ry: Principal judgment
Parties: Kathryn Grant (Plaintiff/Cross Defendant)
David Lane (Cross Defendant)
Matthew Grant (Defendant/Cross Claimant)
Representation: Counsel:
N. Bilinsky (Defendant/Cross Claimant)
K. Grant (Plaintiff/Cross Defendant in person)
D. Lane (Cross Defendant in person)
These proceedings concern the estate of the late Mary Alice Grant ("Mary") ("the Estate"), born in 1923, who died on 17 August 2017 at the age of 94.
Mary and her late husband, Eric Charles Grant (who died in 2007) ("Eric"), had three children: Matthew Ian Grant (born May 1956) ("Matthew"), Kathryn Mary Grant (born November 1957, and also known as "Kate") ("Kathryn") and Erica Lyn Grant (born August 1959) ("Erica"), who all have survived Mary.
By her last will and testament dated 6 August 2015 ("the Will"), Mary appointed Matthew as her executor to distribute the Estate as to nine per cent to six named grandchildren and the balance to Matthew and Erica.
Clause 3 of the Will provides:
"I CONFIRM that between 1 January 2012 and the 31 March 2015 my Daughter KATHRYN MARY GRANT has received as a minimum amount by various payments from me the benefit of Eight Hundred and Five Thousand Seven Hundred and Twenty Dollars ($805,720.00) from my Estate which total amount she has variously applied towards the purchase of her residential property situated at 128 Boulton Drive, Paterson in the State of New South Wales and for the building of her residential property thereon. I am prepared to state the sum of Three Hundred and Eighty Thousand Seven Hundred Dollars ($380,700.00) I consider to be moneys which I have gifted to her during the course of the aforesaid period but I do require her to repay to my Estate if not already paid during my lifetime the outstanding balance thereof which I consider to be loans totalling Four Hundred and Twenty Five Thousand and Twenty Dollars ($425,020.00) UPON the basis that my aforesaid Daughter shall repay to my Estate the whole or so much thereof as shall remain outstanding of the said sum of Four Hundred and Twenty Five Thousand and Twenty Dollars ($425,020.00 and she retaining by way of inter vivos gift the sum of Three Hundred and Eighty Thousand Seven Hundred Dollars ($380,700.00) I have formed the view that she in receiving that amount by way of gift has been enriched by that amount to the exclusion of her brother MATTHEW IAN GRANT and her Sister ERICA LYN GRANT and by that reason I make no further provision for her under the terms of this my Will."
Matthew obtained a grant of probate with the 2015 Will annexed.
In August 2018 Kathryn commenced proceedings in this Court seeking provision under s 59 of the Succession Act 2006 (NSW) ("the Act") for her maintenance and advancement.
Matthew as executor then cross claimed against Kathryn and her de facto husband, Mr David Lane ("David"), claiming that Kathryn is indebted to the Estate in an amount of $425,000. That claim has subsequently been reduced to $361,020. Leaving aside that claim, the Estate has, as at April 2020, funds of $190,000, but that will be reduced by the costs incurred for the hearing and in resisting an application by Kathryn and David to vacate the hearing date, which application was rejected: see my ex tempore reasons dated 28 April 2020.
On the last day of the hearing, Kathryn abandoned her claim for additional provision to be made to her from the Estate pursuant to s 59 of the Act.
In support of her case (and defence of the Estate's claim against her) Kathryn relied on the following affidavits:
1. Kathryn Mary Grant dated 12 September 2018, 23 January 2019, 25 February 2019 and 14 March 2019.
2. David Bruce Lane dated 25 February 2019.
3. Geoffrey Adam Hooper dated 18 March 2019.
In support of the Estate's case (and defence of Kathryn's case against the Estate) the Estate relies on the following affidavits:
1. Mathew Grant dated 2 October 2018, 20 November 2018 and 22 April 2020.
2. Erica Grant dated 25 February 2019.
3. Maclean Jenkins dated 25 February 2019.
4. Jennifer Shaw dated 11 Mach 2019 and 3 April 2020.
The affidavits, particularly of Kathryn on the one hand, and Matthew and Erica on the other, dwell on the alleged wrongdoing of the opposite camp, both towards Mary and to each other.
Kathryn appears for herself as the Plaintiff/First Cross Defendant, David appears for himself as the Second Cross Defendant, and Mr N. Bilinsky of Counsel appears for the Defendant/Cross Claimant.
A critical factual matter which underlies the Estate's claim to $361,020 is the amount of money transferred by Mary to Kathryn and David from 3 January 2012 until 31 March 2015. There is no dispute that the following transfers of money were made from Mary's account to Kathryn and David (or at their direction):
(1) $60,000, 3 January 2012.
(2) $50,000, 15 May 2012.
(3) $240,000, 5 September 2012.
(4) $50,000, 5 September 2012.
(5) $5,000, 29 June 2013.
(6) $1,000, 1 July 2013.
(7) $25,000, 9 July 2013.
(8) $5,000, 30 July 2013.
(9) $5,000, 31 July 2013.
(10) $9,000, 30 January 2014.
(11) $250,000, 10 June 2014.
(12) $11,700, 10 June 2014.
(13) $100,000, 13 November 2014.
(14) $100,000, 28 November 2014.
(15) $7,650, 7 January 2015.
(16) $670, 5 March 2015.
(17) $11,700, 31 March 2015.
Total = $931,720.
There is no dispute that $190,000 was repaid by Kathryn and David on 23 October 2013, reducing the net amount of transfers to Kathryn and David to $741,720 in the period 3 January 2012 to 31 March 2015.
The Will refers to a figure of $805,000 rather than $741,720. The difference arises from the fact that Mary was working off a document prepared by Matthew, which assumed that an amount of $180,000, deducted from Mary's term deposit account in January 2012, went entirely to Kathryn. In fact, it was divided evenly between each of Kathryn, Matthew and Erica. The amount of $180,000 therefore overvalued the payment to Kathryn by $120,000, but it also treated the amount of $180,000 as a loan to Kathryn when in fact the $60,000 she received was a gift. The Defendant/Cross Claimant also later added three further amounts to the list of transfers (namely items (2), (5) and (6) in the paragraph above) to arrive at the figure of $741,720. Mary, through her Will, expressed the intention to treat $380,000 of the $805,000 as gifts. If that amount is deducted from the $741,720, then the amount the Estate says is owing is $361,020.
Thus, the Estate claims that Kathryn and David are required to repay $361,020.
I shall endeavour to summarise the factual matters relevant to the dispute that are not in contest:
1. In the 1990s, Mary and her husband Eric subdivided their parcel of land at Bowral into six blocks, two of which were "concessional" five acre blocks. Matthew was given a 100 acre block, Kathryn and Erica were each given the proceeds of sale of a 100 acre block, and Mary and Eric retained a 100 acre block on which they resided.
2. After Eric's death, Mary continued to live at Bowral until the sale of her property, known as "Stratheden", in 2009. She moved to Fingal Bay, where Kathryn and David resided, but she rented her own accommodation nearby.
3. In 2012 Kathryn and David purchased the Paterson Property. Most of the purchase money was provided by Mary. The eight acre block was purchased for $340,000 and Mary provided $290,000 of that price, although, as I have noted, $190,000 was repaid by Kathryn and David on 23 October 2013.
4. Kathryn and David had in mind constructing a house on the Paterson Property in which Mary could live, and Mary was (according to Kathryn and David) positive about this idea. As at the time of purchase in 2012, Mary was 89 years of age.
5. Mary turned 90 in April 2013. At that time, Matthew and Erica became aware that Mary had agreed to assist Kathryn and David with purchase of the Paterson Property and construction of the house, but they did not know the amount she had lent to them. Mary described to Matthew and Erica the amount she had lent to Kathryn and David as a "frightening amount": see paragraph 47 of Matthew's first Affidavit at CB 283.
6. Matthew and Erica encouraged Mary to document the agreement relating to the transfer of money for the Paterson Property (see paragraph 47 of Matthew's first Affidavit at CB 282-283 and paragraph 41 of Erica's Affidavit at CB 549) and when they learnt that she had not done so, they sought information about the agreement from Kathryn.
7. Kathryn took umbrage at the questioning by her siblings and told them that what Mary did with her money was Mary's business and not theirs (CB 288 and 370), and the relationship between the siblings deteriorated.
8. In July 2013 Mary was admitted to hospital in very poor health. She stayed in hospital for approximately two months.
9. Further amounts were transferred by Mary (or from her account) in the period 2013 to 2014, as set out above.
10. In October 2013, Kathryn and David sold their property at Fingal Bay. They decided to obtain new rental accommodation at Largs in which Mary would also reside. They continued renting at Largs throughout the period October 2013 to 2015. Mary paid the rent: T55.10 - T56.3.
11. As at October 2014, no building work had been commenced at the Paterson Property, which led to tension between Mary, on the one hand, and Kathryn and David on the other, since by now Mary had advanced a total of $350,000 (i.e. $100,000 in September 2012 and $250,000 in June 2014) in connection with the Paterson Property, and Mary either left (or was evicted by Kathryn and David from) the Largs rental accommodation. Mary was collected by her brother, Mr Tim Hooper ("Tim"), and Tim's son, Mr Geoffrey Hooper ("Geoffrey").
12. In October 2014, Kathryn wrote a letter to Mary ("the Five Options letter") (see CB 474-477), which she copied to Ms Val Jessop (a family friend of Mary's who held a power of attorney) and Tim "for their records", to which I shall return, but following receipt of that letter, Mary returned to the Largs residence. Within a few days she transferred another $200,000 to Kathryn for building work at the Paterson Property.
13. In April 2015, at Mary's request, Matthew collected her from the Largs residence and arranged for her to be accommodated in an aged care facility in Glen Innes (which is the region in which Matthew lives). Mary remained at that facility until her death in August 2017.
14. In June 2015 Matthew took Mary to see a solicitor, Mr Maclean Jenkins, in Armidale. A will was prepared for Mary and that became the Will dated 6 August 2015 of which probate was granted. I shall say more about that process below.
I have recounted the broad parameters of the history up to August 2015, but into that picture the following matters need to be inserted:
1. As at the time that Mary transferred $290,000 for the purchase (and build) of the Paterson Property, she had received no advice from a solicitor or accountant concerning the transaction.
2. In February 2013, apparently consequent upon questioning by Matthew and Erica of Kathryn, Kathryn and David prepared a statutory declaration dealing with the advance of the $290,000. That document is found at CB 367. It purportedly records an agreement between Mary and Kathryn and David that $190,000 of the $290,000 is a loan and the balance is described as "to cover costs of the house design, construction and my personal upkeep for the time I am living at Paterson." Mary signed that document but received no legal advice concerning it or the underlying transaction which it purports to record.
3. On 20 August 2013 Mr Leahy of Liston Legal, instructed by Matthew, wrote to Kathryn seeking information concerning the arrangements with Mary (see CB 350-352). Kathryn responded: see CB 357-361.
4. On 21 August 2013 Mr Leahy wrote to Mr Fleming of Haille Paine Solicitors, whom he understood (correctly) to have acted for Mary prior to 2012. Mr Fleming advised on 21 October 2013 that Mary had revoked the power of attorney to Matthew and Erica (see CB 419) and also that (CB 420) they were instructed not to provide Mary's phone number and address to Mr Leahy (on behalf of Matthew).
5. On 22 October 2013 Kathryn and Mary attended on Mr Andrew Vile, a solicitor of Vile & Vile. Mr Vile pointed out that he was uncertain who it was intended was his client and he perceived that Mary and Kathryn "may have competing interests". According to his notes (which I have no reason to doubt are accurate) he told them that:
"…Mary should have been independently advised regarding the $290K total to Kathryn and David, there should have been a formal Deed of Agreement, and there should have been some form of security for the bridging loan." (CB 726)
1. Mr Vile said that "the Stat Decs that had been signed were effectively worthless" and did not have the same strength as a Deed of Agreement which would be "legally binding" (see CB 727).
2. Mr Vile noted that the $190,000 to come from the sale of the Fingal Bay home should be repaid to Mary's account as soon as possible and he noted:
"They acknowledged that other issues/documentation re the $100k needed to be resolved quickly." (CB 727)
Mr Vile also records that he:
"…recommended that medical advice be obtained as to Mary being of sound mind presently but also as far back as February when the Stat Dec signed, suggested this may not be just her GP but possibly a Geriatrician, said she needed to ensure that her back was protected in view of son's issues." (CB 727)
The reference to "son's issues" was clearly a reference to Matthew's questioning of the transfers of money. Mr Vile also noted:
"They both quite happy for me to see Mary separately when she instructs me on documentation in the future, Kathryn acknowledged that this would protect her position as well, as I advised that Mary could not be seen to be being placed under undue influence or duress." (CB 727)
1. On 25 October 2013 Mr Vile wrote to Mary (although the letter seems to envisage that it would be shown to Kathryn and David). In the letter he reiterated some of the matters he had mentioned in his note and he said:
"Furthermore, the agreement should be documented very carefully, particularly in relation to how that sum is to be dealt with after you pass away having regard to the circumstances in which it may, or may not, be required to be repaid to your Estate. Whilst you are entitled to do with your money whatever you wish during your lifetime, all and any documentation should be self evident that you were not placed under any undue influence or duress and we further confirm that you should therefore be separately and independently advised in relation to the advancement of that sum, even though such advice (and documentation) would post date the advancing of that sum. Effectively, you need to determine if that sum is a gift to Kathryn and David, or whether it is a loan." (CB 728-729)
1. On 3 December 2013 (CB 436) Mr Vile wrote to Mary stating:
"Kathryn attended our Office yesterday with an amended Deed of Agreement and we attach a further draft, as a consequence of her instructions, for your approval. Please ensure that you read this document carefully and compare it with the first draft. On the assumption that the enclosed further draft is now acceptable to you, Kathryn and David, please confirm that we may now prepare same in final form ready for your signatures. We recommend that this document be finalised as soon as possible.
We note that we are now awaiting firm instructions from you regarding your Will, following the wide ranging discussion that we had in conference on 21 November. We understand that you are considering appointing the writer as executor of your Will and to this and we enclose a self explanatory pro forma letter which I am required to provide clients with if they are considering such an appointment. Again, we recommend that your new Will be finalised as soon as possible and accordingly await your instructions in that regard in further conference."
(Emphasis added)
1. On 18 December 2013 a Deed of Agreement was executed by Mary, Kathryn and David: CB 438-9.
2. During the second half of 2013 much correspondence passed between Matthew and Erica, on the one hand, and Kathryn, Mary, Mr Vile and even Haille Paine on the other, none of which is relevant to the remaining dispute but which can be summarised as reflecting an internecine war in which Mary was pressed on both sides by the combatants.
3. On 29 October 2014, at a time when Mary had either just returned to Kathryn's rented house at Largs or shortly before Mr Vile attended on Mary by phone (his diary note is found at CB 730-731, and his note of a conversation with Tim at CB 731), Mr Vile records himself as advising Mary that he was surprised that $200,000 was being sought by the builder and Mary as telling him that she was paying money for household expenses because David had purchased an unprofitable bookshop and that:
"…she needs to get to a point where Kate & David can provide a roof over her head so her focus is getting the house built and if she's got to put money to that then that's her choice …
She said she's got to sell some shares straight away. I said I'd be asking why the builder wanted this money so quickly but she said as far as she knows builder is ready to start.
She did say that she doesn't have an open ended cheque book but doesn't seem there's any other way to get this house to the point they can all live in it, her other 2 children aren't in a position to provide accommodation for her and she certainly not ready to go into a home.
I said I could be in a difficult position in that I had acted for all of them beforehand and if a conflict then arose the Law Society/Ethical situation was that I could not act for 1 party against the other…
I told Mary that she should have a copy of the Contract and should be asking more questions about the construction of the house and generally how the money being applied. She said it difficult to talk to Kate and David and they don't seem to give her straight answers."
The note of the conversation with Tim records Mr Vile telling Tim that he was:
"satisfied that Mary understood what she was doing and that she had an agenda which was ultimately to get a roof over her head."
1. On 13 November 2014 Mr Vile wrote to Mary, raising queries about the building contract (CB 478). It included the comment:
"I am therefore unable to explain why you would be being asked at this time to pay $200,000 when I assume that you have already paid the $100,000 that was referred to in the Deed of Agreement that was prepared late last year."
1. On 15 November 2014 Erica wrote to Val Jessop. Erica stated, inter alia:
"I have had a few calls from Mum now where she is becoming increasingly agitated and upset about the house not being built. It hasn't even been started. She is now saying that she plans to put all her money - or as much as is needed - into the project so that it can be built and so that she actually gets to live there. I have cautioned that unless she has ownership of a part of the title that this will probably mean all her money going eventually to Kate and David (tied up in the property) and nothing for her should she need it in future (nursing home) or for her other children and grandchildren." (CB 480)
1. On 19 November 2014 Mr Vile attended Mary's phone call. His diary note includes the following:
"Said she wanted to assure me that she is ok with what she is doing. Additional money has already been paid over. I said it was not covered by the Deed that was signed in December last year but she said she has no alternatives, is not ready to go into a Nursing Home, other two children (other daughter is in UK) are not in a position to look after her and she has to pay this money to allow Kate and David to get house built and provide accommodation for her. I said I was concerned as to how the money was to be applied, she said it has gone into an account which can only be accessed by Kate and the Builder (?). I said I was also concerned as to how much they were putting in. Said she was entitled to ask questions, they should not consider her a nuisance for doing so, she is obviously putting a large sum of money towards the house and is entitled to know what is going on. She said she hopes things will now get moving. She said she is entitled to spend her money as she wishes in her life time, the others have received money along the way, son owns the farming property. I said the other two would be entitled to challenge her Will and effectively nothing she could do to prevent that, but they would have to demonstrate need. Reminded her that the 100K initially given was a gift which was not repayable to her estate…
I said I was concerned that she would have no money left and if she had to go into care there would not be funds available to pay for her to go in. She acknowledged this but did not seem too concerned about it."
1. In June 2015 Mr Maclean Jenkins, solicitor, met with Mary and Matthew. He recounts the conversation he had with them and of later being provided with the document at CB 663-665 (which is also at CB 503-505), which includes details of the transfer of monies to Kathryn and David. He saw Mary on 29 July 2015, initially in the presence of Matthew, but Matthew was asked to leave and Mr Jenkins interviewed Mary alone. In the course of that conversation, Mr Jenkins formed the view that Mary was articulate and fully competent and on 6 August 2015 he presented the Will he had drawn up for execution.
2. There is in this case no issue of competency of Mary, but there were two matters of significance in the conversations that Mr Jenkins had with her which I shall mention:
1. When, in the first conversation, he asked Mary why she had handed over $750,000 - $800,000 to Kathryn and David, and she told him that she intended some to be an advance of Kathryn's ultimate benefit to be received under her Will and the rest were loans to be repaid, so that Matthew, Erica and Kathryn would receive an equal share. She told Mr Jenkins that she had:
"…asked Kate to have loan agreements drawn up by a lawyer but she was always too busy or she would not discuss it."
and that she had no legal advice before paying money to Kathryn and David: see paragraph 9 of Mr Jenkins' Affidavit, CB 657.
1. She told him that Matthew had prepared the document at CB 663-665, but that he had prepared it from her banking records.
2. She agreed that the outcome she wanted in the Will was that $425,000 would be owing to the Estate and she said (see paragraph 19 of Mr Jenkins' Affidavit, CB 659):
"With the debt repaid I can leave it with the rest of my Estate to Erica and Matthew. This will make it equal to what Kate will have received after I leave the grandchildren something each."
and she also said:
"I will leave recovery of the debt to Matthew to worry about."
I have referred to Kathryn's Five Options letter of 13 October 2014. It contained the following important passages:
"I have over the last several months tried to explain where we were at, but each time we talked the conversation turned to Matthew and/or Erica - I could not understand your reasoning. That is why on every occasion we ended up arguing. I still do not understand how you think they are to be given equal credit for your care. The last straw came when you told me that I was not contributing to your well being anymore than they were…
You were never ever, asked to leave this house. I am sorry that you may have interpreted whatever David or I said to you on Wednesday night that led you to believe that was the case. On two occasions on that Wednesday night
David asked you to make a choice by the morning because he was concerned for my wellbeing. The choices we offered were that you:
1. Ring Matthew and advise him of the situation and see what he is willing to do concerning your wellbeing,
2. Ring Erica and advise her of the situation and see what she is willing to do concerning your wellbeing,
3. We (David and I) find a nursing home for you to go to that would be close to us.
Having stated in the car after leaving Dr Adera's office that you did not want to move into Newcastle was your assumption that we had already made that decision. We had not made any decision (just considering alternatives) concerning where we were going to live based on your decision of the above alternatives. Now you have moved to Canberra, I am confused. Why do you think the city of Canberra is better than the city of Newcastle?"
There was always the 4th alternative Mum; that you stayed with us. But your refusal to answer the question posed by David and myself meant we assumed that you were not considering that fourth option.
You chose a fifth option (to move to Canberra) - one we had not even entertained. This has imposed additional stress upon Uncle Tim, who already has enough to deal with. None of that was our doing. This has all occurred as a result of your refusal to make a decision. I do not understand. Who are you expecting to visit you in the home in Canberra? You are now further away from us than if you had decided to move in to one near Bowral. Why could you not think this through and realise that you are now more isolated from your family who you kept saying was the most important thing. None of us will be able to visit you regularly to share what life you may still have on this planet. I do not understand…
I am concerned that all I get from you is "I should be dead" when in fact you could have lived the rest of your life comfortably and happily at Paterson with us. I do not understand your way of thinking that, that would be the best option. You let Matthew and Erica influence your life remotely. They don't restrict their lives for you why do you for them. Where is the logic?
I have always tried to work towards you being comfortable in your last years but I appear to have failed in that, I am sorry. I would have liked to keep my promise that I made to look after you.
I hope you find what you are looking for in Canberra. I will ring you soon to see how things are progressing."
(Emphasis added, apart from "choice" in the second paragraph)
It will be observed that the highlighted passage refers to living "at Paterson with us", not simply "living with us".
The case revolves around the following issues:
1. Of the amounts established to have been transferred to Kathryn and David (set out at [13] above), what amounts were loaned and what amounts were gifts?
2. Of the amounts loaned, what amounts have been repaid?
3. To the extent that any of the amounts transferred to Kathryn between 2012 and 2015 were gifts, were those gifts the result of undue influence by Kathryn and David over Mary or their unconscionable conduct towards her?
There appear to be several elements in Kathryn and David's defence:
1. That all of the monies transferred were gifts not loans.
2. That she was the one assisting Mary on a daily basis, not Matthew and Erica.
3. That her mother was free to do whatever she wanted with her money even if it did not accord with Matthew and Erica's view that all of Mary's assets should be divided equally, and that Kathryn and David did not exert influence over Mary or act unconscionably towards her.
4. That some of the money Kathryn received was not Mary's money but hers. This relates to a claim that Kathryn was due a third share out of the proceeds of sale of Stratheden but which she had asked her mother to retain for her.
5. That the $300,000 which was paid to Kathryn and David by Mary following the collapse of a pizza parlour business which Kathryn and David had operated between 2006 and 2008 was a short term loan that they repaid out of the sale of shares which they owned.
6. That $116,000 of the items claimed (i.e. the items at 13,(2),(5) and (6)) were the subject of equalisation payments made by Mary to Matthew and Erica.
7. That Mary did not sue to recover any amount from Kathryn and David whilst she was alive.
[4]
Credit of Witnesses
Mr Jenkins, Mr Hooper and Erica were not cross examined. I have no reason to doubt their veracity and reliability. Matthew was not shown to have told any untruth and I accept his evidence. David's evidence was unfortunately diminished by the fact that he read Kathryn's Affidavits before preparing his own and, in relation to those matters, he simply agreed with their contents: see paragraph 2 of his Affidavit at CB 167 and see T86-T87. Mr Bilinsky did not otherwise challenge David's credibility.
Kathryn had certainly been far more involved in her mother's care than her siblings and there was in her attitude and evidence an emotional overlay reflecting resentment at the predicament in which she now found herself. Kathryn did appear to recognise that the documents prepared in relation to the 2012 transfer of $290,000 did not protect Mary's interests (see T49.21-29). I have taken these matters into account but Kathryn was, in my view, an unreliable witness whose evidence I would not accept unless it is against interest or corroborated by an independent person. My reasons for that conclusion include the following matters:
1. She claimed to have repaid $300,000 to her mother and, when faced with a document (Statement to Executors) that rendered that extremely improbable, she initially sought to challenge the authenticity of the document (see CB 585 and T80-T82), a challenge she had never made previously in any affidavit. No mention is made of the $300,000 in Kathryn's first Affidavit. Matthew describes it at paragraphs 38 and 39 of his Affidavit: CB 281. Kathryn in her Affidavit of 23 January 2019 refers to Matthew's Affidavit of 20 November 2018. Kathryn responded to many paragraphs in that Affidavit but not to paragraphs 38 and 39. She does not assert in her Affidavit that she repaid the $300,000 given to her by her mother or that it was a loan.
2. She made two assertions that were not found in any of her four Affidavits:
1. That she had repaid the $300,000 Mary lent to her following the failure of the pizza business: T77-T78.
2. That she had provided a draft of the statutory declaration to her mother: T31.
1. She asserted positively that Mr Vile had never told her that the statutory declaration was worthless. Mr Vile's note records that he did inform her of that and, when shown this, she said she did not dispute that he had said that but that she did not recall it.
2. Her assertion that her mother was holding money back for her (i.e. her share of the Stratheden proceeds) was completely inconsistent with her having sought a loan from her mother in 2012 for the Paterson Property (and inconsistent with the $290,000 loan or the "loan and gift" documentation).
3. Her explanation of what she had meant by "the question posed by David" in her letter of 13 October 2014 was unconvincing: see T62-T64.
4. She sought to resile somewhat from the descriptions of her mother's physical condition she had given in her Affidavit: T53.35-44.
5. On a number of occasions she provided non-responsive answers to questions asked of her: see, for example, T13.30, T14.18, T20.40, T31.15, T31.45, T44.20 and T58.22 - T59.32.
6. She asserted at T50.38-46 that she had not raised the forgiveness of the $25,000 loan from her mother because the loan had not been made by that time - although she immediately recanted: see T50.48 - T51.7.
7. Her attempts to deal with the letter of 13 November 2013 from Mr Vile and her assertion that he had sent her a letter prior to that (T45-T48), when no such letter has been produced, were unconvincing and involved her asserting that she was just the "messenger" in relation to the Deed of Agreement (see T48.28-30) despite agreeing at T48.4-6 that she had provided Mr Vile with instructions in relation to it.
8. At T232.24 - T234.46 she dealt with Matthew's assertion (see paragraph 79 of Matthew's Affidavit at CB 288) that she told Matthew that what Mary had given her was none of his business in a manner that did not reflect well on her credit.
9. She endeavoured to distance her involvement with matters relating to her mother's banking, but it is quite clear that Kathryn was carrying out the transactions on her mother's accounts.
10. At T49.21-29 Kathryn spoke of having "a moral agreement" with Mary and when Mr Bilinsky sought to explore this Kathryn said:
"An emotional obligation. I - you know, words are difficult. I'm not a legal person, okay? So, don't lock me in with words that I don't understand and then reinterpret them. All right. I made a promise to my mother."
Mr Bilinsky had not used any legal words but was seeking to question her about the phrase she had used.
I make the following findings of fact:
1. As at 2012 Mary was 89 years of age, frail and in poor health, but even more so by July 2013.
2. By October 2013 Mary was living with Kathryn and David and was dependant on Kathryn in relation to managing her health appointments, banking and other activities.
3. Mary had a deep fear of ending up in a nursing home and she wished to avoid such an outcome.
4. In advancing $290,000 in September 2012, she did not have the benefit of advice from any lawyer, accountant or financial advisor.
5. By the advance of the $290,000, Mary was given no interest in the property, no time for repayment was specified and there was no provision that required Kathryn and David to take any steps to fulfil Mary's expectation that the property would be built or that, when built, it would include accommodation available to her. She was not told how Kathryn and David intended the building cost would be funded. There was no discussion of how realistic it was that, given Mary's age and health, she would be able to reside in the new building when finally built.
6. By October 2014, Mary had put $350,000 into the property, but not one slab had been laid for the construction of the house.
7. The $250,000 transferred on 10 June 2014 was not the subject of any documentation. Nor did Mary receive any advice in respect of it. The matters referred to at (5) above were again not addressed.
8. In October 2014 Mary was asked by Kathryn and David to put another $200,000 towards the construction of the house, even though she had already put in $350,000 and nothing had been built. The matters referred to at (5) were again not addressed.
9. There was at the time of the transfer of the $200,000 referred to in (8) no discussion concerning the basis on which Mary was transferring the $200,000.
10. Kathryn and David were aware of each of the matters at (1) to (9) above.
11. Mr Vile told Mary that she should not be required to hand over any further money for the building cost, but she felt she had to do so in order to ensure that she had a roof over her head. I infer that she was not informed that she could continue living with Kathryn and David if she chose not to put in a further $200,000.
12. Mr Vile had advised Kathryn in connection with the Deed of Agreement (for the 2012 loan), and he could not therefore provide Mary with independent advice, a difficulty which he recognised: see 18 and (12) above.
Shortly before the time of the transfer of the $200,000 in November 2014, there was an indication given to Mary by Kathryn and David (at least through the Five Options letter) that there was a real prospect that she would have to go into a nursing home, particularly since Kathryn knew that there was no prospect of Mary moving in with Erica (who lived in the UK) or with Matthew. I am inclined to think that the question which was "posed" to Mary (see CB 474), and not explained in convincing terms by Kathryn (or David), was most likely "will you contribute more money to the build?" There is evidence which supports the conclusion that Kathryn indicated in April 2015, even after Mary had transferred a total of $550,000 (allowing for the repayment of the $190,000), that Mary would need to put in a further $200,000. Kathryn denies that she put any pressure on Mary for further money in April 2015 (which was not transferred), but Mary complained that she had: see paragraph 233 of Matthew's Affidavit at CB 320 and paragraph 117 of Erica's Affidavit at CB 564. The paragraph of the Five Options letter which I have emphasised in [19] above speaks of living "comfortably and happily at Paterson with us" rather than 'living with us wherever we are living'. Even if Kathryn and/or David did not threaten to put Mary into a nursing home unless she contributed more money, Mary certainly understood in 2013 and 2014 that payment of more money to Kathryn and David was necessary to avoid that outcome.
I will first deal with the elements in Kathryn and David's defence, which I have earlier set out, other than 21 and (3) above. In relation to (4), Kathryn claims that she had not received her one time share of the proceeds of sale of Stratheden when Matthew and Erica received their share in 2009. Kathryn said that she had asked Mary to hold that amount for her until she needed it.
There are a number of reasons why I do not accept Kathryn's assertion:
1. For reasons which I have articulated, she is not a credible witness.
2. When she responded in 2013 to questions posed by Mr Leahy on behalf of Matthew she did not make any assertion then that any money was being held by her mother for her (see CB 357-361) and nor did she do so in her letter to Matthew at CB 370-372. Indeed, she told Matthew "what our mother does with her money is her decision, not yours, mine or Erica's": CB 370.
3. If money was being held by Mary on Kathryn's behalf in 2012 it would have been the very obvious time to have asked for it. Instead, Mary was asked to lend $290,000 and in neither of the attempts at documentation of the $290,000 transfer was any mention made of Mary transferring money to Kathryn that she held in trust.
4. In 2011 Mary signed a document ("Statement to Executors") explaining that she had made gifts to Erica and Matthew of $300,000 each, to even up the $300,000 given to Kathryn: see CB 585. That document is significant not only in relation to the asserted repayment of the $300,000 but also to Kathryn's claim that money was still held for her as at 2011: see also paragraphs 21 and 22 of Erica's Affidavit at CB 545.
In relation to 21, I have referred to CB 545 in the previous point. The asserted repayment was not mentioned in any of Kathryn's three affidavits and it smacks of recent invention. In any event, whether she did or did not repay $300,000 (given in 2008) is not relevant to whether any of the transfers the subject of the cross claim are loans or gifts.
In relation to 21 above, the argument is that the transfers which are agreed to be gifts (including the $60,000, $50,000 and $6,000, making up the amount of $116,000) should not be included as gifts because Matthew and Erica each received the same amount of $116,000. The cross claim is not, however, framed as a claim brought to achieve equality; rather, it is a claim to recover money from Kathryn and David beyond the amount that Mary was willing to gift to Kathryn (i.e. $380,000). Paragraph 2 is framed as follows:
"During the period 3 January 2012 to 31 March 2015 the deceased variously loaned and gifted the sum of $931,720.00 to the first and second cross defendants as described in the particulars of which the first and second cross defendants repaid $190,000, leaving a balance of $741,720 of funds received."
The particulars comprise the list of payments which are set out at [13] above. There is a specific pleading in relation to the $100,000 which became the subject of, first, a statutory declaration and, secondly, the Deed of Agreement, to which I shall return.
In relation to 21 above, it is true that Kathryn had the principal care of Mary but she also had the advantage of Mary paying the rent for their accommodation at Largs: see T55.10 - T56.3. Mr Hooper's evidence was of very limited compass - he said that Mary had not suggested to him that she had been exploited by Kathryn, financially or otherwise, or that she had complained about the level of care provided by Kathryn to her. He does record that his father told him in October 2014 that Mary had just rung him and told him that Kathryn had evicted her, which lends support to the notion that Kathryn and David were only willing to have Mary live with them if she contributed more money to the Paterson build.
In relation to 21, it is true that Mary did not commence proceedings against Kathryn and David whilst she was alive - she told Mr Jenkins that she would leave it to her executor to pursue the debt. There was no pressing need for her to recover the money because she still had some funds left and the repayment was really for the benefit of Matthew and Erica, as was provided by the Will.
The amount of $290,000 was a very significant amount of money for her to provide to Kathryn and David, even as a loan, and at the time she advanced that money she did not have the benefit of advice from any lawyer, accountant or financial advisor. To advance such an amount without documentation that protected her interests was extremely unwise. By the advance, she was given no interest in the Property, no time for repayment was specified and there was no provision designed to ensure that Kathryn and David were required to take any steps to fulfil the expectation that the house would be built. The position is made even worse because, on the evidence, nothing was said to Mary as to how the build of the house would be funded. The land cost $340,000 (and Mary had, at that point, provided $290,000), but no details of what the build would cost was given to her and nor was she told of how Kathryn and David intended the building cost would be funded. They have given no details to the Court as to how they intended the build to be funded. If, as seems likely, they were hoping that Mary would fund it, they had an obligation to tell her that before she sank $290,000 into the purchase of the property. Once Mary had committed a significant amount of money to the purchase, it was far more difficult for her to exit as the funder of the project. This became an increasingly acute problem as time went on - by October 2014 she had put $350,000 towards the property and construction of the house had not commenced. The evidence supports the conclusion that, as at November 2014 when she advanced a further $200,000 for the build, she felt that she had no choice if she was to ensure that she had a roof over her head and it is likely that she had that perception in June 2014 when she advanced the $250,000, having already put in $100,000 (allowing for repayment of the $190,000).
[5]
Legal Principles: Undue Influence and Unconscionable Conduct
In Perry v Gao [2019] NSWSC 1022 I endeavoured to summarise the principles applicable to undue influence and unconscionable conduct in the following terms at [30]:
"Much has been written about the two separate but related concepts of undue influence and unconscionability. Mr Zipser drew attention to Louth v Diprose (1992) 175 CLR 621, Bridgewater v Leahy (1998) 194 CLR 457, Sharkey v Nissi [2015] NSWSC 1266, Badman v Drake [2008] NSWSC 1366, Tulloch v Braybon (No 2) [2010] NSWSC 650 and Thorn v Boyd [2014] NSWSC 1159; 18 BPR 35,179. Louth v Diprose refers to Blomley v Ryan (1956) 99 CLR 362 and Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, and in Thorn, Robb J referred to what had been said on unconscionability in Aboody v Ryan [2012] NSWCA 395; 17 BPR 32,359 by Allsop P (as his Honour then was) with whom Bathurst CJ and Campbell JA agreed. The DCS referred to a UK decision, Hart v Burbidge [2013] EWHC 1628; WTLR 1191, and Union Bank of Australia Ltd v Whitelaw [1906] VLR 711. Relevantly, for present purposes, I extract the following principles:
(1) Examples of unconscionable conduct can be found of a person taking advantage of a person with sickness, advanced age, infirmity of body or mind, lack of assistance or explanation where such is necessary, but there is a general underlying principle of unconscionability - precise matching to a particular earlier case is not required (see Aboody at [64]).
(2) Louth v Diprose at 631 per Brennan J (as his Honour then was):
"When a donor who stands in a relationship of special disadvantage vis-à-vis a donee makes a substantial gift to the donee, slight evidence may be sufficient to show that the gift has been procured by unconscionable conduct."
(3) Once the disability or weakness "is sufficiently evident such that it is prima facie unfair to procure, accept or retain the benefit from the weaker party's assent to the transaction", the onus is on the stronger party to show the transaction to be fair, just and reasonable (see Aboody at [65]).
(4) The fact that a solicitor advised the weaker party, whilst relevant, does not preclude a finding of unconscionability (see Aboody at [66] - [67]).
(5) Undue influence looks to the quality of consent or assent of the weaker party - unconscionable dealing looks to the conduct of the strong party in attempting to enforce or retain the benefit of a dealing with "a person under a special disability where it is not consistent with equity or good conscience that he should do so" (per Deane J in Amadio, cited by Brennan J in Louth).
(6) A central theme of both undue influence and unconscionability is "dominion exercised by one person over another."
(7) In the case of undue influence, the equitable jurisdiction to set aside an alienation of property "is the prevention of an unconscientious use of any special capacity or opportunity that may exist or arise affecting the alienor's will or freedom of judgment": see Johnson v Buttress (1936) 56 CLR 113, 134 per Dixon J (as his Honour then was).
(8) Sometimes independent legal advice is needed to be confident that an elderly vulnerable person has not been the subject of undue influence: Badman v Drake.
(9) A presumption of undue influence can be rebutted by showing that the disposition was the independent, well-understood act of a person exercising free judgment: see Tulloch v Braybon at [39].
(10) Not all influence is undue influence: Watkins v Combes (1922) 30 CLR 180, 193-94; Hart v Burbidge at [49].
(11) In the present context, quoting from Quek v Beggs (1990) 5 BRP 11,761 at 764 per McLelland J:
"'influence' means a psychological ascendency by the donee over the donor, and 'undue influence' means the donee's taking improper advantage of such ascendency: Union Bank of Australia v Whitelaw [1906] 1 VLR 711, 720. It is not necessary that the ascendancy amount to domination: Goldsworthy v Brickell [1987] CH 378, 402-6."
Mr Bilinsky referred to Hanna v Raoul [2018] NSWCA 201 at [89]-[102] and Johnson v Smith [2010] NSWCA 306. At [96] of Hanna, Beazley P (with whom White JA and Macfarlan JA concurred) referred to what Jacobs ACJ had said in Diprose v Louth (No 2) (1990) 54 SASR 450 at 453; (1990) 14 Fam LR 482 (a passage approved in Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457) that:
"It is an oversimplification to say that because the respondent acted as he did with his eyes open, and with a full understanding of what he was doing, he was not in a position of disadvantage, and therefore not the victim of unconscionable conduct."
The mere assertion by a testator in his or her will that money is owing by someone will not itself establish that the money is owing, but provided the Estate can establish that an amount equal to or more than the amount claimed is owing then it does not matter how the testator has arrived at the figure that he or she is willing to forego. Thus, it seems to me here that, provided Kathryn and David have received loans that exceed the $380,000 that Mary was willing to treat by her Will as gifts, it is not relevant how the $380,000 in gifts is calculated, nor whether it includes sums that were equivalent to gifts given to the other children. The same logic would apply to monies that were intended by Mary to be gifts but which are set aside because of the circumstances in which they were made.
The first $100,000 claimed as a loan is problematic - in the statutory declaration the payment is categorised as payment in consideration of Kathryn and David agreeing to build the house in such a way as to give Mary separate accommodation and to provide for her "personal upkeep for the time I am living at Paterson": CB 367. In the Deed of Agreement the consideration for the $100,000 given by Mary is said to be "the provision by Kathryn and David of the aforesaid accommodation for Mary", but it then states that Mary has "gifted" the sum of $100,000 to Kathryn and David: CB 438. No wonder Mary was confused about what had occurred.
The $250,000 transferred on 10 June 2014 and the $200,000 transferred in November 2014 were not the subject of any documentation. There is nothing to indicate that Mary intended to make a gift of these monies and, considering that she had not made a gift of the entire $290,000 (or even of $25,000 on 9 July 2013), I think it is more likely that she was not intending to give Kathryn and David another $450,000 without the expectation that it would ever be repaid to her or her Estate. However, if she did intend at the time she transferred the monies to make a gift of them, then I am persuaded that she did so in circumstances that made it unconscionable for Kathryn and David to retain the benefit of those gifts, namely:
1. Her age and frailty.
2. Her dependence on Kathryn.
3. The fact that she had been put in the position she was in (i.e. having already committed $290,000 to the purchase but reduced to $100,000 when $190,000 was repaid) without being adequately advised.
4. That she received no independent advice concerning these transactions (and it should be noted that even if Mr Vile's advice could be regarded as independent it would not preclude a finding here of unconscionable conduct: see Aboody v Ryan [2012] NSWCA 395 at [66]-[67]; 17 BPR 32,359).
5. That there was no discussion as to the basis on which she was transferring the money, i.e. to ensure that she appreciated that it was a gift which could not be recovered by her or her Estate.
6. She was given no details of the funding arrangements and how the total cost of the build was to be paid - she was given no details of when it would be finished. She was given no guarantee that the money advanced would in fact be used for construction and would be sufficient.
7. She believed that payment of those funds was the only way to ensure she had a roof over her head if she was to avoid going into a nursing home, as Kathryn had threatened her would occur.
8. The transaction was improvident from her point of view because the transfers gave her no security to protect her position either in respect of the money transferred or in respect of the purpose for which it was transferred.
The onus is on the stronger parties to demonstrate that the transactions were fair and reasonable, which they have failed to do. In fact, I am satisfied that the transactions were not fair and reasonable.
I conclude therefore that the amounts totalling $450,000 (i.e. $250,000 on 10 June 2014, $100,000 on 13 November 2014 and $100,000 on 28 November 2014) should be treated as loans or, alternatively, set aside as having been obtained as a result of unconscionable conduct, in both cases, however, only up to the amount claimed of $361,020.
There should be judgment for the Estate in the amount of $361,020 plus interest from the date of demand at the prescribed rate pursuant to s 100 of the Civil Procedure Act 2005 (NSW). This amount will need to be calculated.
[6]
Equitable Lien
Mr Bilinsky submitted that it would be appropriate to order that an equitable lien be imposed over the Paterson Property in favour of the Estate, and made reference to Hewett v Court [1983] HCA 7; (1983) 149 CLR 639, Stephenson Nominees Pty Ltd v Official Receiver (1987) 16 FCR 536; (1987) 76 ALR 485 per Gummow J and QNI Resources Pty Ltd v Park [2016] QSC 222 at [64]; (2016) 116 ACSR 321. In Hewett, Gibbs CJ said at 645-646:
"Equitable lien does not depend either upon contract or upon possession. It arises by operation of law, under a doctrine of equity 'as part of a scheme of equitable adjustment of mutual rights and obligations'; those words of Isaacs J. were used in Davies v. Littlejohn, in relation to the doctrine of vendor's lien, but they have a general application. It would be difficult, if not impossible, to state a general principle which would cover the diversity of cases in which an equitable lien has been held to be created. A vendor's lien for unpaid purchase money has been said to be founded on the principle that 'a person, having got the estate of another, shall not, as between them, keep it, and not pay the consideration': Mackreth v. Symmons. The lien of a purchaser for the purchase money that he has paid to the vendor on a sale that has gone off through no fault of the purchaser may perhaps rest on the converse principle that he who has agreed to convey property in return for a purchase price will not be allowed to keep the price if he fails to make the conveyance. At all events, the rule has been said to be founded on 'solid and substantial justice': Rose v. Watson. In each of these cases the vendor or the purchaser, as the case may be, is treated as a secured creditor (cf. Combe v. Lord Swaythling) - the lien is the security for the money which is justly due. In other circumstances an equitable lien may arise because of the relationship that exists between the parties (e.g., that of partnership, or trustee and beneficiary or solicitor and client) or by reason of subrogation or estoppel. Cases of this kind… do not closely resemble the present, but their existence shows that the rules governing the circumstances in which equity has considered that justice requires the recognition of the existence of a lien are not confined to one narrow category. Indeed… the list may not be a closed one."
(Footnotes omitted)
In Stephenson, Gummow J said that equitable liens have been described:
"…as an equitable remedy, created by the court, regardless of the intent of the parties, as a remedial device to protect a party against some inequitable loss…"
A more recent example of the imposition of an equitable lien in circumstances having some degree of similarity with the present case is Mainieri v Cirillo [2014] VSCA 227; (2014) 47 VR 127 at [20]-[32] per Nettle AP, Hansen JA and Santamaria JA. At [28]-[29] the Court observed:
"[28] The principle, which is calculated to guard against the unconscionability of a defendant departing from an assumption encouraged by the defendant on the faith of which a plaintiff has changed his or her position to their detriment, is sometimes described in terms of Dillwyn v Llewelyn estoppel. But it is not limited to cases where one party has expended money on the land of another on the faith of an assurance that he or she will be granted an interest in the land. As McLelland J explained in Morris v Morris, it is a broad conception of equity which is sufficiently flexible to apply in a great variety of situations, including where a plaintiff has laid out money on the property of another on the faith of an assurance that the plaintiff will be accorded an indefinite right of residence in the property. As McLelland J said, in the latter context the assurance of an indefinite right of residence is the operative equivalent of an assurance or promise to make over part of a defendant's land.
[29] The range of remedies to which the principle gives rise is equally broad and flexible. Depending on the circumstances, it may appear that nothing less than the imposition of a remedial constructive trust will suffice to satisfy the demands of justice and good conscience. In other cases, as was observed in Chalmers v Pardoe, a plaintiff who has expended money on the faith of such an assurance or understanding may instead be granted an equitable charge or lien for the amount so expended. It depends on the circumstances of what was promised or represented and on the plaintiff's change in position in reliance on the assumption thus created. It may also be affected by the interests of third parties."
(Footnotes omitted)
In my view, it accords with the "solid and substantial justice" of the case that there be imposed on the Paterson Property an equitable lien in the amount in which judgment (including interest) is entered against Kathryn and David, particularly since the money which Mary transferred was to be put towards the property. An equitable lien can include interest in addition to the principal amount: see, for example, Mainieri at [32] and [39] and also see P. Young, C. Croft and M. Smith, On Equity (Thomson Reuters, 2009) at [9.220].
Given that Kathryn and David have asserted that they have very little means other than by sale of the Paterson Property to pay legal fees and, hence, to meet any judgment debt or costs order, Mr Bilinsky foreshadowed (at T184) the Defendant's intention to seek further ancillary orders.
I will therefore provide the Estate with the opportunity to put forward its proposed form of orders for the judgment amount and the equitable lien consequent upon these reasons, and to address the issue of ancillary orders and costs. The Estate's proposed form of orders should be forwarded to my Associate and the Cross Defendants by 12 June 2020 and I will list the matter for directions on 19 June 2020 at 9:30 am. The Cross Defendants are to provide any competing form of orders to the Estate's solicitors and to my Associate by 4 pm on 18 June 2020.
[7]
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Decision last updated: 19 June 2020