of the testator's judgment, discretion or wishes, is overborne, will constitute undue influence, though no force is either used or threatened. In a word, a testator may be led but not driven; and his will must be the offspring of his own volition, and not the record of some one else's.
(c) It is not necessary to provide direct evidence of undue influence, circumstantial evidence is sufficient. However, as Fisher J observed in Hayden v Simeti:49
…it is not enough to show that others had the means and opportunity to unduly influence the deceased and that there has been a recent testamentary disposition in their favour. The Court must be satisfied both that the power was exercised and that the will would not have resulted but for that exercise.
What must be shown here?
[67] To succeed here, Eric must prove:
(a) Martin’s influence led to the property transfer; and
(b) the transfer was not the result of the free exercise of Eric’s
independent will.
[68] Eric could establish both elements by proving Martin had actual undue influence over Eric. Alternatively he could establish a presumption by proving Eric
48 Hall v Hall (1868) LR 1 P&D 481 (Court of Probate and Divorce) at 482.
49 Hayden v Simeti HC Auckland P1042/92, 14 May 1993 at 12.
placed trust and confidence in Martin and the property transfer calls for explanation. If Eric does so the burden shifts to Martin, to show the transaction was not the result of undue influence but was the result of the free exercise of Eric’s independent will.
[69] Mr Brodie submits there is evidence of actual undue influence in Martin’s threats to leave Eric and that threat was implicit in Eric’s situation. Alternatively he submits there was a relationship of influence, a transaction which calls for explanation and that Martin has not discharged his burden of proof.
Evidence of undue influence
[70] I agree it is clear that, in November 2012, Eric’s situation was vulnerable to the potential of being influenced. Eric strongly disliked the idea of going into a rest home. It was not an alternative for Eric to live with David. He could not live on his own. He was reliant on Martin to look after him.
[71] The most direct evidence, of whether Martin threatened to leave Eric unless
Eric transferred the house to him, is from Eric and from Martin. It is contradictory:
(a) Eric’s 2013 affidavit stated (and his 2016 affidavit repeated) that Martin raised the subject and told Eric “he was not prepared to continue to look after me only to find that on my death he, Martin, was thrown out on the street”.50 The June 2013 affidavit also demonstrates Eric was so concerned about the prospect of Martin leaving him that Eric considered he was “powerless” to take any action about the transfer while Eric was alive even though he was not happy with it.51 Eric considered “Martin would be likely to go off on an extended holiday and leave me in the lurch” which would be “disastrous”.52
(b) Martin’s evidence suggests Eric raised the idea of Martin having the
property and flatly denies Martin ever told Eric he would leave him in
50 At [18].
51 At [25].
52 At [25].
the lurch. But even Martin’s own account acknowledges that it was
Martin who:
(i) pointed out the property would be divided equally on Eric’s
death;
(ii) advised Eric how to overcome that;
(iii)arranged for Eric to see a lawyer who was not his usual lawyer who had had no prior contact with him;
(iv) accompanied him to see the lawyer; and
(v) was present while Eric signed the documentation. [72] The less direct evidence supports Eric’s account:
(a) David’s evidence of what Eric told him in February 2013 is consistent with Eric’s June 2013 affidavit, describing “a prolonged period of nagging by Martin, saying he had no security and threatening to go to Australia to get a job there and leave Dad high and dry”.53 David, too, was not prepared to exercise his Power of Attorney while Martin lived with Eric.
(b)Ms Palmer’s evidence was that, after September 2014, Eric told her “Martin had made it clear to him that unless the house was transferred to Martin, Martin would leave him and return to the United States of America.”54 She said “Eric told me that he was completely frightened at the prospect that this might occur and felt that he had no alternative
but to agree to the transfer of his property.”55
53 At [34].
54 At [17].
55 At [17].
(c) Ms Gallagher’s evidence is that, in January 2016, Eric revealed “that he had signed the house over to Martin because Martin threatened to go away and leave him to his own devices if he didn’t do so”.56 Mrs Gallagher also says she was present on one occasion when Martin threatened to leave Eric so he would be by himself. And the Gallaghers’ evidence of the incident in January 2016 demonstrates Martin is not above pressuring Eric to sign legal documents.
(d)Dr Peebles’ evidence, based on what Eric told him in July 2016, is revealing. Eric’s responses to Dr Peebles’ questions started by asserting that he owned the house, moved to him having transferred it to Martin “out of the goodness of my heart”, then moved to Martin telling him “he wanted a bit more security otherwise he might take off overseas and leave me to it” until he finally admitted he probably would not have given his house to Martin if he hadn’t said he might
go to Australia.57
[73] The evidence of Mr Scott, the solicitor, is more direct than these sources since Eric talked to him of his intentions at the time of the transfer. Eric attended Mr Scott with Martin but, according to Mr Scott, Eric was the dominant personality who drove the conversation. Mr Scott thought Eric emphatically preferred Martin over David in terms of succession. He gave clear instructions, accepted advice and effected the documentation Mr Scott drafted. Mr Scott saw no sign that Eric was blind. Nothing caused Mr Scott any concern in relation to undue influence or coercion.
Was there actual undue influence?
[74] In weighing all this evidence I find, on the balance of probabilities, Martin told Eric he was not prepared to look after Eric if Martin would be thrown out on the street on Eric’s death. Eric clearly stated that in the June 2013 affidavit and its force is emphasised by Eric’s fear of acting on his unhappiness as also stated in that
affidavit. I don’t consider the 2016 affidavit adds to the 2013 affidavit, but neither
56 At [19].
57 At [27].
does it detract from it. The suggestion of mental capacity problems which may affect the June 2016 affidavit does not undermine the 2013 affidavit.
[75] Eric’s evidence is consistent with, and supported by, the evidence of David, Ms Palmer, Ms Gallagher and Dr Peebles, about what Eric told them each, independently, about the issue in February 2013, after September 2014, January 2016 and July 2016. Martin’s claim never to have threatened to leave Eric is directly contradicted by Ms Gallagher and by David. David Round clearly has a stake in the outcome of the litigation and an animus towards his brother, but his evidence was clear and detailed. Ms Gallagher impressed me as credible, convincing, clear and detailed.
[76] By comparison I treat Martin Round’s evidence with considerable caution. He is clearly highly intelligent and sensitive. He also struck me as skilled at presenting himself and events in such a way as to best serve his own interests, even where that involves self-deprecation and an element of twisting of the past. I am not saying he necessarily lies. Rather, my impression is he is likely to be able to convince himself, and confidently tell others, that past events actually happened in a way that suits him, even if they did not.
[77] I also accept Martin attempted to keep the property transfer a secret. I consider Martin’s strong resistance to Eric going into a rest home on a permanent basis is likely to have derived from Martin fearing the consequences of others finding out Eric had transferred the house to him and he had spent most of Eric’s money. This is not the behaviour of someone confident of the propriety of their actions.
[78] I accept Eric did not communicate to Mr Scott his fear Martin would leave him if he didn’t transfer the house. But there is no inconsistency between Eric’s determination to present the decision as his own, to an independent professional, and Eric not exercising his own independent will. In fact, the more frightened Eric was of the consequences of Martin leaving, the more incentive he would have had to ensure Martin would not leave and, therefore, to ensure the transfer went ahead by
presenting a confident face to Mr Scott. The statements in his 2013 affidavit that he did not wish to challenge the transfer in his lifetime, for that reason, support that.
[79] Eric’s initial presentation of the issue to the other independent professional with whom he discussed it, Dr Peebles, also started with assertions that the transfer was his own idea - out of the goodness of his heart. It was only when Dr Peebles probed this through further questions that Eric’s story changed. Mr Scott was not inclined to probe. He simply saw his role as following his instructions.
[80] I accept Mr Scott explained the transaction to Eric. But Mr Scott did not pick up that Eric was blind and could not read the documentation. Mr Scott also accepted that Eric would not have understood aspects of it. And a person can understand an act and still be subject to undue influence.
[81] Worryingly, Mr Scott was also under the impression that his professional obligations did not extend to advising his clients of the wisdom of the transactions into which they were about to enter. As the House of Lords pointed out in 2001, part of the core minimum expectations of a solicitor is to “point out the seriousness of the
risks involved”.58 I agree. In this case, that would include inquiring into and
advising on Eric’s financial position and other assets and checking whether he wished to proceed, in the absence of Martin. Mr Scott did not do this. Because of this, Eric did not receive the independent advice that might otherwise have been relevant to whether he was exercising his own independent will. Mr Scott may not have been consciously facilitating Martin’s influence but, like the lawyer in Green v
Green, he did not neutralise it and protect Eric, as he should have done.59
[82] I consider, on the balance of probabilities that Martin’s influence on Eric led to the property transfer and his influence was undue in the sense that the transfer was not the result of the free exercise of Eric’s independent will. It was the result of Eric’s fear that, if the transfer did not proceed, Martin would leave him. I accept
Eric has established he was under the actual undue influence of Martin.
58 Royal Bank of Scotland v Etridge (No 2), above n 44 at 794 and 470.
59 Green v Green, above n 41, at [75].
Alternatively, is there a unrebutted presumption of undue influence?
[83] Even if that was not the case, the same considerations would lead to the same result through the easier alternative route of the presumption.
[84] Ordinarily there is no presumption of undue influence by children over parents.60 However, the English Court of Appeal has observed that influence may exist in “the relationship between a son in the prime of life and parents in the evening of life”.61 I consider a middle-aged man or woman living with, and caring for, their elderly blind parent is a class of relationships that raises the presumption of trust and confidence. And, on the facts, I consider it is clear Eric placed trust and confidence in Martin. In 2012 Martin, in middle age, was living with and had sole responsibility for the care of his blind, 90 year old father.
[85] I also consider it is clear the transaction calls for explanation. Eric gave away his most valuable asset, without which he could not afford the only viable alternative of living in a rest home. I find Mr Scott’s sanguinity about this, and his reluctance to advise on its wisdom, inexplicable.
[86] It is up to Martin to discharge the burden of showing that the property transfer was not the result of undue influence. Martin points to his own denials that it was and to Mr Scott’s evidence. My analysis of these factors above, in the context of the rest of the evidence demonstrates that I do not consider he has discharged that burden.
[87] Either way, I consider Martin’s undue influence led to the property transfer which was not the result of Eric’s free exercise of independent will.
Unconscionable bargain
The law of unconscionable bargains
[88] The equitable doctrine of unconscionable bargain developed in eighteenth and nineteenth century England to restrain an unconscientious use of the power
60 ASB Bank Ltd v Harlick [1996] 1 NZLR 655 at 657.
61 Avon Finance Co Ltd v Bridger [1985] 2 All ER 281 (CA) at 298.
arising out of the circumstances and conditions of the parties. In New Zealand in
2008, in Gustav & Co Ltd v Macfield Ltd, the Supreme Court summarised the basis upon which unconscionable transactions are subject to equitable intervention:62
The Court of Appeal dealt fully and accurately with the authorities which discuss the relevant general principles and no issue was raised in this Court regarding those principles. 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.
[89] The Supreme Court clarified that the focus is on the time of entering the transaction.63 The principles stated by Arnold J for the Court of Appeal, which the Supreme Court approved, were:64
[30] We do not propose to analyse these authorities in detail. Rather, we derive the following principles from them. The principles stated are not exhaustive, but are sufficient for the purposes of this case.
1Equity will intervene to relieve a party from the rigours of the common law in respect of an unconscionable bargain.
2This 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.
3A 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.
4If one party is under a qualifying disability or disadvantage (the weaker party), the focus shifts to the conduct of the other party (the
62 Gustav & Co Ltd v Macfield Ltd [2008] NZSC 47, [2008] 2 NZLR 735 at [6].
63 At [7] and [8].
64 Gustav & Co Ltd v Macfield Ltd [2007] NZCA 205 at [30]-[31].
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.
5Before 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.
6The 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:65
… 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.
8If 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.
[31] While factors such as a marked imbalance in consideration or procedural impropriety are generally present in unconscionability cases, neither is a prerequisite for relief. However, if there is no significant imbalance in consideration or if the weaker party received full independent advice it is unlikely that any issue of unconscionability will arise.
Was the property transfer an unconscionable bargain?
[90] My application of the law of undue influence to the facts here informs my application of the law of unconscionable bargains. It follows from my findings on undue influence that Martin unconscientiously took advantage of Eric.
[91] Eric was unable to look after his own interests adequately. Eric’s situation, of
being blind and elderly and unable to care for himself meant he was under a
65 Bowkett v Action Finance Ltd [1992] 1 NZLR 449 (HC) (citation in original at [29]).
significant disadvantage. He was heavily reliant on Martin for his personal welfare and his financial welfare. That situation significantly diminished Eric’s ability to assess his best interests when confronted with an implicit or explicit threat from Martin. As I have found, there was an explicit threat. I accept Eric considered he had no choice, although that was not how he presented it to Mr Scott. I do not consider this is a case of relieving Eric from his foolishness. Eric’s 2013 affidavit makes clear he considered he had to go along with the transfer because he thought, otherwise, Martin would leave him in the lurch and that would be “disastrous”.
[92] Martin knew Eric relied on him. He knew Eric was acting to his own detriment in transferring the house to Martin. Martin knew, better than anyone else, the state of Eric’s financial situation. Mr Scott’s evidence is that he discussed the prospect of Eric not qualifying for social security assistance at length with Eric and Martin was present. It should have been obvious to Martin that, without substantial assets, Eric would be unable to afford paid care in the future. The fear of others discovering that may have been one of the reasons why Martin so strenuously opposed Eric moving into a rest home. I consider Martin took advantage of Eric’s disadvantage and Eric’s reliance on him. He has not shown the transfer was fair and reasonable. It was not.
[93] The property transfer was so much to Eric’s detriment, Martin was obliged to refuse it. Instead he suggested it, facilitated it, facilitated Eric not receiving independent advice and kept it secret. Equity will not allow Martin to procure or accept the property transfer in these circumstances. It would be contrary to good conscience to do so.
The EQC payment
[94] In the Amended Statement of Claim, Eric:
(a) pleaded he had assigned to Martin the benefit of a claim with EQC for earthquake damage sustained by the property and there appears to be
no response to this in Martin’s pleading;66
66 Amended Statement of Claim dated 25 October 2016 at [13](h).
(b) pleaded EQC had settled a claim by paying to Martin $68,310 which
Martin retained and failed to carry out earthquake damage repairs;67
(c) because of undue influence, sought an order requiring Martin to account for the EQC settlement in the sum of $68,310; and
(d)alternatively, sought the same order on the basis of unconscionable bargain.
[95] There were other pleadings in the Amended Statement of Claim regarding other money but, in his closing submissions, Mr Brodie made clear that only the pleading regarding the EQC funds were pursued. He acknowledged that even those funds seemed to have disappeared but submitted, if there was any left, Eric would want to recover it.
[96] In his Amended Statement of Defence Martin admits the funds received from EQC were transferred to him but otherwise denies the pleading about the claim being assigned to him.68
[97] The difficulty with Eric’s claim for the EQC funds is that it appears to be pleaded on the basis of undue influence and unconscionable bargain regarding the transfer of the property. All the pleadings and evidence were directed to the transfer of the property. There are no pleadings about the circumstances of any assignment of the EQC claim by Eric to Martin. We don’t know when it occurred, or whether it occurred. There is no evidence about any such assignment.
[98] I am simply not in a position to determine whether the EQC funds were assigned to Martin on the basis of either undue influence or as an unconscionable bargain. In any event, it seems that little, if anything, of the EQC funds paid to
Martin are left.
67 At [22]
68 Amended Statement of Defence at [15](h).
What relief should be granted?
[99] I have found the property transfer was the result of undue influence and was an unconscionable bargain. The obvious relief is to vest the property in Eric’s ownership again. I consider equity demands that.
[100] I asked Mr Brodie whether it was fair for such an order effectively to place the house Martin is living in under David Round’s control. He did not have a ready answer other than an assurance David Round has an acute sense of family responsibility and would consider acquiring a home in the country for Martin. I hope that, after the inevitable unpleasantness this litigation will have occasioned, the parties can look forward to renewing their family relationships on a new basis such as that.
[101] I order that the following land is vested in Mr Eric Charles Round of Christchurch, retired: the land comprising first, an estate in fee simple being an undivided one third share of the fee simple in that parcel of land containing 1011 square metres more or less being the land in Lot 13 Deposited Plan 926 and, second, an estate in leasehold for a term of 999 years commencing 2 June 1988 in the land described as Flat 2 Deposited Plan 53162, memorandum of lease 747393.1 collectively described in composite Certificate of Title CB31A/875, Canterbury Registry.
[102] I award costs to the plaintiff. If the parties cannot agree on costs I give leave for brief submissions to be filed within 20 working days of the date of this judgment.
Palmer J
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