Willis v Thompson
[2017] NZHC 1645
•18 July 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-002840 [2017] NZHC 1645
BETWEEN LESLIE ARNOLD WILLIS
First Plaintiff
DONALD BRUCE THOMAS Second Plaintiff
AND
PAMELA JOYCE THOMPSON First Defendant
ANZ BANK (NEW ZEALAND) LIMITD Second Defendant
Hearing: 27 March 2017 Appearances:
Margaret Matthew for the Plaintiffs
Stephen Bryers for the First Defendant
Second Defendant abides the decision of the CourtJudgment:
18 July 2017
JUDGMENT OF MOORE J
This judgment was delivered by me on 18 July 2017 at 3:30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Date:
WILLIS & AMPR v THOMPSON & ANOR [2017] NZHC 1645 [18 July 2017]
Contents
Paragraph
Number
Introduction ..............................................................................................................[1] Background...............................................................................................................[7] The pleadings ..........................................................................................................[41] The issues ................................................................................................................[47] Unconscionable bargain
Legal principles....................................................................................................[48]
Was Mr Willis under a “special disadvantage”? .................................................[68]
Did Mrs Thompson unconscionably take advantage of that disability or disadvantage? ......................................................................................................[73]
Undue influence
Legal principles....................................................................................................[94]
Laches
Defence case....................................................................................................... [119] Principles ...........................................................................................................[121] Factual background ...........................................................................................[125] Analysis ..............................................................................................................[130] What is the appropriate relief to be granted? ...................................................[138] Result .....................................................................................................................[139] Costs ......................................................................................................................[140]
Introduction
[1] On 8 September 2000 Arnold Willis (“Mr Willis”) died of pneumonia secondary to terminal cancer in the home he had lived in with his family for many years.
[2] For some considerable time prior to his death he had been unwell and effectively wheelchair bound.
[3] The defendant, Mrs Thompson, was initially employed as his paid caregiver. However, when her employment ceased Mrs Thompson claims she continued to provide some caregiving services, mostly on weekends. A few weeks before Mr Willis died, funds which had been previously held in his sole name were transferred into a Bonus Bonds account in the joint names of Mr Willis and Mrs Thompson.
[4] Normally, on the death of one of the parties such funds would pass automatically by survivorship to the other party, in this case Mrs Thompson. However, Mr Willis’ only son, Leslie Willis, advised the bank that Mrs Thompson’s title to the Bonus Bonds was challenged. In 2001, as a result of Leslie Willis’ intervention, the ANZ Bank (“the Bank”) placed a stop on the account to prevent the redemption of the Bonus Bonds pending resolution of the dispute.
[5] Sixteen years later that stop remains in force. In November 2015
Leslie Willis issued the present proceedings against Mrs Thompson based on unconscionable bargain and undue influence. Declaratory relief is sought in respect of the funds held in the Bonus Bonds account as the holder of the funds. The Bank has been named as a defendant but has taken no steps in these proceedings and will abide the Court’s decision.1
[6] Mrs Thompson denies any undue influence or equitable fraud. She says it was perfectly understandable for Mr Willis to want to make a modest gift in her
favour in recognition of their friendship and the services she had rendered free of
1 The second plaintiff is the executor of Mr Willis’ last will dated 29 September 2000.
charge during the three years before he died. In any event, she says the delay in bringing this claim has prejudiced her in her ability to mount an effective defence and as such it would be unjust for the Court to allow the claim.
Background
[7] Mr Willis lived at 5 Jersey Avenue, Mt Albert, Auckland. It had been the home of his parents. He and his wife had only one child, the first plaintiff Leslie Willis.
[8] Mr Willis died on 8 September 2000 after a long battle with cancer. The primary cancer was basal cell carcinoma, a form of skin cancer which metastasised.
[9] It is unclear when he was first diagnosed as terminally ill, but by early 1997
Mr Willis’ cancer had spread to his lungs, lymphatic system and other organs. Complicating this presentation was that Mr Willis also suffered from muscular dystrophy, an untreatable, progressive musculo-skeletal disease which, according to Leslie Willis, caused his father to suffer muscle spasms, incontinence, as well as visual and balance problems. As a result, the last two to three years of his life were largely spent confined to a wheelchair and mobility scooter.
[10] According to Leslie Willis, his father broke his leg in 1997 and it was as a result of that event he decided his father needed a caregiver. I note that Mrs Thompson said he broke his leg in mid-1999 after which she visited him in hospital. However, for the purposes of my decision nothing turns on this difference.
[11] According to Leslie Willis, in anticipation that he would need to make payments on behalf of his father as, inexorably, his health deteriorated, he set up a joint signing authority on both of his father’s bank accounts which allowed him to operate them when, by reason of his father’s debilitation, that became necessary.
[12] In any event in early 1997 Leslie Willis engaged Focus 2000 to supply a caregiver for his father. Mrs Thompson was employed. Her duties occupied about two hours a day and included showering Mr Willis, bed making and some light
housekeeping duties. This role lasted only a few months before Mrs Thompson left
Focus 2000’s employment in March 1997 to take up another position.
[13] However, this did not end Mrs Thompson’s involvement with her former client. According to her, she had formed a close friendship with Mr Willis and continued to see him in the weekends when his paid caregiver was not on duty. She said he would ring her up and tell her that he had had an “accident”. This was a euphemism for incontinence. Because she lived nearby she said she would go to his home where she would sponge him, remove the sheets, change his pyjamas and leave.
[14] She said they became “dear friends”; they had much in common and spoke a lot about many and diverse topics. Mrs Thompson said she rendered these services, without reward, on and off for about three years until Mr Willis died.
[15] Leslie Willis’ account of these events is quite different. He denied she provided these services. In his evidence he referred to numerous conversations he had with his father about Mrs Thompson; what she had done, and what she disclosed to him about herself and her circumstances. For the purposes of this decision I have put this evidence to one side because it is hearsay and because I am not satisfied it is reliable. Leslie Willis’ recollection of what his father said to him 20 or so years earlier is not supported by contemporaneous notes. Neither is it corroborated. Furthermore, his evidence is that his father, in the later stages of his terminal illness, was on heavy doses of morphine and was easily confused.
[16] For this reason, in respect of Leslie Willis’ evidence, I am prepared to take into account only those matters which he either observed directly or were within his personal knowledge. The evidence of what his father told him of Mrs Thompson may, however, be used for the limited purpose of explaining why he took certain actions.
[17] Leslie Willis also deposed to large, unexplained withdrawals being made from his father’s account during Mrs Thompson’s involvement with his father. He claimed that various items went missing from the house over this period. The
inference sought to be drawn is that these funds and property ended up in Mrs Thompson’s possession. On the state of the evidence before me, I am not prepared to draw these inferences.
[18] The property at 5 Jersey Avenue was large enough for a second dwelling to be built at the rear. Leslie Willis and his then wife, built a new house behind the original home and by 1999, the year before Mr Willis died, had moved into it so they could be closer to Mr Willis as his health gradually and inevitably declined.
[19] According to Leslie Willis, in the first part of 1999 his father’s cancer had spread to his neck and major surgery was required to remove a malignant tumour. In her evidence Mrs Thompson acknowledged he had an operation for “… a lump on his lymph gland” on the left side of his neck although she did not put a date on it.
[20] In mid-1999 Mr Willis was re-admitted to hospital for surgery. By this time the cancer had spread to his stomach. The medical advice was that he was living on borrowed time. As a result he decided to update his will. It was executed on
20 September 1999. Leslie Willis was nominated as the sole executor, trustee and beneficiary.
[21] By mid-2000 Mr Willis’ health took a sharp turn for the worse. According to Leslie Willis, he was on heavy doses of morphine which caused him to be confused and disorientated.
[22] In or around late July or early August 2000 the caregiver employed to look after Mr Willis advised Leslie Willis that she had found a document giving Mrs Thompson authority to sign documents on his father’s behalf. She gave it to him. As a result Leslie Willis decided to look through his father’s papers. He discovered a photocopy of a will and other paperwork which appeared to have the effect of leaving all of his father’s estate to Mrs Thompson. He took possession of these papers. Not long afterwards he showed these documents, including the will, to his father and talked to him about them.
[23] Having been shown the will, Mr Willis became very upset. He said that the will did not reflect what he intended and asked his son to arrange for his own lawyers to come out and see him. He said his father was confused about where he had gone to sign the will. Some days later Mr Willis’ lawyers visited him. Leslie Willis said he left them in private to discuss the will. A new will, revoking all prior testamentary dispositions, was executed on 29 August 2000. It was virtually identical to the earlier will of 20 September 1999 in that Mr Willis left everything to his son. The only difference was that the new will directed an additional executor be appointed from the partnership of his father’s law firm.
[24] A few weeks before his father died, Leslie Willis installed a baby monitor in the bedroom of the front house so he could monitor his father’s rapidly declining health. Conversations overheard through the baby monitor caused him to harbour further concerns about the influence Mrs Thompson appeared to have over this father.
[25] On 16 August 2000, just three weeks before he died, Mr Willis applied for the repayment of $50,000 worth of his Bonus Bonds into his ASB account and then applied for an issue of replacement Bonus Bonds, to the value of $50,000, jointly in his name and Mrs Thompson’s names. On 27 August 2000 the Bank issued the Bonus Bonds, as requested, in the joint names of Mr Willis and Mrs Thompson. None of this was known or disclosed to Leslie Willis.
[26] On 5 September 2000 Mr Willis developed bilateral bronchopneumonia. He died three days later on 8 September 2000.
[27] In her evidence Mrs Thompson explained how she came to be a joint owner of Bonus Bonds worth $50,000. Her account was that in early to mid-August 2000
Mr Willis called her and said he had something he wanted her to sign. She said she went around to his house and he showed her some papers relating to the Bonus Bonds. He told her he wanted to leave her a half share in recognition of the care she had given him over the years. She said she agreed to sign the papers only because he was so insistent and because she did not want to upset him. Mr Willis asked her to
write his name and her name at the top of the form which she did. She then signed it and left the papers with him.
[28] One or two weeks later she said she received an application for repayment receipt and a Bonus Bonds application form. She decided to go around to see Mr Willis because she said she did not think it was right. Shortly after she got to his house, Leslie Willis arrived. She had only met him twice before. She described him as very angry. He told her to leave and not to return, threatening that if she did he would call the Police. She said this was the last time she saw Mr Willis. She said that as a result of Leslie Willis’ conduct and because she felt she should respect his father’s wishes, she changed her mind about accepting the Bonus Bonds.
[29] On the day his father died, Leslie Willis instructed his father’s solicitors to contact the Bank and advise them there could be a possible fraud involved in the transfer of the Bonus Bonds into the joint names of his father and Mrs Thompson. The initial response from the Bank was that his request was too late; the Bonus Bonds were held in joint names so that title had passed to the survivor, Mrs Thompson. However, shortly afterwards, the Bank changed its position and confirmed that a stop had been placed on the Bonus Bonds to prevent their redemption until the dispute was resolved.
[30] Some months after Mr Willis’ death, Mrs Thompson said she received a letter from Bonus Bonds advising her that the executors of Mr Willis’ estate had put a stop on the account to prevent the transfer of the Bonus Bonds.
[31] In February 2001 she wrote to Bonus Bonds sending copies of the documentation and requesting the Bonus Bonds be issued to her. She also instructed a solicitor to advance her claim which, at that time, sought only a half interest in the Bonus Bonds. In response, the solicitors for Mr Willis’ estate advised that Mrs Thompson was not entitled to any claim and that investigations were being undertaken in respect of other claimed irregularities around Mrs Thompson’s involvement with Mr Willis prior to his death.
[32] Thereafter matters stalled. According to Leslie Willis this was because he was distracted by his deteriorating marriage and later because he claimed he could not ascertain Mrs Thompson’s whereabouts. He engaged a private investigator and he also made a complaint to the Police. The Police investigation did not result in any criminal charges being laid and, apparently, the private investigator was unable to locate Mrs Thompson. I shall deal with these aspects more fully later in this judgment.
[33] However, in May 2015 Leslie Willis’ solicitors wrote to Mrs Thompson requesting that she enter into a settlement agreement in respect of the Bonus Bonds. On 12 May 2015 she replied. Extracts of that letter are reproduced below:
“I refute wholeheartedly the allegation made by my dear Arnold Willis’ son, Lesley [sic] of impropriety in my dealings with his late father. My relationship with his father went way beyond being his carer, we were dear friends and the fact I was able to be paid by an agency for a small part of the care and support I had provided him doesn’t diminish the quality of our existing relationship.
…
The documentation that has been forwarded to me with these allegations also contains information about Bonus Bonds that have nothing to do with me. My dear friend was accustomed to administering his own affairs, as he saw fit when he was alive.
I suspect that the introduction of such information, linked with salacious allegations like the ones that are being levelled at me, is an effort to provide evidence towards the provenance of and lay claim to money that is not his. His father and I administered a joint bank account, one where we were both signatories and had control over. As owners of this bank account, we were both entitled to make deposits, transfer funds into and out of as well as withdraw funds from the account.
The purpose of the account was that of a simple cash savings account, for us to deposit, withdraw and manage savings and expenditure together. On deposit in this account at the time of his death was approximately $50,000. With interest, this balance should reflect a sum closer to $100,000. However the preceding decade and a half have seen these funds frozen in an account by the bank and not servicing anyone’s needs or baring [sic] fruits. The imposition of an injunction separating people from access to their funds over such a long period of time, to me, is an unconscionable act which can only be described as hurtful and vexatious.
The reporting of these events to the Avondale Police by way of complaint has had no results because no offences were committed by anyone with regards to any financial dealings conducted by yourself or my dear friend Arnold.
…”
[34] In her evidence, Mrs Thompson sought to correct some aspects of this letter. In particular, she said the reference to Mr Willis and her having a joint account may possibly have been because she was confused about Mr Willis’ intentions. She said the letter was prepared by a friend and her recollection was that Mr Willis mentioned opening a joint account with the ASB when she bought a barbeque from him in 1999 but she said she did not know whether he actually opened such an account. Furthermore, she explained that the paragraph referring to having no discussions with Mr Willis was not “quite right”. She said she had no discussions with him about depositing, withdrawing or managing the Bonus Bonds.
[35] In relation to the photocopy of the will which Leslie Willis found amongst his father’s papers, Mrs Thompson, in her affidavit, said she could not remember anything about a will or any other paperwork which left Mr Willis’ property to her. Neither could she recall discussing this with Mr Willis. However, in cross- examination she said the first time she saw the will was when it arrived in the mail after Mr Willis had died; she thought with the Bonus Bonds papers. She said that when she went to see her lawyer in September 2001 she gave him the draft will “… which left most of Arnold’s estate to [her].”
[36] A copy of the unsigned draft will was annexed to her affidavit as an exhibit. It is dated August 2000. Mrs Thompson said she assumed that Mr Willis must have given it to her but she could not remember him doing that, nor who prepared the document. She said it was certainly not her and she never asked Mr Willis to leave her anything. She said there had been no discussion at all about his will. She said she did not really understand it and did not know what the document was. But in contradiction with that statement she then claimed she was “shocked” when she saw it because she did not expect to receive anything from Mr Willis. She kept this document, along with the others on a file which she gave to her lawyer.
[37] In cross-examination Mrs Thompson asserted that Mr Willis never told her that he was dying. He never told her that the cancer had spread nor did he ever complain of pain. Indeed, in her affidavit she said she did not even know he had cancer. He never told her. Neither, did she know he was on morphine during his last days.
[38] The delay in bringing these proceedings has created some complications in terms of the state of the evidence. For example, Mr Willis’ medical records were destroyed several years ago and, as a result, there is no independent evidence of his mental and physical condition nor the drug regime he was on. Another complication is that in the years which followed Mr Willis’ death, the marriage between Leslie Willis and his wife failed. According to Leslie Willis, his wife had possession of some of the relevant documentation, including the photocopy of the will which left virtually all of Mr Willis’ estate to Mrs Thompson. Leslie Willis claimed he could not retrieve this material from his wife.
[39] In concluding this part of this discussion I make some observations on the question of credibility. Leslie Willis impressed me as a witness. He gave his evidence in a forthright and unadorned fashion. Under cross-examination he did not prevaricate and where appropriate he made concessions. As previously noted I have put to one side some parts of his evidence on the grounds that it is hearsay and/or is unreliable. Furthermore, in respect of those parts of his evidence on which I have placed particular reliance, for example the nature of his father’s illness and its progression, the discovery of the unsigned will and Mr Willis’ testamentary intentions, these are independently supported by other evidence.
[40] In contrast, I found Mrs Thompson to be at times evasive and contradictory in her evidence. Some examples have already been discussed. Other examples follow.
The pleadings
[41] The plaintiffs seek declaratory relief under two causes of action based on unconscionable bargain and undue influence respectively. In summary, on the claim the gift was unconscionable, the plaintiffs say that Mrs Thompson knew or ought to have known Mr Willis was suffering under a significant disability. She took
advantage of him either by actively extorting or passively accepting the transfer into her name of the Bonus Bonds in circumstances where it was contrary to conscience that the bargain or gift should have been accepted by her.
[42] Alternatively, in respect of the undue influence claim, the plaintiffs rely on the same circumstances to assert that Mrs Thompson, by reason of the relationship she had with Mr Willis, had the capacity to and did unduly influence Mr Willis causing him to sign the Bonus Bonds application in Mrs Thompson’s favour to the manifest disadvantage of Mr Willis by reason of his parlous health and vulnerability.
[43] Thus the plaintiffs, as they do in relation to the first cause of action, seek a declaration that the Bonus Bonds application form is void to the extent it purports to name Mrs Thompson as an account holder, and that Mrs Thompson has no legal or beneficial interest in the Bonus Bonds, and that the only legal owners of the Bonus Bonds are the plaintiffs as the executors of Mr Willis’ estate.
[44] In all material respects Mrs Thompson denies the plaintiffs’ claims. In particular, she says she did not know Mr Willis was suffering from a significant disability or that he was emotionally or physically vulnerable. She agrees that Mr Willis reposed trust and confidence in her to provide care but expressly denies that he placed trust and confidence in her in respect of his life including, and in particular, his financial affairs.
[45] She accepts that at the request of Mr Willis she completed a Bonus Bonds application for repayment form which authorised the transfer of $50,000 worth of Mr Willis’ Bonus Bonds into his ASB account and that Mr Willis signed the form. She accepts that she completed the Bonus Bonds application form in the joint names of Mr Willis and herself and that she signed the form. However, she denies she persuaded Mr Willis to undertake the transactions or to sign the Bonus Bonds application for repayment or the Bonus Bonds application form or that she presented these documents to the Bank. She says that the transactions carried out in mid- August were entirely Mr Willis’ initiative.
[46] Mrs Thompson also pleads the affirmative defence of laches. She says that the claim should be dismissed by reason of the plaintiffs’ delay in bringing or pursuing the proceedings expeditiously.
The issues
[47] Four issues are engaged in these proceedings. These may be framed in the following way:
(a) Should the transfer by Mr Willis of the Bonus Bonds into the joint account owned by Mrs Thompson and him in the weeks preceding his death be set aside on the grounds it constituted an unconscionable bargain?
(b)Alternatively, should the transfer of the Bonus Bonds be set aside on the grounds it was brought about by undue influence?
(c) Are the plaintiffs’ claims, being equitable claims, time barred by the
doctrine of laches?
(d)In the event the transfer of the Bonus Bonds should be set aside, what is the appropriate relief to be granted?
Unconscionable bargain
Legal principles
[48] Rather than formulating rigid criteria or elements which comprise the doctrine of unconscionable bargain, the Courts have typically identified factors which are said to be relevant to the unconscionability inquiry. An example of this approach may be found in the judgment of Tipping J in Bowkett v Action Finance Limited, where a number of principles said to be neither determinative nor
exhaustive were identified:2
2 Bowkett v Action Finance Limited [1992] 1 NZLR 449 (HC) at 460.
“The rationale for the intervention of equity in the case of an unconscionable bargain is not the relief of the foolish from their foolishness but rather the relief of the weak in appropriate cases from bargains entered into as a result of their weakness. The touchstone is not an inequality of bargaining power alone, but that element will normally be present. Although the House of Lords in Morgan gave the quietus to Lord Denning’s inequality of bargaining power thesis in Lloyds Bank Ltd v Bundy [1975] QB 326, this factor as an element of unconscionable bargain cases is still important.
An examination of the case law leads me to the view that the following circumstances will normally be present when the Court finds an unconscionable bargain:
(1) The weaker party is under a significant disability.
(2) The stronger party knows or ought to know of the disability.
(3) The stronger party has victimised the weaker in the sense of taking advantage of the weaker’s disability, either by active extortion of the bargain or passive acceptance of it in circumstances where it is contrary to conscience that the bargain should be accepted.
(4) There is a marked inadequacy of consideration and the stronger party either knows or ought to know that to be so.
(5) There is some procedural impropriety either demonstrated or
presumed from the circumstances.”
[49] In Gustav & Co v Macfield Limited, the Court of Appeal identified, albeit non-exhaustively, a number of principles it regarded as relevant to the factual matrix before it.3 These non-exhaustive factors may be summarised as follows:
(a) equity will intervene to relieve a party from the rigours of the common law in respect of an unconscionable bargain;
(b)this equitable jurisdiction is not intended to relieve parties from “hard” bargains or relieve the foolish from their foolishness. The jurisdiction is to protect those under a significant disability or disadvantage from exploitation;
(c) it is not simply an inequality of bargaining power. It will arise where there is a conditional characteristic which significantly diminishes a
party’s ability to assess what is in his or her best interests. These may
3 Gustav & Co v Macfield Ltd [2007] NZCA 205. The Supreme Court endorsed these principles on appeal in Gustav & Co v Macfield Ltd [2008] NZSC 47, [2008] NZLR 735.
include ignorance, lack of education, illness, age, mental or physical infirmity, stress or anxiety;
(d)if one party is under a disqualifying disability or disadvantage (the weaker party) the focus shifts to the conduct of the other party (the stronger party). The central question is whether, in the particular circumstances, it is unconscionable to permit the stronger party to take the benefit of the bargain;
(e) before unconscionability will be found the stronger party must know of the weaker party’s disability or disadvantage and must take advantage of that disability or disadvantage;
(f) the requisite knowledge may be actual or constructive. Factors such as marked imbalance in consideration or the way in which the transaction was concluded, for example without independent advice, may lead to a finding that the stronger party had constructive knowledge. So in the particular circumstances the stronger party may be put on inquiry and in the absence of such inquiry may be treated as if he or she knew of the disability or disadvantage;
(g) “taking advantage of” encompasses both active extraction and passive
acceptance of a benefit; and
(h)if these conditions are met the burden falls on the stronger party to show the transaction was a fair and reasonable one and should therefore be upheld.
[50] Before I move to consider the application of these principles it is necessary to consider whether the equitable doctrine of unconscionable bargain extends to gifts. While there is a divergence of view on this issue I am satisfied that the doctrine of unconscionable bargain does extend to gifts.
[51] Mr Bryers, for Mrs Thompson, submits to the contrary. He says that the unconscionability doctrine applies to bargains and that a bargain is normally understood to mean a transaction in the nature of a contract; that is mutual promises supported by consideration. As such, a gift would not normally fall within that description.
[52] In support of that proposition he relies on the English case of Langton v Langton.4 There Mr A W H Charles QC, sitting as a Deputy Judge in the Chancery Division, expressed the view the doctrine does not extend to gifts because:
(a) if the doctrine applied to gifts it would mean that in the case of all gifts by poor and ignorant persons without independent legal advice the onus of proving that the gift was “fair, just and reasonable” would be placed upon by the donee;
(b)“fair, just and reasonable” is a phrase that obviously applies to bargains but not gifts. In deciding whether a gift is unconscionable equity should, as it does in undue influence cases, look to whether the donor made it of his or her own free will and thus to the circumstances in which the gift was made rather than whether the gift itself, were fair, just and reasonable;
(c) the history of the doctrine relating to unconscionable bargains arose and was developed to protect persons who were likely to be persuaded to enter into unfair or unconscionable bargains. This rationale does not apply to a gift which is a different type of disposition, one where the donor is not, by definition, seeking a return; and
(d)undue influence is the proper doctrine to apply when considering whether to set a gift aside on the grounds of unconscionability.
4 Langton v Langton [1995] 2 FLR 890.
[53] Langton v Langton was mentioned with approval by Mr E Bartley Jones QC, sitting as a Deputy Judge of the Chancery Division, in Randall v Randall.5
[54] However, in the more recent case of Evan v Lloyd Judge Keyser QC
expressly decided not to follow Langton v Langton for the reasons which follow.6
(a) He was of the view that Mr Charles’ remarks were obiter dictum.
(b)He could find no authority for the proposition that the doctrine did not extend to gifts.
(c) Although the doctrines of undue influence and unconscionable bargain share a common root, that of equity’s concern to protect the vulnerable from economic harm, they are generally regarded as distinct doctrines.
(d)To exclude gifts from the scope of the doctrine would be to make its application turn on form rather than substance.
(e) The underlying rationale of the doctrine is a form of procedural unfairness; that is knowingly taking advantage of impaired consent. It is the characterisation of the transaction as unconscionable, rather than its legal characterisation, which is important.
(f) To include gifts within the ambit of the doctrine would not be going too far. The donee would be under a burden to show the gift was “fair, just and reasonable” only if the gift was challenged and the requirements of an unconscionable bargain satisfied. Most gifts would be unaffected by the doctrine.
(g)This approach has not apparently troubled other common law jurisdiction, notably Australia7 and the Republic of Ireland8.
[55] On this point, the authors of Snell’s Equity have commented:9
“There is conflicting first instance authority on the point, but if a particular set of facts surrounding B’s entry into a contract with A justifies equitable relief, it is impossible to see why the same facts, if instead surrounding B’s making of a gift to A, would not also give rise to such relief. There are good reasons why it may be easier to set aside a gift than a contract, and it is very hard to see why the converse should be true.”
[56] In New Zealand, James Every-Palmer in Equity and Trusts in New Zealand suggests that the doctrine may be invoked to set aside a gift induced by the donee’s exploitation and manipulation of a known position of special disadvantage.10 Two Australian decisions are cited in support of the proposition.11 In particular, the
comments of Brennan J in Louth v Diprose deserve repetition:12
“Equity intervenes "whenever one party to a transaction is at a special disadvantage in dealing with the other party ... and the other party unconscientiously takes advantage of the opportunity thus placed in his hands". Citing this passage in Amadio, Dawson J. said:
‘What is necessary for the application of the principle is exploitation by one party of another's position of disadvantage in such a manner that the former could not in good conscience retain the benefit of the bargain.’
What his Honour said of a bargain can be said equally of a gift.
…
[57] And:13
“… [W]here it is proved that a donor stood in a specially disadvantageous relationship with a donee, that the donee exploited the disadvantage and that the donor thereafter made a substantial gift to the donee, an inference may, and often should, be drawn that the exploitation was the effective cause of the gift. The drawing of that inference, however, depends on the whole of the circumstances.
7 Wilton v Farnworth (1948) 76 C.L.R. 646; Louth v Diprose (1992) 175 C.L.R. 621.
8 Prendergast v Joyce [2009] IEHC 199.
9 John McGhee (ed) Snell’s Equity (33rd ed, Sweet and Maxwell, 2015) at [8-041].
10 James Every-Palmer “Unconscionable Bargains” in Andrew Butler (ed) Equity and Trusts in
New Zealand (2nd ed, Brookers, Wellington, 2009) at [23.1.1].
11 Above n 7.
12 Louth v Diprose, above n 7, at 630.
13 At 631-632.
…
Once it is proved that substantial property has been given by a donor to a donee after the donee has exploited the donor’s known position of special disadvantage, an inference may be drawn that the gift is the product of the exploitation. Such an inference must arise, however, from the facts of the case; it is not a presumption which arises by operation of law. The inference may be drawn unless the donee can rely on countervailing evidence to show that the donee’s exploitative conduct was not a cause of the gift. At the end of the day, however, it is for the party impeaching the gift to show that it is the product of the donee’s exploitative conduct. This is the final and necessary link in the chain of proof of unconscionable conduct leading to a decree setting aside the gift.”
[58] The analysis set out above tends to demonstrate that the weight of authority and academic opinion favours applying the doctrine to gifts as well as bargains. I agree with the logic that the presence of consideration, modest as it may be, should not limit the application of a doctrine grounded in unconscionability. The purpose of this equitable remedy is to prevent an unconscionable use of power arising out of the
particular circumstances and conditions affecting the relevant parties.14 To restrict
the operation of this doctrine to contractual dealings has the potential to exclude those most deserving of its remedial application.
[59] Significantly, as Judge Keyser QC noted in Evan v Lloyd, not all gifts given by a party found to be labouring under a significant disadvantage would require the donee to explain why the transaction should be upheld. That is because equity looks to the conduct of the stronger party.15 Before the onus shifts to the donee, the claimant must establish that the donee acted unconscionably in obtaining or retaining the benefit of the transaction.
[60] I acknowledge there is something of a conceptual awkwardness in applying the phrase “fair, just and reasonable” to gifts because, by definition, a donor is not seeking anything in return. But this point may in fact demonstrate equity’s greater readiness to intervene where the relevant disposition is a gift rather than property exchanged for value. If a claimant is able to establish under the doctrinal criteria that it would be unconscionable for a donee to accept a gift, the donee will be unlikely to discharge its burden of showing the transaction to be fair, just and reasonable. In
other words, the task of persuading the Court to uphold an unconscionable transaction is likely to be more difficult for a volunteer than a contracting party. As the authors of Snell’s Equity put it: “there are good reasons why it may be easier to set aside a gift than a contract, and it is very hard to see why the converse should be true.”16
[61] The conclusion that unconscionable bargain extends to gifts is supported by recognising the doctrine has a separate and distinct focus from that of undue influence. Mason J in Commercial Bank of Australia Ltd v Amadio described the distinction in the following terms:17
“Although unconscionable conduct … bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.”
[62] Thus, the fact a claimant may have a tenable claim for undue influence should not detract from the cogency or otherwise of a parallel claim for unconscionable bargain.
[63] To round off this discussion I observe that the label of “unconscionable bargain” is perhaps inappropriate given I am of the view it applies to gifts as well as contracts. Moreover, as Rick Bigwood has commented:18
“[T]he ‘unconscionability’ that justifies equitable interference with an impugned legal contract does not reside definitionally in the ‘bargain’ at all, that is, in the comparative merits of the obligations or benefits and burdens exchanged. The objection, rather, lies in the manner with which the stronger party has treated the other party, who was particularly vulnerable to him, when procuring or receiving the transaction in question.”
[64] For these reasons, different terminology is preferable. I refer in this connection to Gustav & Co where Tipping J referred to “unconscionable
16 Snell’s Equity above n 9.
17 Commercial Bank of Australia v Amadio (1983) 151 CLR 447 at 461.
18 Rick Bigwood “Ill-Gotten Contracts in New Zealand: Parting Thoughts on Duress, Undue
Influence and Unconscionable Dealing – Kiwi-Style?” (2011) 42 VUW Law Rev 83 at 96.
transactions”.19 Similarly, leading Australian authorities, Amadio for instance, have eschewed “unconscionable bargain” in favour of the term “unconscionable dealings”. In my view, these labels are more apt given the essential nature of the doctrine.
[65] Having determined that the doctrine of unconscionable dealings extends to gifts the next question is whether, on the facts as I find them, Mrs Thompson’s acceptance of Mr Willis’ gift of the Bonus Bonds was unconscionable.
[66] Having regard to the relevant authorities, James Every-Palmer in Equity and
Trusts in New Zealand suggests it is useful to approach the analysis in two steps:20
(a) first, ask whether the complainant was under a “special disadvantage”
due to lack of education, illness, age or some other factor; and
(b)if so, shift the focus of the inquiry to the stronger party and ask whether they have unconscionably taken advantage of that disability or disadvantage.
[67] I propose to adopt this approach in my analysis.
Was Mr Willis under a “special disadvantage”?
[68] I am satisfied that he was. My reasons follow.
[69] First, Leslie Willis described his father’s deterioration over a period of about three and a half years and I accept his evidence on this point. Despite the absence of medical records, it is supported by Mr Willis’ death certificate which states that the cause or causes of death were “bronchopneumonia bilateral three days; carcinoma stomach one year; metastasis – cell CA three years”. Leslie Willis’ evidence is, to some extent, also supported by Mrs Thompson’s descriptions of Mr Willis including his broken leg, his reliance on his wheelchair and mobility scooter, the removal of a malignant lymph tumour from his neck and his incontinence.
[70] I accept Leslie Willis’ evidence that his father’s health deteriorated progressively and with time he became increasingly debilitated. He underwent major surgery and was prescribed morphine as part of a palliative regime to reduce pain.
[71] I also accept Leslie Willis’ evidence that in the month before his father died Mr Willis’ health had declined to the point that it was necessary for him to be cared for at 5A Jersey Avenue, the house occupied by Leslie Willis and his then wife. His was a progressive irreversible, chronic and terminal illness no doubt complicated by muscular dystrophy and lack of mobility. At the time he and Mrs Thompson signed the Bonus Bonds application form on 16 August 2000 he had not yet moved into Leslie Willis’ home. However, by that time he was a frail and elderly man, with just three weeks left to live.
[72] In these circumstances I am satisfied he was under a special disadvantage or disability at the time the documents were signed.
Did Mrs Thompson unconscionably take advantage of that disability or disadvantage?
[73] As already discussed, equity will only intervene if it can be shown that
Mrs Thompson either:
(a) actively extorted the benefit out of Mr Willis; or
(b)passively accepted the benefit in circumstances where she had an obligation in equity to say to Mr Willis, “No, I cannot in all good conscience accept the benefit of this transaction in these circumstances either at all or unless you have full and independent
advice”.21
[74] A key inquiry here is whether Mrs Thompson was aware Mr Willis was labouring under a significant disability.
21 Bowkett v Action Finance Ltd above n 2 at 457.
[75] In her affidavit evidence, Mrs Thompson claimed she was not aware
Mr Willis had cancer. She said:
“[38] … I was not aware that Arnold had cancer. He did not tell me that. When I last saw him he was frail, but in good spirits and his mind was unaffected. He was certainly not fighting for every breath and I did not know he was taking morphine.”
[76] On the same theme she also deposed:
“[59] … I was not aware of Arnold having stomach cancer, although I do remember him having the lymph gland operation and, later, a broken leg … as I have said I mainly went to see him on the weekends when he wanted me to visit. Very occasionally I would pop in to see him. The regularity of my visits never altered at any time.”
[77] In her evidence at the hearing Mrs Thompson accepted she knew Mr Willis had undergone a substantial operation on the left side of his neck to remove a lymph gland which she knew was cancer but she insisted Mr Willis never told her that he was dying. Nor, she claims, did he ever tell her that the cancer had travelled to his stomach or that he was in pain and on morphine. She even claimed his illness never cropped up in their conversations.
[78] The assertion by Mrs Thompson that she was not aware of the nature of Mr Willis’ illness, its seriousness and his frailty is untenable on the facts. I do not accept Mrs Thompson’s evidence on this point. My reasons follow.
[79] First, although it is unclear when Mr Willis was first diagnosed with terminal cancer, it appears this was before Mrs Thompson was engaged as Mr Willis’ caregiver in early 1997. As a new caregiver it would be most unlikely that she would not have been told, either by Focus 2000 or Mr Willis’ family that the elderly man she would be looking after was not only unwell but his condition was terminal. It is also most unlikely the nature of his illnesses would be left undisclosed.
[80] Secondly, Mr Willis was largely confined to a wheelchair or mobility scooter. In addition to terminal cancer he was suffering from muscular dystrophy. This must have been obvious to Mrs Thompson even if she may not have known the actual diagnosis (although, for the reasons already given, I regard that as unlikely).
[81] Thirdly, after Mrs Thompson had finished as Mr Willis’ paid caregiver, she continued to visit him, mostly on weekends, and often as a result of him calling her because he had soiled himself. Mrs Thompson attempted to suggest that he soiled himself because he was a heavy drinker. However, curiously she claimed she had never seen him drunk and that when he did drink in her presence it might have been a rum and green ginger. The only other available basis for Mrs Thompson to believe Mr Willis was a heavy drinker was because she said she knew he was a regular at the Richardson Tavern. I do not accept Mrs Thompson believed that alcoholic intoxication explained Mr Willis’ incontinence. If he was incontinent, as Mrs Thompson claims he was, then it must have been for other reasons connected to his illness. Mrs Thompson must have appreciated that. Her evidence was that she had considerable experience in the care sector. She was not naïve in these matters. It must have been obvious to her that this elderly man was frail and vulnerable.
[82] Fourthly, Mrs Thompson portrayed her relationship with Mr Willis as warm, close and trusting. She gave the impression they spoke at length across a broad range of topics. In her correspondence and in her evidence she described him as a close and very dear friend. Given that her weekend attendances on Mr Willis were frequently, if not usually, as a result of a cry for help from Mr Willis, it is inconceivable they did not discuss Mr Willis’ illness and prognosis.
[83] Fifthly, as already discussed, although Mrs Thompson initially denied knowing Mr Willis had cancer she accepted in cross-examination that the surgery to his neck was to remove a cancerous growth.
[84] Taking into account these factors and standing back and reviewing the whole of Mrs Thompson’s relationship with Mr Willis it is beyond belief she did not know he was labouring under a significant disability.
[85] That, however, is not the end of the inquiry. The next question is whether Mrs Thompson actively extorted the benefit from Mr Willis or passively accepted the benefit in circumstances where she had an obligation in equity to either refuse it or to insist Mr Willis had independent advice. This is where I regard the evidence of the unexecuted August 2000 will as relevant. This will, purporting to leave Mr Willis’
entire estate to Mrs Thompson, provides crucial context for their dealings and suggests exploitative conduct. My reasons follow.
[86] During 1999 Mr Willis underwent two separate surgical procedures both of which related to the spreading cancer. It was as a result of these events he decided to update his will. The will of 20 September 1999 left his entire estate to Leslie Willis. Then, in late July or early August 2000, Leslie Willis found the photocopy of a new will and other papers which appeared to have the effect of leaving all of his father’s estate to Mrs Thompson. He showed these documents to his father who was very upset and instructed his lawyers to prepare a new will which was executed on
29 August 2000. The new will was all but identical to the earlier one of September
1999.
[87] Mrs Thompson’s explanation for the unexecuted will dated August 2000 is implausible. First, she said she could not remember anything about a will or any other paper work which left Mr Willis’ property to her. On its face that explanation seems perfectly reasonable because had she seen it she would hardly forget it. After all, this was a document which left all of Mr Willis’ property to her. However, in cross-examination she said she had seen it; the first time was when it arrived in the mail with, she thought, the Bonus Bonds papers. When she went to see her lawyer in September 2001 she gave him the draft will. She assumed that Mr Willis must have given it to her but she could not remember this. She did not know who prepared the document and did not really understand it. But under further questioning, she said she was shocked because there had been no discussion about it before it had arrived. For her to have been shocked she must have realised what it was. Certainly, even a cursory reading of the unexecuted will would have revealed that Mr Willis was proposing to leave his entire estate to her.
[88] Plainly, the circumstances surrounding the execution of the 29 August 2000 will undertaken with the assistance of his lawyer show it was not Mr Willis’ intention to leave his entire estate to Mrs Thompson.
[89] These circumstances add to the body of other evidence which supports the inference that Mrs Thompson was considerably more active in managing and
directing Mr Willis’ financial and other affairs than she is prepared to accept. Another example of her active management and involvement in Mr Willis’ financial affairs can be seen in the contents of Mrs Thompson’s letter to Mr Willis’ solicitors dated 12 May 2015. This evidence is discussed in more detail later in this judgment. However, in that letter, contrary to her claim she was not involved in his financial affairs she disclosed that she and Mr Willis had, together, administered a joint bank account which allowed both of them to deposit, withdraw and manage savings and expenditure.
[90] On this evidence I am satisfied that Mrs Thompson actively extorted the benefit from Mr Willis or, at the very least, passively accepted the benefit in circumstances where she had an obligation in equity to decline it in good conscience, absent Mr Willis having the benefit of full and independent advice.
[91] Finally, I also regard as significant Mrs Thompson’s evidence as to how she came to be a joint owner of Bonus Bonds worth $50,000. She said that when Mr Willis first told her that he wished to leave her a half share in recognition of the care she had given him over the years she agreed to sign the papers only because he was so insistent and did not want to upset him. Later, when she received the application for repayment receipt and the Bonus Bonds application form she decided to go around to see Mr Willis because she did not think it was right for her to accept the gift. She only decided to proceed with the transaction after the altercation with Leslie Willis, apparently because she resented his behaviour and because she wished to respect Mr Willis’ wishes. In other words Mrs Thompson seemed to accept, at least initially, she could not in good conscience accept the benefit of the transaction.
[92] For these reasons I am satisfied that this was not a case of a dying man genuinely wishing to provide his loyal caregiver and friend with a gift in recognition of her services. The Bonus Bonds represented a substantial amount of money for little or no consideration at a time when the donor was particularly vulnerable and labouring under a significant disability. In these circumstances, I am not persuaded the transaction was fair, just and reasonable and should therefore be upheld.
[93] I am satisfied the first cause of action is made out. However, if I am wrong I
now turn to discuss the second cause of action, namely undue influence.
Undue influence
Legal principles
[94] In ASB Bank Limited v Harlick Gault J explained that for a relationship of undue influence to be sufficient to set aside a transaction, the relationship:22
“Must involve such degree of reliance and trust as suggests a real risk that a disadvantageous transaction has not resulted from the kind of informed and independent decision to be expected from a person in the position of the party seeking relief but rather from the influence the other party to the relationship has in that position.”
[95] The doctrine of undue influence is based on the principle that:23
“A transaction to which consent has been obtained by unacceptable means should not be allowed to stand. Undue influence has concentrated in particular upon the unfair exploitation by one party of a relationship which gives him [or her] ascendancy or influence over the other.”
[96] In Green v Green Winkelmann J analysed the leading authorities24 and distilled them into a number of concise propositions. I gratefully reproduce and adopt those relevant to the disposition of the present case:25
(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 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
22 ASB Bank Limited v Harlick [1996] 1 NZLR 655 (CA) at 659.
23 R v Attorney-General for England and Wales [2004] 2 NZLR 577 (PC) at [21].
24 Royal Bank of Scotland v Etridge [2002] 2 AC 773 (HL); Hogan v Commercial Factors Ltd
[2006] 3 NZLR 618 (CA).
25 Green v Green [2015] NZHC 1218, (2015) 4 NZTR 25-017 at [100]. These principles were confirmed as correct on appeal in Green v Green [2016] NZCA 486, [2017] 2 NZLR 321 at [48].
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 with 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”.26
(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
26 National Westminister Bank Plc v Morgan [1985] AC 686 (HL) at 704, cited in Royal Bank of
Scotland v Etridge (No 2) above n 24 at [25].
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.
[97] In terms of (d) above, a party can succeed in establishing undue influence either directly by proving “actual undue influence” or with recourse to an evidential presumption. I commence with the latter.
[98] Two primary facts must be shown before the presumption will be engaged. First, there must have been a relationship of influence between claimant and the party exerting the claimed influence. Secondly, the impugned transaction must be one which calls for an explanation.
[99] As to the first, the requisite relationship must give one party “an authority or influence over the other from the abuse of which it is proper that he should be protected”.27 In examining this issue it is necessary to identify the nature of the relationship between Mr Willis and Mrs Thompson. In other words was she a caregiver, or a dear friend or was there even a romantic or emotional element?
[100] On this question Mrs Thompson’s evidence is difficult to reconcile. After she terminated her formal employment as Mr Willis’ caregiver she said that because she “… only lived at the top of the hill … [she was] … able to float down” because there were no caregivers on the weekends. She claimed Mr Willis would call her to say he had had an accident and she would attend never expecting to be paid for her services.
She said she did this out of the goodness of her heart; they had a lot in common and spoke a lot.
[101] In her letter of 12 May 2015 she described an occasion when visiting Mr Willis at Waitakere Hospital following admission for his broken leg, which Mrs Thompson put at about 10 months before he died. She said that Leslie Willis bailed her up against the wall in the hospital because he held her responsible for his father suspending his monthly allowance. She said that Leslie Willis demanded to know what she had to do with his father’s decision. His father apparently intervened telling his son that it was not his business and “… even if he wished to marry [Mrs Thompson] that was entirely his decision and no one else’s”.
[102] At another point in her evidence Mrs Thompson, when being cross-examined about whether or not she knew Mr Willis was on morphine, answered, “I did not know that. We are not privileged to that, my dear, as caregivers. It’s not my job to know medication, it’s an RN [registered nurse] job. I’m not qualified as a caregiver to do medication, dear.” And yet the time in question related to a period shortly before Mr Willis died, well after Mrs Thompson had ceased being his caregiver.
[103] Thus, in summary, it is unclear what the nature of the relationship was. The hospital incident hinted at a possible romantic element even if only from Mr Willis’ perspective. Mrs Thompson’s evidence suggests a very close personal friendship with a strong caregiver component.
[104] The question here is whether the relationship, whatever it may have been, gives rise to a presumption that Mrs Thompson was able to unduly influence Mr Willis. Was the relationship one of trust and confidence sufficient to invoke the presumption?
[105] Dunningham J faced a not dissimilar situation in Davidson v Drummond.28
There the deceased, Mr S, had limited reading and writing skills. He was plagued with health problems, had limited mobility and suffered from chronic cardiovascular deficits complicated by Parkinson’s disease. He was a lonely and vulnerable old
man susceptible to anyone who offered him friendship. His caregiver, who had originally been engaged through an agency, was later employed by Mr S. It was agreed the caregiver would be paid $700 a week. However, the payment was not made in the conventional way. Instead, payment was made in kind through the provision of gifts and other benefits in lieu of wages for some time before the position was regularised and an automatic payment system was set up. Dunningham J observed that it was possible the decision to pay the caregiver in kind was motivated, at least in part, by the fact that Mr S did not view the relationship initially as a strictly commercial one and, furthermore, for a period entertained the idea that he and the caregiver could become romantically involved. The caregiver visited him twice a week which increased to five days a week. She became an indispensible part of Mr S’s life assisting him in all aspects.
[106] Dunningham J found the last will and testament of Mr S to have been procured through the exercise of undue influence. This will bequeathed a subdivided lot to the caregiver. This will differed materially from a will executed just four days earlier with the changes favouring the caregiver. Dunningham J found the instructions in the will were given as a consequence of undue influence being exercised over Mr S by the caregiver and her family. She had encouraged the high level of dependency which Mr S had on her services, deliberately kept Mr S away from the beneficiaries of his earlier wills, and was attempting to have Mr S revise his
will to leave all the property to her family trust.29
[107] In the present case Mr Willis’ reliance on Mrs Thompson appears to have been a good deal more modest. There are, however, some clear parallels between the two cases. Both involved vulnerable men in the final phases of lives plagued by complex medical challenges and disabilities. They formed close attachments with female caregivers who helped them prepare documentation which had the effect of transferring assets from the dying men to themselves. On Mrs Thompson’s evidence, Mr Willis relied heavily on her. Whether or not his reference to marrying her was hyperbole, it is a statement which reveals Mrs Thompson’s knowledge of how significant she was to Mr Willis not long before he died.
[108] Furthermore, Mrs Thompson’s letter of 12 May 2015 reveals that she regarded her relationship as transcending that of a caregiver. She and Mr Willis together administered a joint bank account which entitled them to make deposits, transfers and withdrawals. Despite Mrs Thompson’s later attempt to explain away this reference as relating to the Bonus Bonds account, that cannot be the case. She specifically described it as a cash savings account which allowed both of them to deposit, withdraw and manage savings and expenditure together. This evidence reveals how intertwined and intimately connected Mrs Thompson had become in Mr Willis’ life in the months before he died and for that reason I am satisfied that the relationship between the couple was one where one party had an authority or influence over the other the abuse of which he should be protected from.
[109] Having found the relationship gave Mrs Thompson an authority or influence over Mr Willis the abuse of which he should be protected from, the next issue is whether the transaction calls for explanation. The following comments of Stephen Kós QC (as he then was) in Equity and Trusts in New Zealand are helpful:30
“Secondly, the requirement that the transaction also “call for explanation” should not be invested with too much mystique. It simply defines a modest threshold of scepticism that must be crossed before the onus shifts. All that is required is that the transaction “is not readily explicable by the relationship of the parties”. Something must seem to be amiss, calling for explanation. Typically the transaction will in fact be a gift. If that gift in all its aspects appears the product of the natural warmth and affection underlying the relationship, the onus does not move. But if a question is left as to whether the gift is not the product of a healthy relationship, but rather the abuse of an unhealthy relationship, then the onus will transfer.
Undue influence will not be presumed where the benefit “can reasonably be accounted for on ordinary motives of friendship or charity”. In Re Brocklehurst (deceased) an elderly and eccentric baronet gifted a 99-year lease of the shooting rights over his estate to the defendant, a garage proprietor, who was his valued friend and aide. At the donor’s insistence the donee’s solicitor prepared the lease. He refused to take independent advice. He “badgered” the defendant to accept a lease of that duration. The Court of Appeal held that there was no relationship of influence but had there been, the transaction would have been found to be spontaneous, independent, and motivated by a genuine and deep affection for the defendant. In such a case it is unlikely that the onus would have shifted from the disappointed legatees to prove undue influence in the usual way.”
30 Stephen Kós QC “Undue Influence” in Equity and Trusts in New Zealand above n 10 at
[22.6.2(2)].
[110] Thus the question here is whether the gift of the Bonus Bonds, in all its aspects, appears to be the product of “the natural warmth and affection underlying the relationship”. If it does then the onus does not shift. But if the gift does not appear as such then it is for Mrs Thompson to demonstrate an absence of undue influence.
[111] In this case I am satisfied that the “modest threshold of scepticism” is
crossed. There are a number of troubling aspects which lead me to this conclusion.
[112] First, there is the unsigned August 2000 will which, if signed and unrevoked by subsequent wills, would have left Mr Willis’ entire estate to Mrs Thompson. I have already discussed this evidence and Mrs Thompson’s inability not only to explain its provenance but also to provide a consistent account as to when she first learned of it and what she believed it was.
[113] Secondly, the cash savings account which she described in her letter of
12 May 2015 contradicts her claim that she was not involved in Mr Willis’ financial
affairs. In her affidavit evidence she said:
“He never discussed his financial affairs with me. He said he wanted to leave me a half share in the Bonus Bonds for all the care I had given him over the years. I said, ‘You don’t have to do that’ but he said he wanted to. I did not want to upset him so I agreed to sign the papers. …”
[114] Her letter of 12 May 2015 is in direct contradiction of this claim.
[115] Thirdly, at about this time Mr Willis was well familiar with the making of testamentary dispositions. He had made a new will in September 1999. He may have been responsible for the making of the unexecuted August 2000 will and, of course, his last will was executed on 29 August 2000. Why then, if he wished to make a testamentary disposition in favour of Mrs Thompson in recognition of her contribution, did he not do so in his last will rather than in the form of an inter vivos gift?
[116] Fourthly, Mrs Thompson’s explanation of the unexecuted August 2000 will was both wholly unconvincing and contradictory. I have already discussed this. However, the following exchange with the Court reveals this:
“Q. Have you looked at that document [the unsigned will giving the residue to Mrs Thompson], do you understand what that document is?
A. I don’t understand it really, Your Honour, I just believe my name is there, it’s got it there.
Q. Do you know what that document does? A. No I don’t Your Honour.
Q. You don’t know what the effect of that document is?
A. No I don’t, Your Honour.
Q. Have you read the document?
A. Just, I don’t understand all the, um, all the big words, Your Honour.
Q. Right. Do you understand the words at the top of it, ‘This is my last will and testament’?
A. I do.
Q. Right. And do you see your name appearing there about two-thirds of the way down the page?
A. Yes I do.
Q. What did you think that referred to when you [saw]31 your name two thirds of the way down that first page?
A. Shocked.
Q. Why were you shocked?
A. Because I didn’t, he’s a friend, you know, not a lover or anything like that, Your Honour he was a friend and I – I helped a person in need Your Honour.
Q. So why were you shocked?
A. Because I – I don’t expect anything from anybody, Your Honour.”
[117] As observed, the question here is whether the gift, in all its respects, appears to be the product of a natural warmth and affection underlying the relationship. I do
31 The trial transcript refers to “social worker” at this point. That is an error. Having listened to
the FTR audio what was actually said is as it is noted in this quote.
not accept that such is the case here for the reasons discussed. The Bonus Bonds do not reflect a testamentary gift to a dear friend to be transferred upon Mr Willis’ death to reflect the devoted care and affection which Mrs Thompson had invested in him.
[118] For that reason I am satisfied that the onus falls on Mrs Thompson to explain the transaction and for the reasons already given, I am not satisfied that her explanation is adequate to meet that onus. And even if undue influence is not presumed, the features of the case I have referred to above are sufficient to make out actual undue influence.
Laches
Defence case
[119] Mr Bryers’ submissions rest heavily on the proposition that much of the evidence relied on by the plaintiffs is hearsay and unreliable. For the reasons given earlier in this judgment I agree. I have set out what evidence I have relied on in coming to my reasons.
[120] He says that the claim should be dismissed by reason of the plaintiffs’ delay in bringing or pursuing the claim with due speed and, in particular, relies on the following matters:
(a) the events which the plaintiffs rely on in bringing their claim occurred between 1997 and 2000; in other words between 16 and 19 years ago;
(b)there is no excuse for the delay given Mrs Thompson’s location was known to the plaintiffs for the period 2000 to 2003 and her location after that has been readily discoverable through the electoral rolls and/or the telephone books; and
(c) the delay is prejudicial in that the Court has been asked to make findings in respect of conversations and events which occurred between 16 and 19 years ago and evidence of conversations and events which occurred so long ago will be inherently unreliable.
Principles
[121] The starting point is Eastern Services Ltd v No 68 Ltd where the Supreme
Court said:32
“[34] The classic exposition of the doctrine by Lord Selborne LC bears repetition. The part most often cited is in these terms:
‘Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or whereby his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.’
[35] An authority often cited in the same breath as Lindsay Petroleum is Erlanger v New Sombrero Phosphate Company. We particularly refer to the speech of Lord Blackburn. After referring to Lord Selborne LC’s exposition Lord Blackburn said:
I have looked in vain for any authority which gives a more distinct and definite rule than this; and I think, from the nature of the inquiry, it must always be a question of more or less, depending on the degree of diligence which might reasonably be required, and the degree of change which has occurred, whether the balance of justice or injustice is in favour of granting a remedy or withholding it. The determination of such a question must largely depend on the turn of mind of those who have to decide, and must therefore be subject to uncertainty; but that, I think, is inherent in the nature of the inquiry.”
[122] In Neylon v Dickens the Court of Appeal held the doctrine of laches debarred the plaintiffs from claiming an inquiry into damages or rents and profits. The Court observed:
“As to detriment, Mr Penlington emphasised in his argument in this Court the absence of any material affidavit by Mr Dickens in the first action and the paucity of the latter's affidavit in support of the motion for leave to issue a third party notice in the second action. That is a valid point as far as it goes; but what was said by McCarthy P in delivering the judgment of this Court on a somewhat analogous question of striking out for want of prosecution in Fitzgerald v. Beattie [1976] 1 NZLR 265, 269, applies to the present case mutatis mutandis:
32 Eastern Services Ltd v No 68 Ltd [2006] NZSC 42, [2006] 3 NZLR 335.
‘Extensive delay by itself can in any type of case give rise to the inference that it would be unfair to allow the action to proceed. We said in the New Zealand Industrial Gases case also that in most, if not all, instances of delay there is some prejudicial effect arising out of the mere expiration of time, the dimming of memories, possible changes in physical features and so on; to what extent this was important depended upon the character of the action ([1979] NZLR 58, 63). This aspect assumes especial importance if the action is one such as we have here, where the claim is founded on negligence and where its proof will not be by business or other written records, but by the oral testimony of witnesses, who will have to depend largely on their memories for much of the detail of events which happened nine years ago.’
As those observations recognise, an inference may be drawn as a matter of common sense that delay in making a claim has prejudiced the defendant. It depends on the character of the claim. The plaintiffs here took three years from December 1978 to December 1981 in assembling materials for a claim for an inquiry into damages. The claim cannot depend mainly on business or other written records; the affidavits for the plaintiffs confirm that this is so. The natural inference, we think, is that in meeting the claim the defendant will be prejudiced by having to start investigations so far behind scratch. Further, assuming that the High Court still has jurisdiction to join a third party in the first action (as submitted for the appellants), the extra three years are likely to have added to the difficulty of proving an oral or implied agreement by Alpine to indemnify the vendors. It is not realistic to suggest that there was an express written agreement between those parties. The difficulties of adducing evidence on the claims for damages could be even greater for the suggested third party than for the defendant. It is far from clear that on a contested hearing a Judge would allow a third party notice in the first action to issue or to stand.”
[123] Indeed, at least as far back as Allcard v Skinner, evidential issues suffered by virtue of delay have been recognised as relevant:
“The delay in this case … in my opinion … cannot be relied upon as having deprived the Defendant of any evidence in her favour which could have been adduced if the Plaintiff had brought her action shortly after she left the sisterhood.”
[124] However, as this passage illustrates, the party claiming laches must be able to articulate why it is the delay has prejudiced its ability to effectively defend the case.
Factual background
[125] As already discussed, Leslie Willis first made the allegation of fraud by Mrs Thompson when, on the day his father died, he asked the Bank to place a stop on any dealings with the Bonus Bonds.
[126] He said that within a couple of months he engaged a private investigator, Julia Moore, to locate Mrs Thompson. He said he received her report before the end of 2000. Apparently she was unable to locate Mrs Thompson.
[127] Leslie Willis said that he did not start any proceedings because his marriage was failing and he did not regard the matter as one of high priority. He and his wife separated in 2008.
[128] It was not until 2015, following discussions with his solicitors, that it was suggested a further attempt should be made to locate Mrs Thompson. He engaged a new private investigator who, within a few days, found out where Mrs Thompson was living.
[129] Mrs Thompson’s unchallenged evidence is that she and her husband moved to Fowlds Avenue, Sandringham in 2000. She was living at that address when Mr Willis died. She moved from Fowlds Avenue in 2003, first living for a short time in Avondale before moving to where she presently resides in the same suburb. She has lived there ever since. She said that although her name has been in the telephone book it is incorrectly listed, at least in the current directory, under “J Thompson” instead of “P J Thompson”. She said that while she is unaware of how long it has been incorrectly listed, others have not had difficulty contacting her, particularly given that she has lived there for more than 11 years.
Analysis
[130] Undoubtedly, the 15 year delay from August 2000 to November 2015 is substantial and given the relative ease with which the second private investigator located Mrs Thompson in 2015 an examination of the circumstances and the consequences of the delay is necessary. The most obvious is the prejudicial effect on the defence arising out of the delay and, in particular, the dimming of memories, the loss of evidence, particularly documentary records but also the oral testimony of witnesses and their availability given the passage of time.
[131] The focus of this inquiry must centre on the prejudice to Mrs Thompson in being able to properly defend this claim. In examining that question the following factors are of relevance in this case.
[132] First, Leslie Willis challenged the transaction as soon as he became aware of it. He advised the bank and following some correspondence a stop was placed on the transfer of the funds to Mrs Thompson. The account has remained frozen ever since.
[133] Secondly, Mrs Thompson has taken no active steps to pursue any claim she believed she may have had in respect of the disputed funds. In 2001, she attempted, through her solicitors, to have the funds released. When this failed she took no further steps until the present proceedings were instituted.
[134] Thirdly, the passage of time has resulted in compromising the body of evidence which would have been available had Leslie Willis brought these proceedings earlier. Memories have dimmed. Documentary evidence which would otherwise have been available has been lost. In that regard the copy of the will and other papers found by Leslie Willis in August 2000 is an example. He said that this documentation was in the possession of his former wife, although he gave no explanation as to what steps he had taken to attempt to locate them or require his former wife to produce them (although the unexecuted will dated August 2000 has been produced). The destruction of Mr Willis’ medical records is another example. However, the unavailability of both bodies of evidence has tended to adversely affect the plaintiffs’ ability to prove its case rather than Mrs Thompson’s ability to defend it.
[135] The resolution of this case is founded on an analysis of the nature of the relationship between Mr Willis and Mrs Thompson. Leslie Willis could only contribute relatively modestly to that body of evidence. With Mr Willis dead, the only other person able and available to speak of the relationship was Mrs Thompson. On her account and description of the relationship there was no other witness who could add to or corroborate her account. No one else witnessed the interaction between Mr Willis and Mrs Thompson other than Leslie Willis and his observations
were limited. Mr Bryers did not point to any documentary or other specific evidence which, by reason of the delay, is now not available and which may have materially assisted Mrs Thompson’s defence. That underscores this very point. For that reason, any prejudice, by reason of delay such as it may be, has affected the plaintiffs’ ability to prove their case rather than the defendant.
[136] For this reason I am not satisfied that the prejudice claimed by reason of the delay is such that it is unfair or unjust to grant the relief sought in this case.
[137] It follows I am satisfied that this defence must fail.
What is the appropriate relief to be granted?
[138] The plaintiffs, having made out their claim, are entitled to relief. I make the following declarations:
(a) the transaction involving Mr Willis’ purchase of the Bonus Bonds and the subsequent issue by the Bank of the Bonus Bonds in the joint names of Mrs Thompson and Mr Willis is voidable at the suit of the plaintiffs, in their capacity as executors of the estate of Mr Willis, it being unconscionable in the circumstances for Mrs Thompson to retain the benefit of the Bonus Bonds;
(b)the Bonus Bonds application for repayment form and the Bonus Bonds application form were brought about by Mrs Thompson’s undue influence at the time they were signed on or around August
2000, and therefore the transaction involving Mr Willis’ purchase of the Bonus Bonds and the subsequent issue by the Bank of the Bonus Bonds in the joint names of Mrs Thompson and Mr Willis is voidable at the suit of the plaintiffs, in their capacity as executors of the estate of Mr Willis;
(c) the Bonus Bonds application form is void to the extent that it purports to name Mrs Thompson as an account holder;
(d) Mrs Thompson has no legal or beneficial interest in the Bonus Bonds;
(e) the sole legal owners of the Bonus Bonds are the executors of the estate of Mr Willis; and
(f) the Bank should remove Mrs Thompson’s name as an account holder
of the Bonus Bonds.
Result
[139] The declarations sought by the plaintiffs in respect of both causes of action are made.
Costs
[140] In the circumstances I am of the preliminary view that costs should lie where they fall. However, I note that Mr Bryers asks that costs be reserved, adding that there are matters relating to this issue which should be considered by the Court following determination of the claim.
[141] I invite counsel to file a joint memorandum as to costs. In the absence of agreement, the parties are to file and serve costs memoranda within 25 working
days of the date of this decision.
Moore J
Solicitors/Counsel: Rennie Cox, Auckland Mr Jones, Auckland
Mr Bryers, Auckland
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