Sen v Public Trust
[2022] NZHC 1776
•22 July 2022
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE
CIV-2019-442-48
[2022] NZHC 1776
BETWEEN LATIKA DEVI SEN
Plaintiff
AND
PUBLIC TRUST
Defendant
AND
MICHAEL ALLAN FRIEND AND JUDITH LEIGH FRIEND
Interested Parties
Hearing: 30 May – 1 June 2022 Appearances:
L S Acland for the Plaintiff
J C Ironside and P J Bellamy for the Interested Parties
Judgment:
22 July 2022
JUDGMENT OF COOKE J Table of Contents The plaintiff’s claims
[5]
Contract [15] Promissory estoppel [19] Capacity [21] Undue influence [34] Unconscionability [42] Conclusion [50]
[1] In March 2015 Mr Colin Friend, then aged 88, won $1 million in bonus bonds. Some three months later he purchased a house in Stoke near Nelson for $425,000. He then made a proposal to his friend, Mrs Latika Sen — if she and her family returned
SEN v PUBLIC TRUST [2022] NZHC 1776 [22 July 2022]
to Nelson from Wellington to resume providing him with friendship and care as they had previously when they lived in Nelson, they could live in the new house and it would become hers after his death. Latika agreed and on 18 June 2015 she signed the documents transferring ownership of the property into the names of Colin and Latika as joint tenants. Latika and her family then left Wellington and moved into the house in August 2015, and duly then provided Colin with the promised friendship and support.
[2] Shortly before his death less than a year later Colin’s family found out what had happened. They were providing him with the final care he needed in the period through to his death. Mr Michael and Ms Judith Friend were told by Colin what he had done. Colin also said that he had provided additional financial benefits to the Sen family. This turns out not to be true. In any event, Michael and Judith formed the view that Latika had taken advantage of Colin. After taking advice from Mr Tony Stallard, Michael Friend used his authority under a power of attorney to sever the joint tenancy so that Colin and Latika owned the property only as joint tenants, not tenants in common. This meant that on Colin’s death on 28 April 2016 only half the property passed to Latika.
[3] Latika now brings these proceedings advancing two causes of action — breach of contract and promissory estoppel. The Public Trust (acting as executor), but substantively Michael and Judith, defend the claim on the basis that Colin did not have capacity when entering the agreements under which Latika obtained the joint tenancy with Colin. They also say that in accordance with the principles of undue influence and unconscionability she is not entitled to that interest. Moreover they advance a counterclaim requiring the remaining half share held by Latika to be transferred to the Public Trust as executor, although in closing Mr Ironside for the family only advances the issues of unconscionability and undue influence as defences to Latika’s claim for the full share.
[4] The trial proceeded before me over three days. It was set down for the week but it proceeded more efficiently as the hearing was conducted by remote means. I heard evidence from Latika, the legal executive involved when Colin entered the agreements with Latika (Mr Mervyn Huston), members of the family (Michael and
Judith Friend, as well as Ms Carla Eade and her partner Mr Corrie Curnow) and from Tony Stallard. I also heard expert evidence from Dr Jane Casey and Dr Suzanne Busch relating to Colin’s capacity, and Mr Mark Dobson relating to appropriate steps when taking instructions from those who may have capacity issues.
The plaintiff’s claims
[5] I deal with the plaintiff’s claim in contract, and then the claim in promissory estoppel before addressing lack of capacity and undue influence/unconscionability.
[6] Latika and her family immigrated to New Zealand from Fiji in February 2011 living in Nelson. In June or July that year they met Colin outside a dairy when he was waiting for it to open to get his newspaper. Over the following months and years they became good friends, and Latika and her family provided him with both friendship and support.
[7] Colin had health issues. He had a spell in Nelson hospital in 2012. Later in February 2013 when he was visiting Latika’s husband in hospital he fainted. It turned out that he needed a pacemaker for his heart which was subsequently installed. He was more seriously sick in May 2013 and spent some weeks in hospital. There was some concern by hospital staff that he should not be living at home on his discharge on 19 June. There was some consideration given to him having respite care, or temporary accommodation at a rest home. At this stage he took a mental state assessment scoring 23 out of 30 which led Dr Bosch diagnosing that he had mild dementia.
[8] When Colin was discharged a decision was made, after consultation with Colin’s family, Latika and her family, and hospital staff that he would be discharged into Latika’s care. He stayed in their home for about two months, returning to his own home thereafter.
[9] In late 2014 Latika and her family relocated to Wellington for better work opportunities. Colin remained in touch, and told them he wanted them to return to Nelson, but Mr Sen had a good job and they liked living in Wellington. Colin was obviously disappointed.
[10] In March 2015 Colin won $1 million in bonus bonds. It is apparent that Colin gave reasonably careful consideration on what to do with his new fortune. First he made some specific gifts. He gave Latika, Michael, Judith and three grandchildren
$10,000 each. He then devised a plan to get Latika and her family back into his life. Although it is only evidenced by documents it is first apparent that he found a property for purchase in Stoke near Nelson. He signed an agreement for sale and purchase on 10 June 2015. It appears that there was some negotiation as the purchase price on the face of the contract was increased by Colin from $419,000 to $425,000 before being accepted by the vendors.
[11] Colin then made a proposal to Latika that month. He asked her to come to Nelson because he had a big surprise. He met her at the airport and asked her if she would look after him when he was sick. She said that she would and he then told her that he had bought a house for her and her family in Nelson. He then said that she and her family could move back to Nelson and that he could then live with them when he got sick instead of being in a rest home. He said that she would then own the house when he died. He drove her to the house and showed it to her from the outside.
[12] Latika then discussed the situation with her husband, and they decided to accept Colin’s offer. In order to sign the necessary documents Latika needed her passport, which was sent by her immigration lawyer a day or two later. Colin then took Latika to the lawyers to sign the legal documents. Latika was advised that when Colin died the house would become hers. The relevant documents were signed on 18 June 2015.
[13] Latika moved into the house in August and her husband soon followed. Whilst they were not as physically close to Colin as they had previously they would still see him every day. He had his own bedroom at the house and would stay overnight during the week.
[14] In March 2015 Colin was admitted to hospital again. On 4 April he was advised he had serious cancer and only had weeks to live. At this stage Colin revealed to Michael and Judith Friend what he had done. On that day Michael sought Tony Stallard’s advice and, using the power of attorney that Colin had granted, Michael
severed the joint tenancy. Latika and her family did not know that this had happened. Colin then died on 26 April.
Contract
[15] The plaintiff’s first claim is that she is entitled in contract to full ownership of the property as that was what she agreed with Colin. Although it is not formally admitted by the defendant/interested parties, Mr Ironside did not contend that there was no contract. Rather the defence focused on issues of capacity and undue influence/unconscionability.
[16] I accept, on the basis of Latika’s evidence that there was a binding agreement between Latika and Colin. The terms of that agreement were that Latika and her family could move into the house, and that the house would become hers after Colin’s death if Latika and her family returned to Nelson to live in the house and provide Colin with friendship and care as he needed it given his age and health concerns. These facts provide the necessary elements of offer, acceptance and consideration. I also accept there was an intention to create binding legal relations. These obligations were also performed by Latika and Colin until the time that Michael terminated the joint tenancy. That termination was a breach of the contract that Colin had formed.
[17] There is no difficulty in treating Latika’s side of the bargain as valid consideration. Although expressed in the context of claims under the Law Reform (Testamentary Promises) Act 1949, the Court of Appeal said in Thwaites v Keruse:1
Companionship, affection, cohabitation, may properly be regarded as “services” in some circumstances, where for example the promisor is elderly or lonely or in poor health. But that cannot be so in the case of young people simply sharing together the pleasures of each other’s company in a common household.
[18] In the present case not only did Latika provide such services beyond those that would normally be expected by the pre-existing relationship, but she and her family uprooted themselves from Wellington and relocated to Nelson as part of her side of the bargain.
1 Thwaites v Keruse (1993) 11 FRNZ 19 at 23; cited with approval in Byrne v Bishop [2001] 3 NZLR 780 (CA) at [6]–[7].
Promissory estoppel
[19] Latika also brings a claim in promissory estoppel. For there to be a claim in promissory estoppel three elements must be satisfied:2
(a)A representation or assurance must be made to the claimant.
(b)There must be reasonable reliance on it by the claimant.
(c)There must be detriment to the claimant in consequence of his or her reliance.
[20] Again the existence of such a claim was not disputed by Mr Ironside. The required elements are satisfied in the present case. Colin made a promise to Latika that she would obtain full ownership of the property after his death if she and her family moved back to Nelson to live in the house and looked after him. They duly did so in a manner that amounts to reasonable reliance to their detriment on his promise. Subject to the defences raised by the defendant/interested parties such a claim is made out.
Capacity
[21] The first matter advanced by the family is that Colin did not have the capacity to enter the agreement or arrangement he did with Latika at the time he did so, and accordingly that the contract entered with her is not enforceable, and the claim for promissory estoppel cannot be sustained.
[22]In Dutton v Thompson Jessel MR said:3
It is not the province of a Court of Justice to decide on what terms or conditions a man of competent understanding may choose to dispose of his property. If he thoroughly understands what he is about, it is not the duty of a Court of Justice to set aside a settlement which he chooses to execute on the ground that it contains clauses which are not proper.
2 Wolfe v Wolfe [2021] NZHC 2878 at [80].
3 Dutton v Thompson (1883) 23 ChD 278.
[23] But a transaction will not be honoured if it was entered without capacity. The principles relating to capacity were summarised by Winkelmann J at first instance in Green v Green in relation to a case concerning testamentary capacity.4 The test for assessing whether a person had sufficient capacity to enter a transaction other than a will was set out by the Court of Appeal in Scott v Wise in the following terms:5
The law requires in a case such as this that a person entering into [a transaction] is able to understand the nature of the transaction when it is explained to him. It follows that the capacity required is related to the transaction. … It was not necessary that Mr Scott should have understood the whole detail as worked out by the lawyers and accountants. But it was necessary that he understood its general nature …
[24] The important point arising from these authorities is that the assessment of capacity is contextual, and relates to the particular transaction involved. A person may have capacity to undertake some transactions but not others, just as a person may have the capacity to do some things but not others. The ultimate question is whether the person had sufficient understanding of the particular transaction in question to say he or she had capacity. And this does not require any form of elaborate or detailed understanding, provided that the essence is grasped.
[25] I received expert evidence from Dr Busch and Dr Casey on the extent of Colin’s capacity when he entered the transactions in June 2015. There was no contemporaneous assessment of his capacity, and neither doctor saw him at that time. Dr Busch had earlier treated him in 2013 and diagnosed him with dementia. He was given two mental state exams scoring 20 and 23 out of 30 at this time. Dr Busch said this was suggestive of mild dementia. She also said there was a high risk that he would not have understood the full implications of a purchase of property in June 2015. By contrast Dr Casey was of the opinion that Colin had demonstrated the ability to make decisions and communicate his choices notwithstanding his dementia diagnosis. This view was based on her assessment of the contemporaneous materials.
[26] I accept that the medical evidence is of some assistance, particularly given there had been a diagnosis of dementia. But that diagnosis does not tell us much about
4 Green v Green [2015] NZHC 1218 at [89].
5 Scott v Wise [1986] 2 NZLR 484 at 491. See also Dark v Boock [1991] 1 NZLR 496 at 500 and
Dodssuweit v Olivier [2019] NZHC 1226, (2019) 5 NZTR 29-025 at 162–169.
Colin’s capacity in June 2015 as it only involved mild dementia. There was some difference between the two doctors on whether there would have been a significant decline in his mental state by the time of June 2015, but to some extent this is speculative given there was no contemporaneous test, and neither of them saw him at that time. The assessment of capacity is also transactional. So whilst I accept that this evidence provides important background, in the end the Court’s assessment needs to be based primarily on the evidence of what Colin did at the time, and whether it shows that he had a capacity to understand what he was doing.
[27] The primary evidence that Colin had the capacity to enter the agreement with Latika, and the associated transactions in relation to the property, is provided by the very fact that he entered and performed such transactions without apparent difficulty. Usually a capacity issue arises when a person signs a document, and the question is whether they really knew what they were doing in so signing it. But here Colin did far more. He devised a strategy to get Latika and her family back into his life. He then identified a property for sale in Stoke, and put an offer in on it on the standard Law Society form. He then negotiated the price until he secured the agreement. He then made the proposal to Latika that she and the family come and live in the property, arranging for her come down to Nelson to discuss that with her in person. He also arranged the transaction with her following her agreement in a form that meant he retained a degree of control — he did not transfer the property to her outright, but remained on the title as a joint tenant, thus securing the passage of the title to her on his death but also residual power. He instructed a law firm to take the necessary steps to achieve this.
[28] It is very difficult to see that a plan with these steps could be made and implemented by someone without the capacity to enter into the relevant transactions. It could hardly be said, for example, that he had no capacity to negotiate and acquire the property because he did precisely that. If he had the capacity to enter that transaction it is very difficult to see that he did not have the capacity to enter the one with Latika, particularly as it appeared to have even more sophisticated elements. This is so even though he will have been suffering from dementia to some degree.
[29] Additional evidence then comes from Colin’s interaction with the legal executives he instructed at Knapps Lawyers, who acted for him implementing the transaction with Latika. When Ms Sara Clelland first saw Colin she asked Mr Mervyn Huston, an older and more experienced legal executive at the firm to see Colin. Mr Huston made a file note of his consultation in the following terms:
…
2.Colin Friend was aged 88 years and explained that he was buying a house property to provide accommodation for his friend, Litika Devisen and her family. He then said that he wanted the title to the property to be in both of their names.
3.The purchase price of the property was over $400,000.00. Colin said he was concerned that his family would be unhappy with what he had done and during my discussions I ascertained the following:
(a)He had 3 children.
(b)One son had died.
(c)He had not seen his daughter for 10 years. She had been married 4 times (so far as he knew). He said that he had lent her
£145,000.00 (must have been prior to decimal currency day) and had to sue his daughter and her husband to get that money back. He maintained that it had cost him a lot of money in legal fees, Court fees etc.
(d)He had 1 other son who owned a large farm was well off.
4 .Colin explained that Litika and her husband were immigrants from India and it was his intention that they should receive the house property either under his Will or by virtue of survivorship. I tried to explain all issues including the fact that if their friendship deteriorated then it was most likely that Litika and her husband would end up with one-half of the proceeds of sale of the property. Colin indicated that he just did not want to discuss that matter.
5.I explained to him that issues could arise if he had to go into Residential Care. He was aware that the cost of being in care was about $45,000.00 a year. He simply said that he had enough money (after buying the house) to pay for his own care until 2040. This appeared to be without taking into account his own home.
6.Although Colin is aged 88 years he appeared very much in absolute control of his life and his finances. He said he had his Will with Public Trust and while he was not happy with their charges he did not intend to change.
[30] Mr Huston gave evidence and confirmed that the note summarised his consultation with Colin. The note records that Colin knew well what he was doing,
and the implications of the transactions. That was also Mr Huston’s evidence, which I accept. The interested parties sought to argue that elements of what Colin is recorded as having said show a lack of full understanding. But I do not accept this. In particular:
(a)The fact that paragraph 4 records that Colin did not want to discuss the implications if his friendship with Latika deteriorated does not demonstrate he did not understand the transaction. It just demonstrates that Colin did not want to discuss this topic further. Mr Huston also duly explained those implications to him in outline terms.
(b)The fact that the historic loan referred to in paragraph 3(c) was described by Colin in pounds rather than dollars simply demonstrates a kind of slip that people of his generation can easily make. It does not demonstrate a lack of capacity to understand what he was doing.
(c)The reference to him having enough money to pay for rest home care until 2040 in paragraph 5 does not mean that he thought he would live that long. Rather it suggested that he had calculated that the money he had won from bonus bonds could pay for a rest home for that period. On rough mathematics that appears to be about right.
[31] I conclude that the exchanges between Mr Huston and Colin confirm that Colin had capacity to enter the transactions.
[32] I note there was some suggestion that Mr Huston should have arranged a capacity assessment at this time, and expert evidence was given by Mr Mark Dobson and Dr Busch to this effect. I accept that discussing a capacity assessment with Colin would have been consistent with best practice. Colin could have been advised that it was a good idea to get an assessment to avoid later challenge. But I otherwise make no findings on that question. The simple fact is that a capacity assessment was not done, and Mr Huston decided Colin had the capacity to understand the transaction based on their discussion. For the reasons outlined above I accept that that was so.
[33] For these reasons I dismiss the argument that Colin had no capacity to enter the transaction with Latika, or to make binding promises supporting the claim in promissory estoppel.
Undue influence
[34] The alternative argument advanced by the defendant/interested parties is that the transaction involved Latika exercising undue influence over Colin.
[35] The approach to questions of undue influence was set out by Winkelmann J at first instance in Green v Green as involving the following principles:6
(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…
(c)The person asserting undue influence must show the alleged influence led to the making of the impugned transaction, and 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 an explanation.
(e)Whether there is a relationship of trust and confidence can either be established factually or by reference to a class of specific relationships such as lawyer/client; parent/child; doctor/patient. In the latter category the law presumes irrebutably that one party had influence over the other. The presumption is only as to proof of influence. The person alleging undue influence will still need to establish a transaction calling for an explanation.
(f)Whether a transaction calls for an explanation depends on the circumstances of the case. The question is simply whether “failing proof to the contrary, [the transaction] was explicable only on the basis that undue influence had been exercised to procure it”.7
6 Green v Green, above n 4, at [100]. Upheld in Green v Green [2016] NZCA 486, [2017] 2 NZLR 321 at [35].
7 National Westminster Bank Plc v Morgan [1985] AC 686 (HL) at 704, cited in Royal Bank of Scotland v Etridge (No 2) [2002] 2 AC 773 (HL) at [25].
(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.8
[36] In cases of alleged actual undue influence, such as the present, the focus is on the impact of the influence on the other party. As put by the authors of Burrows, Finn and Todd on the Law of Contract in New Zealand, it arises when “… something that has been done to twist the mind of the contracting party or donor…”.9
[37] Mr Ironside argued that the transaction was the product of Colin’s fixation to have Latika return to Nelson, that he was in a vulnerable position, and he did not make rational decisions. Latika and her family had moved away and he was desperate to get them back. These circumstances meant the concept of undue influence applied. These arguments were supported by the evidence of Dr Busch who said that Colin was vulnerable to undue influence given a number of risk factors including dementia, social isolation, the existence of family conflict, the need for physical assistance to remain at home, the previous bereavement involving the death of his wife in 2007, and the unusually large provision for his carer.
[38] I do not accept these arguments. As I have already held the transactions involved a quite careful plan implemented by Colin to get Latika and her family back into his life. Rather than them being a product of Latika’s undue influence, they were
8 Harris v Rothery [2013] NSWSC 1275.
9 Stephen Todd and Matthew Barber, Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed Lexis Nexis NZ, Wellington 2022) at [12.4.5(a)].
the product of Colin’s shrewdly devised strategy to achieve the most happiness he could in his remaining years.
[39] Examples of undue influence of older family members are found in the case of Round v Round (a 90-year-old transferring his house to one of his sons),10 and Sexton v Titiro Trustee Co Ltd (88-year-old advancing half her wealth to her step-son).11 But the case of Nelson v Codilla has greater similarities to the present case.12 In that case Mr Posa, then aged around 82, began communicating with Ms Tenchavez in the Philippines. He paid for her to come to New Zealand and then asked her to stay with him. She got a job in a rest home working night shifts. They did not have a sexual relationship but she lived with him and looked after him. At one stage he asked her to marry him but the pair were advised by consultants that the age gap between them would not get accepted by the New Zealand Immigration Service. When he died aged 86 he left his estate to Ms Tenchavez. In rejecting the claim of undue influence Gordon J relied on the fact that whilst Ms Tenchavez did have a large role in Mr Posa’s life there were aspects of his life that he reserved for himself, such as his finances which he fully controlled.13 This was inconsistent with the claim of undue influence.
[40] Latika was not in a pre-existing domestic relationship with Colin at the time of the challenged transaction. She had made the decision with her family to move out of Nelson to Wellington. Colin wanted them back in his life. She and her family ultimately called the shots. To that extent she had significant influence. But it cannot be regarded as undue influence. Colin was asking them to uproot their lives in Wellington and return to Nelson to provide him the support he wanted. In order to do so he made her an offer that they could not refuse. I agree that what Latika and her family have obtained what probably involves an element of windfall. But the whole case involves a windfall arising from Colin’s $1 million win, and the reality is that it concerns a debate over who should now benefit from that windfall.
[41] In my view it is unrealistic to say that the transaction involved Latika’s undue influence over Colin. If anything it is the other way around. It was Colin who
10 Round v Round [2017] NZHC 428.
11 Sexton v Titiro Trustee Co Ltd [2008] NZAR 312.
12 Nelson v Codilla [2021] NZHC 1958.
13 At [216].
manipulated Latika and her family to return back to Nelson to look after him. The transaction was not a consequence of pressure that Latika applied to Colin, but pressure that he applied to them.
Unconscionability
[42] The principles in relation to unconscionability are similar to those involved in undue influence. In Gustav & Co Ltd v Macfield Ltd the Court of Appeal summarised the principles in the context of a commercial transaction in the following way:14
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 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.
14 Gustav & Co Ltd v Macfield Ltd [2007] NZCA 205 at [30].
7“Taking advantage of” (or victimisation) in this context encompasses both the active extraction and the passive acceptance of a benefit. Accordingly, as Tipping J said in Bowkett at 457, an unconscionable victimisation will occur where there are:
… circumstances which are either known or which ought to be known to the stronger party in which he has an obligation in equity to say to the weaker party: no, I cannot in all good conscience accept the benefit of this transaction in these circumstances either at all or unless you have full independent advice.
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.
[43] In Round v Round Palmer J summarised the differences between unconscionability and undue influence in the following way:15
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”.16 Undue influence focuses so strongly on the mind of the person consenting that wrongdoing by the person exerting influence is unnecessary.17 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.18
[44] So undue influence focusses on the mind of the person said to be influenced, whereas unconscionability focuses on the conscience of the person benefitting.
[45] The claim by Colin’s family is perhaps at its strongest under this head. Mr Ironside argued Latika should have declined Colin’s offer as she knew it involved an unjustified benefit for them. Under cross-examination Latika accepted that she should have declined Colin’s offer. But I do not consider that her answer involves an admission of unconscionability. Her somewhat meek agreement in cross-examination seems to me to reflect her humility and integrity more than anything else.
15 Round v Round [2017] NZHC 428 at [64].
16 Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 (CA) at 165 (Richardson J).
17 Green v Green, above n 6, [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].
18 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].
[46] There were no real negotiations between Colin and Latika at the time they made the arrangements. Perhaps Latika and her family might have been prepared to return to Nelson and look after Colin in return for only half of the property rather than the whole thing. But it is not the role of the Court to renegotiate arrangements, or to exercise an overall moral judgment. The sole question is whether under the principles it was unconscionable for Latika to agree to what Colin proposed.
[47] In my view it was not. What Latika and her family had to do to fulfil their side of the bargain involved a significant commitment for them. All that Colin was doing was spending a windfall. It cannot be regarded as unconscionable for Latika to accept what Colin was proposing. It must be remembered what this case is ultimately about. The whole set of circumstances arose because Colin, aged 88, won $1 million in bonus bonds. For Colin this would have been wonderful news. But it would not be a surprise if he also looked skywards and asked “why now?”. At that stage of his life there was perhaps little that could be done with the money that did not involve benefitting others. But in Colin’s case he managed to secure the thing that would give him the most happiness in his remaining years. He managed to get Latika and her family back in his life. From his perspective it was a good bargain. The claims of lack of capacity, undue influence, or unconscionability are somewhat unrealistic given these circumstances.
[48] It is also significant that Colin spent only approximately half of the $1 million he had won in bonus bonds on his arrangements with Latika. The remaining half of his winnings were kept by him, and ultimately form part of the estate benefitting his family. So they continue to benefit from his windfall, even though the estate has been diminished, including as a consequence of professional fees.
[49] It is also significant that an application of the principles of unconscionability or undue influence (or indeed capacity) would affect the whole transaction, and not just the half share Michael secured by terminating the joint tenancy before Colin’s death. There are both a defence and a counterclaim formally before the Court. In seeking to maintain the stance that Latika could retain half the value of the property notwithstanding the counterclaim Michael and Judith made their stance before the Court more palatable. But in terms of the application of the relevant legal principles
it is not easy to see how that result would arise. Mr Ironside argued that if Colin had capacity to enter the transaction with Latika he would retain the capacity to sever the joint tenancy so that Latika would only retain half the property on his death. But that severance would be in breach of the contract Colin had reached with Latika, and inconsistent with the promise forming the basis of a promissory estoppel. It is then difficult to see how the principles of capacity, undue influence or unconscionability could affect only half of the transaction between Latika and Colin so that she could keep a half interest in the house.
Conclusion
[50] It follows from the above that Latika’s claim succeeds, and the defence and counterclaim are dismissed.
[51] In doing so I acknowledged that Michael and Judith may have legitimately questioned what Colin had done. Indeed before his death Colin raised additional spending that suggested that Latika and her family had taken undue financial advantage of him. These matters turned out not to be correct. Unfortunately this alleged spending was included in Michael and Judith’s briefs of evidence as fact. The solicitor who prepared those briefs should not have included those allegations without recording that they were simply based on what Colin had said. The question of the admissibility of such evidence could then have been properly assessed.19 Precisely why Colin said these things about Latika and her family near the end is unclear. Perhaps the dementia had got the better of him. But it is important to record there is no basis for the allegations. It may be that Latika and her family have benefitted financially from Colin from the transaction in question. But this benefit arose from a financial windfall. And in the end they have benefited because they acted kindly towards an old man they had met in the community, and they provided him with friendship and support without any suggestion that they should be financially rewarded, and notwithstanding that they were not well off. What goes around comes around.
19 See High Court Rules 2016, r 9.7(4).
[52] I uphold the plaintiff’s claim and direct that the half share of the property currently held by the defendant be vested in the plaintiff. Leave is reserved if there is any need for a more precise order from the Court to give effect to this.
[53] If there is any issue as to costs memoranda may be filed. My preliminary view is that costs should be awarded to the plaintiff on a 2B basis, and this should be calculated assuming a four day trial given the efficiencies arising from the proceedings being conducted remotely. Any memoranda seeking costs must be filed and served within 10 working days (no more than 5 pages plus a schedule) to be responded to within 10 working days (no more than 5 pages plus a schedule).
Cooke J
Solicitors:
Rout Milner Fitchett, Nelson for the Plaintiff
0
7
0