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Vernon v Public Trust

Vernon v Public Trust

Case [2016] NZCA 388 9 August 2016

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA517/2015
[2016] NZCA 388

BETWEEN	ASHLEY WILLIAM VERNON AND BEVERLEY KAY VERNON Appellants
AND	PUBLIC TRUST Respondent

Hearing:	28 June 2016 (further submissions received on 11 July 2016 and 18 July 2016)
Court:	Ellen France P, Harrison and Wild JJ
Counsel:	A C Beck for Appellants H N McIntosh and H M Macfarlane for Respondent
Judgment:	9 August 2016 at 3 pm

JUDGMENT OF THE COURT

AThe appeal is dismissed.
BThe appellants are ordered to pay the respondent’s costs for a standard appeal on a band A basis together with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Harrison J)

Contents

Para No

Introduction  [1]
Facts  [5]
High Court  [17]
Decision  [26]

Undue influence  [26]
Fiduciary duty  [32]
Breach of fiduciary duty  [43]
Limitation  [56]
Beverley’s liability  [65]

Result [69]

Introduction

On the day his wife Naomi died in March 2006, the late Kenneth Vernon left his home. He went to live with his son and daughter-in-law, Ashley and Beverley Vernon. Kenneth was then aged 86 years and was not in good health. He had previously executed an enduring power of attorney (the EPOA) in Ashley’s favour.
Kenneth’s assets at that time, represented primarily by his home which he sold a few months later, amounted to about $329,000. By the time Kenneth moved into a rest home in October 2008 his assets were reduced to a bank balance of $11,000. In exercise of his powers under the EPOA, Ashley had controlled Kenneth’s bank accounts throughout this period.
Following Kenneth’s death in 2011, the Public Trust was appointed as the replacement administrator of his will. In 2014 it issued a proceeding in the High Court against Ashley and Beverley (collectively the Vernons) to recover the funds withdrawn from Kenneth’s account, alleging that Ashley had wrongly misapplied them for the joint benefit of himself and Beverley. The Vernons denied liability and the claim went to trial.
Kós J found that Ashley had exercised undue influence over Kenneth.[1] Alternatively, he found Ashley had breached his fiduciary duties to his late father or had acted unconscionably towards him. The Vernons were liable to restore all misapplied funds to the estate. Judgment was entered against them jointly for $280,354 plus interest and costs. The Vernons now appeal.

Facts

[1]Public Trust v Vernon [2015] NZHC 1928 [HC decision].

The material facts are not in dispute.
In December 2005 Kenneth signed his last will appointing Ashley and Kenneth’s brother-in-law as his trustees and executors. He divided his residual estate, should Naomi predecease him, equally between Ashley and Kenneth’s grandson, Dante. Ashley was aware of the terms of the will from the time of its execution. Shortly afterwards, Kenneth appointed Ashley as his EPOA under the provisions of the Protection of Personal and Property Rights Act 1988 (PPPRA). The appointment was not made on the ground that Kenneth was mentally incapable and nor did the Public Trust allege that it was induced by Ashley’s influence.
In the period…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Vernon v Public Trust

Details

AGLC: Vernon v Public Trust [2016] NZCA 388
Case: [2016] NZCA 388
Decision Date: 9 August 2016 at 3 pm

CaseChat Overview and Summary

The Vernons appealed against a High Court judgment which found them liable to restore funds withdrawn from Kenneth's account. The Public Trust had issued a proceeding against Ashley and Beverley for the misapplied funds, alleging that Ashley had wrongly misapplied the funds for the joint benefit of himself and Beverley. The Vernons denied liability and the claim went to trial. Kós J found that Ashley had exercised undue influence over Kenneth or had breached his fiduciary duties to his late father or had acted unconscionably towards him. The Vernons were liable to restore all misapplied funds to the estate. Judgment was entered against them jointly for $280,354 plus interest and costs. The Vernons appealed. The Court of Appeal dismissed the appeal and ordered the Vernons to pay the Public Trust's costs for a standard appeal on a band A basis together with usual disbursements. The appeal failed for the following reasons. The undue influence claim was unsustainable because the transactions did not occur with Kenneth's consent. However, the judgment could be sustained on the alternative findings of breach of fiduciary duty and unconscionability. The Court of Appeal rejected the submission that the enduring power of attorney (EPOA) did not give rise to an obligation upon the donee enforceable in equity. The relationship created by an EPOA is one of principal and agent. Unless the instrument or statute required otherwise, the agent must discharge his or her duties towards the principal with the utmost loyalty, honesty and good faith. And he or she must act always in the donor's best interests. The Court of Appeal found that the EPOA created a fiduciary relationship between Ashley and Kenneth and that Ashley breached his fiduciary obligations by spending Kenneth's money for his own benefit. The appeal against the finding of Beverley's accessory liability for knowing receipt must also fail. Beverley was aware that the transactions entered into by Ashley were wrongful and she benefited fully and equally with Ashley from the misappropriated payments.

Orders