Rule v Rule
[2016] NZHC 3160
•20 December 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-005837 [2016] NZHC 3160
BETWEEN DOUGLAS IAN RULE AND
ELIZABETH JANE BELCHER Plaintiffs
AND
LESLEY LOUISE RULE AND ANTHONY CHARLES ON BEHALF OF THE ESTATE OF MURIEL GWENDOLINE RULE
Defendants
Hearing: 19-23 September and 10 October 2016 Counsel:
A C MacMillan for Plaintiffs
W Galvin for Lesley Rule
J D Turner for the estateJudgment:
20 December 2016
JUDGMENT OF WHATA J
This judgment was delivered by me on 20 December 2016 at 1.00 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………………….
Solicitors: B Knowles, North Shore City
McVeagh Fleming, Albany
RULE AND BELCHER v RULE AND CHARLES [2016] NZHC 3160 [20 December 2016]
[1] Muriel Gwendoline Rule passed away in August 2011. Her will leaves the bulk of her estate to her daughter, Louise. There is no provision for Muriel’s other children, Douglas Rule (Doug) and Elizabeth Jane Belcher (Jane), unless Louise pre- deceased her.1 Doug and Jane challenge the will on the basis that:
(a) Muriel lacked testamentary capacity at the time she executed her will, due to a stroke;
(b) Muriel was unduly influenced in the making of her will by Louise;
(c) Muriel breached her moral duty pursuant to s 4 of the Family Protection Act 1955, to make provision for the maintenance and support of the plaintiffs.
[2] At the hearing the executors of the will applied to vary the will to accord with Muriel’s intentions, namely that Louise remain in Muriel’s principal residence until she dies, with Muriel’s share in that house passing to Doug and Jane, or if they have died, to their children. This was not opposed. I will proceed on the basis of the will as varied.
Background
[3] Doug, Jane and Louise were loving children to their mother, Muriel.
[4] On 19 July 2007, Muriel executed a Will (the July Will) in the presence of her lawyer, Mr Tony Coupe; a nurse, Ms Adrianne Wilson; and a neighbour, Mr Ross Armstrong. They did not notice anything wrong with her. Muriel had, in fact, only recently been released from hospital eight days earlier, having suffered a probable neurovascular event, most likely a lacunar infarct. For ease of reference, I will refer to this as the stroke event.
[5] The July Will leaves Muriel’s half share of her principal residence at 3 Rarere
Road, Brown Bay (the family home) to Louise, who had already inherited the other
1 Louise accepts that the July Will was meant to only confer a life interest in Muriel’s half share of
a residential property, being the main asset of her estate.
half share from her father. Doug and Jane were shocked to learn about the July Will. They feel abandoned. They believe Muriel was not competent when she executed the July Will and/or that Louise engineered the outcome. They also believe the previous will, which had been executed only two months earlier, in May 2007 (the May Will), is the only valid Will. The May Will appointed Doug as the sole Executor and left Muriel’s half share to Doug and Jane. Muriel’s competency to issue instructions to prepare and then to execute the May Will is not in dispute. It is, however, necessary to elaborate on the circumstances leading up to the execution of July Will.
The July Will
[6] On 10 June 2007, Muriel was admitted to North Shore Hospital, with a possible infection of her right knee joint. After treatment and a period of rehabilitation Muriel was discharged to an intermediate care/residential home. On 23
June, Muriel presented with a probable stroke event. A CT scan performed on 24
June 2007 showed no haemorrhage or bleeding in the brain, but general atrophy of the brain that was not unusual for a person in her 90s. Muriel remained in hospital care until discharged on 11 July 2007 to her doctor’s care. No formal cognitive impairment testing was undertaken, but the clinical notes and tests done in hospital record that Muriel was alert, orientated, sensory, communicative, engaged, and coping with everyday tasks, like eating breakfast, though not consistently. The clinical notes also report Muriel as having “tangential speech at times” and as being sleepy, confused and not orientated in time and place. At other times she is recorded as alert and orientated.
[7] The process of changing Muriel’s will commenced the following day. Muriel executed a new enduring power of attorney (EPOA) in favour of Louise, revoking the EPOA for Doug. Shortly afterwards, Louise executed the EPOA as well at Mr Coupe’s offices. At about this time Mr Coupe was called by Muriel and given instructions to alter the will so that Louise had a life interest in the family home. He prepared the will and travelled to Muriel’s home on 19 July 2007. Muriel reviewed the will and discussed its terms with him. Two previously arranged witnesses, Ms Nicholson and Mr Armstrong, then witnessed the execution of the will.
[8] On 31 July 2007, Mr Coupe sent a further letter to Muriel enclosing a further account “in relation to your revised Will” and noting the revocation of the EPOA in favour of Doug, and new EPOA in favour of Louise. It also noted that Louise and Mr Coupe were appointed as executor and trustee under the will, and the will “left a life interest in your share of 4 Rarere Road to Louise”.
Muriel’s health in July 2007
[9] Doug, his then wife Sandra, Jane and her son, Brook, recall a marked deterioration in Muriel’s general health and ability to hold a conversation following Muriel’s stroke event. However, at the time of the execution, Mr Coupe (who had no knowledge of the stroke) did not notice any mental fragility or incapacity. Muriel also appeared normal at about this time to Ms Nicholson, Mr Armstrong, Louise and to a friend, Ms Grainne Kalaja, who recalled visiting Muriel in hospital shortly after the stroke event.
Other observations
[10] Muriel’s GPs, Drs McRae and Barber, did not observe any behaviour that might suggest mental incapacity in the months before and following July 2007, though they did note that she was an anxious person. There was also evidence from neighbours, Mr and Mrs Rogan and Marie Moselin, that Muriel appeared normal throughout this period, but I am not satisfied that they made contact with Muriel in July 2007.
The witnesses of fact
[11] Witnesses of fact included Doug, Jane, Louise, Mr Coupe, Ms Nicholson, Ms Kalaja, Mr and Mrs Rogan, Marie Moselin, and Ross Armstrong. They all presented as honest witnesses, holding genuine views about what they recalled happening, including about Muriel’s mental health at the time of the execution of the July Will. Some aspects of their accounts are vague and at times appear unreliable, though for the most part, this is explained by the passage of time or honest error. I will address
the significance of their evidence further, where relevant, below when I turn to the substantive claims.
The expert evidence
[12] As noted Muriel’s GPs gave evidence about Muriel’s health in the years
leading up to and following the stroke event. To them she appeared normal.
[13] Two experts on Muriel’s testamentary capacity were called, Dr Monash for the plaintiffs and Dr Wood for the defendant. Their evidence is central to the resolution of the first claim so I will examine it in some detail. I preface this by observing that they helpfully reached agreement on certain matters which has been replicated in attachment A.
Dr Monash
[14] Dr Monash is a medical practitioner specialising in occupational medicine, with experience in the rehabilitation of people suffering from various types of brain insult, such as trauma, poison (such as carbon monoxide), or natural causes like stroke. He carefully reviewed Muriel’s medical records between May and July 2007. In his opinion:
(a) Muriel suffered a small stroke on or about 23 June 2007 and was diagnosed as having had a LACI (a set of clinical stroke syndromes) or stroke.
(b)It was most likely to be a brain blood vessel blockage with brain tissue death or infarction.
(c) It unlikely to be bleeding, leading to pressure on the brain and disruption of brain tissue inside.
(d)There was no assessment of her mental capacity at the time in an expert sense.
(e) There were a number of indicators that identified ongoing impairment of her cognitive abilities or mental cognition, including sleepiness, inability to self-help, a confusion about certain complex facts, for example, Louise’s employment status.
(f) Muriel’s medication of lorasapam may have aggravated her cognitive abilities, particularly at the time that she executed the will.
[15] Dr Monash was cross-examined extensively on his opinion about whether Muriel’s mental cognition was properly tested by reference to the medical notes. He did not resile from his position that it was not. When pressed on the fact that there were other behavioural indicators which may have suggested that she had recovered by the time of the execution of the will, he said that none of them were convincing or persuaded him that there had been a full recovery and he felt it was unlikely that there would have been.
Dr Wood
[16] Dr Wood is a specialist in geriatric treatment, including geriatric research. He addresses the specific question of whether or not it was more likely that Muriel was incapacitated at the time she executed the will. He carefully reviewed all available medical notes. He opined:
(a) Muriel is likely to have suffered a small stroke-like event in the central part of her brain which appears to have been confirmed by review of CT scans undertaken in 2010 and 2011.
(b) Muriel most likely suffered from a LACI – or lacuna infarction.
(c) It is possible that such an event may have diminished her cognitive reserve, particularly as she was very old, but various observations and tests made of Muriel indicate that she was functioning normally by the time she was discharged, including:
(i)The National Institute of Health Stroke Scale (NIHSS) assessment which resulted in a zero or normal function result, an excellent predictor of patient outcomes and indicating a strong probability of good recovery.
(ii)Dr Yosini’s report which also tended to corroborate the analysis that Muriel had recovered cognitively by the time of discharge.
(d)There is no specific mention of cognitive difficulties in the medical notes at the time of discharge.
(e) Confusion was noted on 24 June 2007 but that, over time, it had improved.
(f) The discussion in the medical notes relating to Muriel’s ability to operate the knee brace tended to suggest that she was operating in a normal way.
(g)Based on the information available, the effect of the stroke event was likely to have been relatively minor, affecting the silent part of the brain and, in particular, the cerebellum and therefore unlikely to affect the cognitive function.
(h)Any effect was likely to have been subtle and the impact imperceptible after a few weeks.
[17] Dr Wood responded to Dr Monash’s analysis. He accepted that it is appropriate to look at surrounding evidence but that on the information available to him Muriel was competent. He also referred to the 5 July 2007 notes which indicated that she had tangential speech at times, but discounts that as a significant factor. He also discounts the fact that Muriel appeared to be having problems with mechanical tasks, such as a catheter, noting that there is a difference between dealing
with new mechanical tasks and remembering historical detail and facts for the purpose of executing a will.
[18] Dr Wood was taken, in cross-examination, to the high points of the plaintiffs’ case in terms of indicators of mental impairment. He did not resile from his position. He maintained that problems in dealing with the catheter engage processes that are distinct from cognitive processes, so any problems about that were not necessarily indicative of a mental impairment. He disputed the importance of Muriel telling her lawyer that Louise was unemployed (which was wrong), if she in fact said that. In his view, there could be many reasons for this, including that she may have been thinking prospectively at the time, i.e. on the basis that Louise would have to stay home to look after her. He noted also it was a highly emotional context and that may have influenced what she said to her lawyer.
Overview comments on expert evidence
[19] Neither expert came through the evidence process totally unscathed. Both of them appeared to be unduly dismissive about behavioural indicators that did not favour their respective positions. Dr Monash did not have specialist geriatric experience and his review of available information was incomplete. On the other side, I found aspects of Dr Wood’s evidence to be unclear in terms of the significance of statements allegedly made by Muriel to Mr Coupe at the time of the
execution of the will.2 At times he appeared to shade into advocacy on this topic.
Nevertheless, I am satisfied overall that both experts presented a proper, reasoned basis for their respective opinions and their agreed statement provided considerable assistance to me.
[20] Having said that, I consider that Dr Wood’s more specialist experience and detailed review of the medical notes provided a more accurate account of Muriel’s condition and supports a finding that Muriel had largely (though not completely) recovered, in terms of her cognitive abilities, by the time of discharge. In particular,
I consider his opinion was better supported by the medical notes, including the
2 Mr Coupe said in his first statement that Muriel told him that Louise was unemployed. This was wrong and Muriel should have known this.
NIHSS assessment and other medical reports which provided a more objective measure of her recovery than debatable observational information, including the accounts provided by lay witnesses of fact. Furthermore, and in any event, the preponderance of the observational evidence favoured his assessment.
Capacity
[21] Ms MacMillan, for the plaintiffs, submits:
(a) There is a tenable issue as to lack of capacity – given the medical evidence of stroke and circumstantial evidence of mental incompetence at the time;
(b)Louise must therefore show on the balance of probabilities that Muriel did have mental capacity at the time she executed the July Will;3
(c) This requires proof demonstrating Muriel’s understanding of three
things:4
(i) She was making a will and the effect of doing so; (ii) The extent of the property being disposed of;
(iii)The moral claims to which she ought to give effect when making testamentary dispositions.
(d) Relevant factors showing incapacity include:5
(i) The May Will;
3 Citing Public Trustee v Bick [1973] 1 NZLR 301 (CA); Peter v Morris CA99/85, 19 May 1987;
Watkins v Public Trustee [1960] NZLR 326 (CA).
4 Citing Re Howie (dec’d) [2014] NZHC 346; Bishop v O’Dea (1999) 18 FRNZ 492 (CA) and
Green v Green [2015] NZHC 1218.
5 Other matters were raised, but they were speculative at best, for example that (possible) utterances by Muriel about the unfairness of another person’s will showed she thought the July Will may have been unfair.
(ii)
(iii)
Muriel’s long-held belief in treating her children fairly;
Muriel suffered a stroke with symptoms still present for more
than 24 hours, with blockage of arteries and brain damage likely; (iv)
No formal cognitive testing was done, and the motor function testing was inconclusive;
(v)
The medical notes reveal cognition difficulties;
(vi)
Muriel was uncharacteristically uncommunicative at the time;
(vii)
Louise accepted that Muriel was confused at certain times of the day, had tangential and slurred speech for a week or so
after discharge; (viii)
Muriel knew Louise was working prior to the stroke, but told
Mr Coupe at the time of executing the July Will that Louise was unemployed (when she was still employed by Air NZ); (ix)
Muriel told Ms Nicholson that she was giving Louise the family home, Doug the house at Stanley Point and Jane
something else; (x)
Mr Coupe could not positively recall whether Muriel had the
requisite mental capacity. Assessment
[22] The principles addressing testamentary capacity were thoroughly canvassed by Winkelmann J in Green v Green,6 recently approved by the Court of Appeal.7 I
borrow that statement (with necessary modification for context):
6 Green v Green, above n 4.
7 Green v Green [2016] NZCA 486.
[89] … the following principles apply to the enquiry as to [Muriel’s]
capacity:
(a) Capacity must be assessed in relation to the specific decision or act that is questioned.
(b) For [Muriel] to have had the capacity to make the various decisions that are now challenged [she] needed to have the capacity to understand the nature of the particular act and its effect.
(c) In respect of testamentary capacity, to that must be added the capacity to understand the extent of the property that [Muriel] was disposing of, and to comprehend and appreciate the claims to which [she] ought to give effect.
(d) The enquiry in all cases is into [Muriel’s] capacity to understand rather than [her] actual understanding. As the English Court of Appeal has stated:
If there is evidence of actual understanding, then that would prove the requisite capacity, but there will often be no such evidence, and the court must then look at all the evidence to see what inferences can properly be drawn as to capacity. Such evidence may relate to the execution of the Will but it may also relate to prior or subsequent events. It would be absurd for the law to insist in every case on proof of actual understanding at the time of execution.
(e) In relation to the challenge to the will, as the will is rational on its face [Doug and Jane] must establish a tenable case that [Muriel] lacked capacity. If [they] can do this then the onus shifts to the defendants to show that [Muriel] had capacity.
(f) However, where a will has been professionally prepared and the lawyer has formed the view that the will maker has capacity, the Courts should not too readily overturn that view, particularly on the basis of expert evidence, where the expert did not interact with the testator. As the English Court of Appeal said in Hawes v Burgess:
[60] My concern is that the courts should not too readily upset, on the grounds of lack of mental capacity, a will that has been drafted by an experienced independent lawyer. If, as here, an experienced lawyer has been instructed and has formed the opinion from a meeting or meetings that the testatrix understands what she is doing, the will so drafted and executed should only be set aside on the clearest evidence of lack of mental capacity. The court should be cautious about acting on the basis of evidence of lack of capacity given by a medical expert after the event, particularly when that expert has neither met nor medically examined the testatrix, and particularly in circumstances when that expert accepts that the testatrix understood that she was making a will and also understood the extent of her property.
(g) In relation to the other challenged decisions the onus of proof lies on [Doug and Jane]. It does not shift as it does with testamentary capacity.
(Footnotes omitted).
[23] The Judge also noted:
[91] Many of these principles as they relate to testamentary capacity were helpfully elucidated by the Court of Appeal in Woodward v Smith as follows:
[19] The celebrated judgment of the Court of Cockburn CJ in the Queen’s Bench (Cockburn CJ, Blackburn, Mellor and Hannen JJ) in Banks v Goodfellow (1870) LR 5 QB 549 remains the leading authority on testamentary capacity. We paraphrase and number the propositions stated in that case at 565–8:
(1) Because it involves moral responsibility, the possession of the intellectual and moral faculties common to our nature is essential to the validity of a will
(2) It is essential to the exercise of such a power that a testator: [i] understands the nature of the act and its effects; and
also the extent of the property of which he is disposing;
[ii] is able to comprehend and appreciate the claims to which he ought to give effect;
[iii] be free of any disorder of the mind which would poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties; that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not have been made.
(3) Unsoundness of mind arising from want of intelligence caused by defective organization, or by supervening physical infirmity or the decay of advancing age, as distinguished from mental derangement is equally cause of incapacity. But
[i] though the mental power may be reduced below the ordinary standard, yet if there be sufficient intelligence to understand and appreciate the testamentary act in its different bearings, the power to make a will remains.
[ii] It is enough if the mental faculties retain sufficient strength fully to comprehend the testamentary act about to be done.
(4) It is not necessary that the testator should view his will with the eye of a lawyer, and comprehend its provisions in their legal form. It is sufficient if he has such a mind and memory as will enable him to understand the elements of which it is composed, and the disposition of his property in its simple forms.
(5) In deciding upon the capacity of the testator to make his will, it is the soundness of the mind, and not the particular state of the bodily health, that is to be attended to. The latter may be in a state of extreme weakness, feebleness or debility and yet he may have enough understanding to direct how his property shall be disposed of; his capacity may be perfect to dispose of his property by will, and yet very inadequate to the management of other business, as, for instance, to make contracts for the purchase or sale of property.
(6) A testator who has reflected over the years on how his property should be disposed of by will is likely to find it less difficult to express his testamentary intentions than to understand some new business.
(7) Testamentary capacity does not require a sound and disposing mind and memory in the highest degree; otherwise, very few could make testaments at all;
(8) Nor must the testator possess such capacity to the same extent as previously. His mind may have been in some degree weakened, his memory may have become in some degree enfeebled; and yet there may be enough left clearly to understand and make a sound assessment of all those things, and all those circumstances, which enter into the nature of a rational, fair, and just testament.
(9) But if that standard is not met, he will lack capacity. (Footnote omitted).
[24] Applying this guidance, the plaintiffs have not shown a tenable case that Muriel was incapacitated at the time that she executed her will, but even if they had, I am satisfied on the evidence that Muriel was not incapacitated at the time she executed the July Will. That finding is supported by:
(a) The expert evidence of Dr Wood, who, as noted, is a specialist geriatrician. He thoroughly canvassed all the available medical notes and opined that Muriel displayed the normal functioning when she was discharged and was likely to have recovered from the stroke
event by the time she executed the Will. In this regard, I do not accept Ms MacMillan’s criticism that Dr Wood was unduly adversarial in his evidence (though as noted his evidence shaded into that territory at times). In my view, however, his firmness was logically based on a fair interpretation of the available information.
(b)The experts agreed that Muriel had suffered a minor stroke and that there were some indicia, at least on her discharge, of the effects of the stroke on her mental capacity. While they did not agree about whether she was mentally incapacitated at the time she executed the will, they agreed “the recovery time and rehabilitation of the testatrix for the [LACI] Event was relatively short, due to it being minor LACI/minor stroke with limited observed deficit”.
(c) I prefer the evidence of the witnesses of fact in closest proximity to Muriel at the specific time that she executed her will, including Mr Coupe,8 and the two witnesses, Mr Armstrong and Ms Nicholson.9
They uniformly considered that she appeared to be normal and articulate at that time. This evidence was also supported by Louise’s observations who presented as unsophisticated and an honest witness
– a topic to which I return below.
(d)While Dr Monash raises a number of matters which provide some foundation for the argument of mental incapacity, I found him less convincing in relation to the period immediately leading up to and at the time of the execution of the will. It may well be that there was a period of mental incapacity. But even if so, the clinical medical
record and observational evidence does not support a finding of
8 Mr Coupe gave affidavit evidence that he recalled clearly that at the time of execution of the July Will that Muriel was very definite about the contents of the will. In cross-examination he noted that he very clearly remembered reading her the will because she had a pair of glasses on at the end of her nose and that she took a few minutes to read each line. Although he could not say for certain that she comprehended the July Will, he said he had no reason to believe that she did not comprehend it at the time. However, Mr Coupe conceded that he was unable to recall exactly what Muriel said in his discussion with her that day.
9 In saying this I do not discount the evidence given by Doug, Jane and her son that Muriel appeared withdrawn and non-communicative when they spoke to her, and that she still needed constant care when she was discharged.
substantive incapacity by the time she executed the will. At its highest, the evidence appeared to support the proposition that, on her discharge, Muriel was not her usual self at certain times of the day, was still suffering from slurred speech and had difficulties performing certain tasks. Balanced against that, there was substantial evidence to suggest that she was improving quickly and had mastered a number of difficult complex behaviours as evidenced by the NIHSS test on her discharge.
(e) Ms MacMillan made much of the fact that there was evidence that Muriel may have mistakenly said: (a) to Mr Coupe that Louise was not employed at the time she executed the will; and (b) to Ms Anderson that she gifted the Stanley Point property to Doug. This is important, according to Ms MacMillan, because it shows that Muriel may have been operating under a mistake of fact which can only be explained by mental deficit. But I do not place great weight on the recollection of witnesses some six to ten years after the key alleged utterances. Mr Coupe was initially adamant in early affidavits that Muriel had told him that Louise was out of employment, but changed his position on learning that Louise was in fact employed at the time. However, I accept his explanation that it may have been emphasised to him that Muriel was concerned about Louise in the event that she became unemployed. I also have no reason to doubt Mr Coupe’s honesty. He, like Louise, also presented as a forthright witness, though he understandably struggled with some of the detail given the elapse of time. As to the evidence about the Stanley Point property, this may also be reasonably explained either by misunderstanding or by the fact that Muriel believed that she had made a substantial contribution to the Stanley Point property, because it transpired she provided a loan for the purposes of its purchase by Doug. In any event, it is simply speculative at this distance to suggest she made any particular statement about Stanley point or what was meant by it.
[25] Overall, I accept the evidence of Dr Wood, supported by the available medical notes, eyewitness testimony at the time of execution and Mr Coupe’s direct oversight, together with the broader circumstantial evidence, including subsequent medical assessments, to the effect that it demonstrates Muriel did not lack testamentary capacity at the time of execution of the July Will or subsequently.
[26] One residual concern relates to whether the effect of the July Will was made clear to Muriel and/or that she was clear about its effect. There is a paucity of documentary evidence about what was explained to her, and the fact the July Will as drafted wrongly vested the principal residence in Louise without any benefit being conferred to Doug and Jane. Had this been the outcome, then I may have been less inclined to find capacity, given the inherent unfairness arising.10 But Mr Coupe explained that this was simply a drafting error, and it was always intended that Doug and Jane receive Muriel’s half share on Louise’s passing. While the delay in the
vesting raises issues of fairness (as I will come to below), it does not trigger
sufficient concern to demand still closer examination of Muriel’s capacity.
Undue influence
[27] The threshold principles for undue influence in a will-making context were also canvassed by Winkelmann J in Green and expressly approved by the Court of Appeal.11 They broadly align with the propositions made by Ms MacMillan for the plaintiffs.12 They are:
[100] The principles I apply as to the law of undue influence are as follows:
(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
10 For the principles and limitations underpinning this approach see Green v Green, above n 4, at
[98]-[99].
11 Green v Green (CA), above n 7, at [35].
12 Citing Fisher J in Re estate of Dudley, Irvine v Simeti HC Auckland P1042/92, 14 May 1993. I
note that Green v Green, above n 4, was also footnoted in Ms MacMillan’s submissions.
offending), the Court will require strong evidence to be satisfied on the balance of probabilities that that occurred.
(c) The person asserting undue influence must show that the alleged influence led to the making of the impugned transaction, and that the influence was undue in the sense that the transaction was not the result of the free exercise of an independent will on the part of the person at whose expense the transaction was made.
(d) The question of whether a transaction was brought about by undue influence is a question of fact. A party can succeed in establishing this either directly by proving “actual undue influence“ or recourse to an evidential presumption which arises where it is established that:
(i) the person said to have been subject to undue influence placed trust and confidence in the other; and
(ii) the transaction called for explanation.
(e) Whether there is a relationship of trust and confidence can either be established factually or by reference to a class of specific relationships such as lawyer/client; parent/child; doctor/patient. In the latter category the law presumes irrebutably that one party had influence over the other. The presumption is only as to proof of influence. The person alleging undue influence will still need to establish a transaction calling for an explanation.
(f) Whether a transaction calls for an explanation depends on the circumstances of the case. The question is simply whether “failing proof to the contrary, [the transaction] was explicable only on the basis that undue influence had been exercised to procure it”.
(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.
[101] In relation to the alleged undue influence in the making of a new will
I recognise the following additional points:
(a) In relation to the alleged undue influence in the making of a new will, the burden of proof rests upon the plaintiff. There is no evidential presumption that [Doug and Jane] can rely upon.
(b) Pressure of whatever character can amount to undue influence if it overbears the will of the testator. As Sir JP Wilde recognised:
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:
… 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.
(Footnotes omitted).
[28] Applying this framework, I can deal with the undue influence claim briefly. It is not strong. First, a small but important point, Louise was not directly cross-
examined on whether she set out to influence her mother to change her will. While that is not fatal to the plaintiffs’ case, the absence of direct challenge means that it is very difficult to make adverse credibility findings on this issue.
[29] Second, as I have said, Louise presented as an honest, unsophisticated witness. She earnestly addressed each question put to her and she made concessions without apparent pause or forethought for the consequence, including that Muriel’s speech slurred from time to time shortly after discharge and that there was marked difference between her mother’s health pre and post the stroke event. She denies the allegations of undue influence and there is nothing concrete in the evidence to suggest that she placed pressure on Muriel to change her will. Rather, the evidence reveals that she was a loving daughter, having lived with her mother her entire life and as her primary caregiver in Muriel’s dotage.
[30] Louise’s evidence did initially appear to unfairly claim that Doug did not always enjoy his mother’s affection and that his family was not always actively in touch with Muriel. But she readily accepted in cross-examination that Doug was a loving son and that she was simply recalling what her mother had said from time to time. She was also pressed on her knowledge about the July Will and she did seem to struggle with questions about whether she was surprised at the contents of the will, which tended to suggest that perhaps she did know something about the outcome before it was made known publicly. But, overall, she maintained that she was not familiar with the terms of the will at any time and I was satisfied she was not being untruthful about this.
[31] Third, the circumstantial case for the plaintiffs is insubstantial. Four factors were emphasised: Muriel was vulnerable; Louise was preferred and was in close proximity to her mother; Louise disliked Doug; and Muriel had otherwise expressed an interest in dealing with all of her children fairly. Muriel’s condition is a reason for caution, but the mere fact that Louise has been preferred and had a close relationship with Muriel does not provide a presumptive basis of undue influence in
a will making context, as noted above.13 The fact that she has been preferred over
13 Green v Green, above n 4, at [91] citing Silbery v Silbery-Dee HC Wellington CIV-2005-485-
2499, 22 August 2007 at [67]–[68] and Puru v Puru HC Auckland CIV-2007-404-3881,
her siblings, insofar as she has been gifted a life interest, can be rationally explained by dint of the fact that Louise has always lived in the home, provided direct care to the mother over a number of years and her mother was anxious about Louise’s future. It is also significant that Muriel’s share of the family home was left to Doug and Jane on Louise’s death. I address below as to whether or not this result satisfies the Family Protection Act 1955 requirements in terms of moral duty, but it is sufficient, in my view, to dispose of the issue of undue influence based on preferential treatment per se.
[32] I accept there was evidence Muriel wanted to provide for all her children, including the May Will itself.14 But I consider she had a reasonable basis, independently of Louise’s influence, for structuring the July Will in the way that she did: there was ample evidence of a genuine and understandable anxiety about where Louise might live after her death. The available record (including notes apparently written by Muriel and the letter of advice on the May Will) shows that Muriel had
long been concerned to provide for Louise in terms of her occupation of the family home. Furthermore, while Louise appears to have had an active role in obtaining Mr Coupe’s assistance, his presence and his evidence that Muriel was happy to change the will to provide a life interest in favour of Louise militates against the prospect of undue influence. Finally, some significance was placed on the fact that Louise cancelled a planned session for Muriel with health services. But this is a rather slim basis upon which to conclude that Louise pressured Muriel into changing her will.
[33] Given the foregoing, there is no proper basis for finding undue influence.
5 November 2008 at [79]–[80].
14 Together with notes apparently written by Muriel recording that Doug and Jane were to receive a
quarter each of her share of the property and a hand written note by Muriel’s brother in law, Alfred. While the admissibility of this evidence is disputable, I have taken it into account because it plausibly corroborates the evidence by Doug and Jane that Muriel wanted to provide for them all. I however reject as speculative the opinion expressed in Alfred’s note that Muriel would not have changed to the will to exclude Doug and Jane unless she was “under undue influence.”
[34] As stated by the Court of Appeal in Williams v Aucutt15 the test in terms of Muriel’s moral duty to her children is whether, objectively assessed, there has been a breach of moral duty judged by the standard of a wise and just testator. There is no presumption in favour of equal treatment. Mere disparity or unfairness is not enough. Rather, a composite enquiry into financial, moral and ethical considerations at the time of Muriel’s death is required. I agree with Ms MacMillan that relevant factors to take into account include: the claimant’s age, health, assets, income, need to support other dependents, previous standard of living, absence of previous inheritance from the other parent, the likelihood of a future inheritance from the other parent and any misunderstanding by the testator. Further as Ms Galvin submitted for Louise, the moral duty extends beyond mere economic need to support in the form of recognition as family members, while at the same time acknowledging that Muriel was presumptively best placed to appreciate the claims on her estate. If breach is
established, then only sufficient provision to repair the breach is necessary.16
[35] The claim of breach can be stated simply: there is a real risk Doug and Jane will not receive any benefit from Muriel’s estate (except Jane has received forgiveness of debt of $12,000) because Louise, their younger sister is unlikely to die before them. There is no suggestion that their mother was ill disposed towards them and had always expressed a desire to treat her children fairly, yet the realistic effect of the July Will is to exclude them altogether. This breach is exacerbated by the fact that they were, at the time of Muriel’s passing, in similar circumstances to Louise. By contrast, Louise had already received a half-share of the family home: after her father died in 1991, Muriel received his half-share in the house, and on 6 July 1994
Muriel subsequently transferred that half-share to Louise out of a concern that Louise be provided for in the event that Muriel pre-deceased her. Under the July Will, Louise received a life interest in Muriel’s share valued at approximately
$325,174 (using rating value) or $441,812 (using market value) together with the
residuary estate of $215,300.
15 Williams v Aucutt [2000] 2 NZLR 479 at 472.
16 See Vincent v Lewis [2006] NZFLR 812 (HC) at [81]; Auckland City Mission v Brown [2002] 2
NZLR 650 (CA) at [33]–[38] and [45].
(a) Muriel appreciated their moral claims, reflected in the fact that Louise’s interest in the family home is simply a life interest and even if Louise were to sell, she could not resort to using the capital;
(b)Any relative disparity is explicable by her greater claim given the nature of her relationship with, and support of, Muriel, together with Muriel’s relatively modest estate.
Assessment
[37] At the time of Muriel’s death:
(a) Doug, Jane and Louise enjoyed the love and affection of their mother
– Louise (properly) conceded that any suggestion otherwise was wrong;
(b) Their financial circumstances were and are similar:
(i)Doug’s total assets were valued at $657,000 as at 2011, together with earnings of $30,071 p.a. Doug’s current assets are valued at $785,000 plus earnings of $27,327 p.a. (including superannuation).
(ii)Jane’s total assets were A$475,200 as at 2011 plus earning income of $42,500 p.a. Jane’s current assets are $733,721 plus earning income of $45,000 p.a. plus superannuation of approximately $15,000 p.a.
(iii) Louise’s total assets were $649,300 plus earning income of
$37,789 p.a. Louise’s total current assets are $697,782
(excluding the life interest in the property)17 plus a sickness benefit of $12,441 p.a.
(c) Both Doug and Jane were employed at the time of Muriel’s passing,
while by this stage Louise had taken up full time care of Muriel (since
2008). In three years time all three siblings will be on the same superannuation income.
(d)Doug and Jane have been diagnosed with serious medical illness: Doug with recurring prostate cancer (for which he had surgery in
2010) and back problems; Jane with Barrett’s oesophagus since 2008, irritable bowel disease and back problems stemming from a car accident in the 1970s. Louise does not report as having serious ill health at the time of her mother’s passing.
(e) Doug (70) and Jane (66) have attained retirement age, while Louise
(62) is approaching it.
(f) As noted, Louise had already been given a half share of the property at the time of Muriel’s death and with the life interest will have benefited from her parents’ estates in the value of approximately
$1,000,000 (existing half interest of $460,000, life interest of
$325,174 and residual estate of $215,000, but Ms Galvin advises that this final figure is now less than $88,000 due to litigation costs). In comparison, the value of the estate left with Doug and Jane is about
$147,000 (assuming a $134,826 remainder value), including Jane’s
forgiveness of debt.18
[38] Given the foregoing (and assuming that the financial difference is a rough estimate only), the provision made for Muriel’s children is grossly disparate, taking into account financial, moral and ethical considerations. This is further exacerbated
by the fact that as Doug and Jane are much older than Louise the prospect of them
17 Based on half rating value of the family home property.
18 Doug was also loaned money to purchase his home, but this was repaid.
enjoying any meaningful form of recognition is low. All things being equal, the authorities suggest that a distribution in the order of 10-20 per cent would usually satisfy the moral duty to a loving child.19 I therefore accept the plaintiffs’ basic proposition that the will is deficient both financially and emotionally and in a way that is discordant with evidence of Muriel’s prior commitment to caring for all her children.
[39] As mentioned above, I am troubled by the lack of clear documentary evidence showing that this effect was discussed with Muriel. I mean no criticism of Mr Coupe, as it is clear he was acting on her instructions. But there really is nothing to suggest that Muriel fully appreciated the full consequences of her decision to leave a life interest in the family home to Louise. While I have not put any store on the claim that Mr Coupe told Doug and Jane that the July Will was morally wrong; had he made that statement, he would have had a solid basis for saying so.
[40] I acknowledge that given Louise’s very close relationship with her mother in all senses, Muriel was fully entitled to provide for Louise as best she could, including to express some preference for her. But when the disparity is as stark as it is in the present case, I am satisfied that the moral duty she owed to her other loving children was breached.
[41] I turn then to remedy. Scant attention was given to this in the submissions. It is not about achieving parity and is complicated by the fact that Muriel’s legitimate concern about Louise’s future underlay the life interest. I think some sophistication is needed in terms of providing a just result for all the children. My current thinking is that this will be achieved by vesting of Muriel’s half share in Doug and Jane as tenants in common when Louise reaches the age of 67 (five years from now). This will remedy the breach while recognising Muriel’s legitimate desire to secure long- term residence in the family home for Louise. This will give Louise ample time to find alternative accommodation, while providing a fixed point for Doug and Jane in terms of the recognition to which they are entitled. I would have been minded to
award a monetary sum if there were sufficient funds in the estate. Regrettably, legal
19 See the decision of Wild J in National Heart Foundation of New Zealand v Carroll (2009) 28
FRNZ 268 (HC) at [54] and the decision of the Full Court in TB v JB [2014] NZHC 478, [2015] NZFLR 9 at [71].
fees have reduced this figure from about $200,000 to $88,000, so that is not an option.
[42] But given the complexities of this case, I wish to afford the parties an opportunity to submit to me on the proper relief for the breach of moral duty. While I have expressed a preference for an outcome, I remain open to be persuaded that a different approach should be taken. Ultimately, the most preferable outcome is one where Doug, Jane and Louise reach an agreement that accords with Muriel’s long- stated desire that all her children be treated fairly while securing a home for Louise.
[43] Accordingly:
(a) I find that Muriel breached her moral duty to Doug and Jane, by providing a residual interest only in her share of the family home;
(b)I reserve leave to the parties to file submissions on relief. I do not propose to fix a timetable for this in the hope that the parties will reach some agreement. However, if any party wishes to fix a timetable for submissions, then leave is also granted to make that request.
Costs
[44] If agreement cannot be reached about costs, submissions should be filed by Doug and Jane, with reply submissions by the Estate and Louise to be filed three working days thereafter. Any memoranda longer than three pages, normal type script will be returned to counsel unread.
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