Plaintiff v First Defendant

Plaintiff v First Defendant - [2009] VSC 583 - VSC 2009 case summary — Zoe

[78]

"The basis of the equitable jurisdiction to set aside an alienation of property on the ground of undue influence is the prevention of an unconscientious use of any special capacity or opportunity that may exist or arise of affecting the alienor's will or freedom of judgment in reference to such a matter. The source of power to practise such a domination may be found in no antecedent relation but in a particular situation, or in the deliberate contrivance of the party. If this be so, facts must be proved showing that the transaction was the outcome of such an influence over the mind of the alienor that it cannot be considered his free act. But the parties may antecedently stand in a relation that gives to one an authority or influence over the other from the abuse of which it is proper that he should be protected. Where they stand in such a relation, the party in the position of influence cannot maintain his beneficial title to property of substantial value made over to him by the other as a gift, unless he satisfies the court that he took no advantage of the donor, but that the gift was the independent and well understood act of a man in a position to exercise a free judgment based on information as full as that of the donee. This burden is imposed upon one of the parties to certain well known relations as soon as it appears that the relation existed and that he has obtained a substantial benefit from the other. A solicitor must thus justify the receipt of such a benefit from his client, a physician from his patient, a parent from his child, a guardian from his ward, and a man from the woman he has engaged to marry. The facts which must be proved in order to satisfy the court that the donor was freed from influence are, perhaps, not always the same in these different relationships, for the influence which grows out of them varies in kind and in degree. But while in these and perhaps one or two other relationships their very nature imports influence, the doctrine which throws upon the recipient the burden of justifying the transaction is confined to no fixed category. It rests upon a principle. It applies whenever one party occupies or assumes towards another a position naturally involving an ascendancy or influence over that other, or a dependence or trust on his part. One occupying such a position falls under a duty in which fiduciary characteristics may be seen. It is his duty to use his position of influence in the interests of no-one but the man who is governed by his judgment, gives him his dependence and entrusts him with his welfare. When he takes from that man a substantial gift of property, it is incumbent upon him to show that it cannot be ascribed to the inequality between them which must arise from his special position ... But, except in the well recognised relations of influence, the circumstances relied upon to establish an antecedent relation between the parties of such a nature as to necessitate a justification of the transaction will be almost certain to cast upon it at least some measure of suspicion that active circumvention has been practised. This often will be so even when the case falls within the list of established relations of influence. Because of the presence of circumstances which might be regarded as presumptive proof of express influence, cases outside the list but nevertheless importing a special relationship of influence sometimes are treated as if they are not governed by the presumption but dependent on some inference of fact."[14]

[172]

146 Such a situation would, to say the least, be most unusual. Certainly, the interest of a life tenant is registrable under s 10(1)(f) of the Transfer of Land Act, and therefore, presumably, is an interest in land under s 222 of the Property Law Act. Accordingly, theoretically, a client, gaining a life interest in a one half interest in the property, might be able to force the sale of it. However, the solicitor would then need to contemplate what benefit such a sale would be to the client. On such a sale, the client would not be entitled to the proceeds of the sale of her half interest. Rather, she could, as contended by Mr Ehrlich, use any income generated by an investment of that capital sum. Based on the auction price of April 2006, the net value of that sum would be in the region of $230,000. No evidence was led as to how it might have been invested. Presumably, the hypothetical prudent solicitor might reckon on that sum returning a net income of about $10,000 per annum at that time. In this respect, the suggestion of Mr Ehrlich runs into a further difficulty. At that time, as I understand it, the plaintiff was on an aged pension. The guide to Social Security law, tendered on behalf of the plaintiff (Exhibit O), sets out the relevant permissible income levels in respect to such a pension. If the solicitor were to have advised the course now contended for the plaintiff, he would also have had to bear in mind whether any income generated by the capital sum brought about by a sale of a half interest, would have any, and if so what, adverse effect on the plaintiff's pension entitlement. In the end, if the solicitor contemplated such a structure, it would be unsurprising if he rejected it as too complicated, with little (if any) potential benefit to the client. Thus, in the upshot, in my view, the idea of reserving a life interest, in the manner contended for by the plaintiff, would not present itself as an option capable of generating any substantial benefit for the plaintiff.

[178]

152 Each of the three alternatives, postulated by Mr Ehrlich, would have provided, in effect, that the plaintiff would have, in one form or another, a life interest in the property, with the first defendant becoming entitled to an interest in fee simple on her death. However, it is here that the plaintiff's claim encounters two difficulties. First, it is by no means clear that the plaintiff has not, in fact, gained a life interest in the property under the conveyancing deed. In other words, it is not clear that the deed does not constitute a "settlement" under s 8(1)(c) of the Settled Land Act 1958. That question was raised by me in final address with Mr Ehrlich. It was only the subject of limited submission both by Mr Ehrlich and by Ms Ryan, and Mr Ehrlich has filed a short supplementary submission in respect of it. The point is not clear cut. The deed, both in the recitals, and in its operative conditions, refers to the grant of a "life interest" to the plaintiff "to reside at the property". The critical question is whether the deed, in that way, provided to the plaintiff a mere right to "reside" or "live on" the property as a personal right, or whether it also provided to her a life interest in the property, entitling her to occupy or use it, as well as to reside in it.[56] In the absence of full argument, I am loathe to decide the point. Indeed, in my view, it would not be necessary for me to do so. It is accepted by the parties that the deed is a legally enforceable document between them, notwithstanding that it was entered into by the parties primarily in order to protect the plaintiff's rights to her pension. There is no suggestion that the deed was a sham document. Further, there is no evidence that the first defendant does not recognise that, under the deed the plaintiff, has a life interest. The evidence is entirely neutral to that effect. This is not a case in which the first defendant has successfully resisted a claim by the plaintiff that, under the deed, she has a life interest. Thus, the plaintiff has not proven, against the second defendant, that the first defendant has not accepted, or does not recognise, that she has a life interest in the property under the deed. The plaintiff could only suffer the loss and damage, now claimed on her behalf, if she were precluded from claiming that she has a life interest under the deed. That issue has not arisen. Thus, the plaintiff has failed to prove a critical element of her claim for loss and damage in any event.

[181]

155 As I have earlier stated, the claim pleaded on behalf of the plaintiff was based on the value of her half share in the property. The plaintiff did not adduce any evidence as to the current market value of the property. However, it might be assumed that the market value of it, at the time of the transaction, was constituted by the price agreed to be paid by the plaintiff and the first defendant at the auction sale in April 2006. Nevertheless, the plaintiff's loss, on the claim made on her behalf in this case, is not to be quantified by reference to the market value of the plaintiff's half interest in the property. Rather, ex hypothesi, the plaintiff's claim is based on the proposition that if the second defendant had provided to her "non-negligent" advice, she would now have the equivalent to a life interest in a one half interest in the property. The plaintiff has not called any evidence to prove the value of that life interest. As I have already observed, under the Settled Land Act, if she were a life tenant of a one half interest in the property, she would be able to sell that interest. It is most improbable that she could find a willing purchaser for a one half interest in the property. Accordingly, in order to realise the value of that interest, she would first need to obtain an order for the partition and sale of the whole property under s 222 of the Property Law Act. Upon such a sale, she would not be entitled to receive the equivalent of the net proceeds of one half of the sale of the property. Rather, she would be entitled to use, during her lifetime, any profit from the investment of that capital sum. The plaintiff did not call any evidence as to the amount of those profits, or as to their current day value. Further, no evidence was given as to the effect, on her pension, of the receipt by her of any income, from the investment. Accordingly, assuming all other matters in favour of the plaintiff, she has nonetheless failed to prove the loss and damage she has sustained on the basis of the claim now made against her by the second defendant. For that further reason, the plaintiff's claim against the second defendant would, in any event, have failed.

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Cases Cited (16)