Hingston v Hingston

• Jurisdiction: New Zealand
• Judge: Edwards J
• Judgment Date: 22 November 2022
• Neutral Citation: [2022] NZCA 568
• Docket Number: CA64/2022
• Court: Court of Appeal

Between

David Lewis Hingston

First Appellant

David Lewis Hingston As Trustee Of The Hingston House Trust

Second Appellant

Anthony Murray Richardson As Trustee Of The Hingston House Trust

Third Appellant

and

Keith Hamilton Hingston

Respondent

[2022] NZCA 568

Court:

Dobson, Duffy and Edwards JJ

CA64/2022

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

Equity — appeal against a finding of undue influence in a sale agreement — father and son — principles of undue influence — sale of house at undervalue — relevance of separate legal advice — evidential burden

Counsel:

C J Griggs and J J Pietras for the Appellants

J W Howell for the Respondent

The appeal was allowed. The judgment on the undue influence cause of action was set aside.

• A The appeal is allowed.

• B The judgment on the undue influence cause of action is set aside.

• C The appellants' counterclaim is remitted to the High Court for determination.

• D The respondent must pay the appellants costs for a standard appeal on a band A basis and usual disbursements. No allowance for second counsel.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Edwards J)

Table of contents

	Para No
Introduction	[1]
Relevant background	[4]
High Court judgment	[28]
Undue influence: relevant legal principles	[47]
Does the transaction call for an explanation?	[49]
Is the transaction the result of undue influence?	[54]
Sale price	[55]
Debt of $115,729	[62]
Transfer of other assets and superannuation	[65]
Lack of certainty in the Agreement to Occupy	[70]
Independent legal advice	[73]
Keith's understanding of the transaction	[77]
Evidence of pressure	[86]
Conclusion	[88]
Counterclaim	[94]
Result	[102]

Introduction

1 Keith Hingston and his son, David Hingston, have been embroiled in a dispute since 2010. 1 The dispute concerns a transaction between the parties on 19 October 2009. That transaction provided for the sale and occupation of Keith's house, and the transfer of his assets and superannuation payments to a trust associated with David (the Hingston House Trust).

2 The High Court found that the transaction was a result of David's undue influence over Keith, and that David and the Trust had breached its terms. 2

3 David and the other trustee of the Trust appeal that judgment on two grounds:

• (a) First, they challenge the finding of undue influence. They say the High Court erred in finding that the transaction called for an explanation and that the independent legal advice Keith received on the transaction was deficient.

• (b) Second, they say that the High Court failed to give judgment on their counterclaim.

Relevant background

4 The house at the centre of this dispute is in Welcome Bay, Tauranga (the House). It was designed and built by Keith. Keith had a strong attachment to the House and wished to remain living there for the rest of his life.

5 In 2007, Keith, who was then in his early 70s, was separating from his second wife, Shona. The House was relationship property. It had been valued at $580,000 in September 2007.

6 Pursuant to a consent order of the Family Court dated 2 October 2008, Keith was required to pay Shona $306,000 by a specified date, failing which the House was to be sold and Shona's entitlement was to be paid out of the sale proceeds. Keith was to retain the chattels.

7 In mid-2007, Keith had reconciled with his first wife, Gwen. She began living in the House. Keith and Gwen are the parents of David and his brother Guy. David is in his 60s and has been a medical practitioner for some 35 years.

8 Keith attempted to borrow money to pay the amount owing to Shona but was unable to do so. He turned to David for assistance. David considered the consent order was unfair to Keith, and he took steps on Keith's behalf to have the consent order set aside. Keith authorised David to act on his behalf and signed two enduring powers of attorney in relation to property, and personal care and welfare, on 13 October 2008 to allow that to occur.

9 The House was valued at $530,000 in an updated valuation dated 15 September 2008. A further valuation obtained in March 2009 assigned a market value to the House of $505,000, and a forced sale valuation of $430,000.

10 David engaged new lawyers on Keith's behalf to challenge the Family Court consent order. A variation to the Family Court consent order was granted on 8 September 2009. Keith was required to pay Shona $295,000 on or before 23 October 2009, failing which the House was to be sold and Shona paid the sum of $295,000 from the proceeds of sale.

11 Keith was still unable to raise the money to pay Shona her entitlement under the varied consent order. It was agreed that David would assist Keith by purchasing the House from which the proceeds of sale could be used to pay Shona. On 15 October 2009 David settled the Trust for that purpose.

12 There are two trustees of the Trust, David is one of them. The principal discretionary beneficiaries are David, his partner Wendy, and their daughter.

13 On 19 October 2009, Keith and the Trust executed three documents:

• (a) An agreement for sale of the House to the Trust for the price of $375,000.

• (b) An agreement to occupy the House (Agreement to Occupy).

• (c) A deed of acknowledgement of debt in the sum of $115,729.00 (Deed of Acknowledgement of Debt).

14 The Agreement to Occupy stipulates Keith's right to continue to occupy the House. Clauses 2 to 5 of the Agreement to Occupy provide:

2. There shall be no rental payable in respect of the Agreement, however, consideration for this Agreement is provided as follows:

2.1 The transfer of the [House] to the Trust.

2.2 A payment of $115,729.00 being made in respect of [Keith's] right to occupy the [House] for life as recorded in the Agreement.

2.3 A Deed of Acknowledgement of Debt for $115,729.00 being entered into by Keith in favour of the Trust.

2.4 The transfer (or sale proceeds thereof) of Keith's Isuzu Journey motor home to the Trust.

2.5 The transfer (or sale proceeds thereof) of Keith's Stabicraft boat, outboard motor and trailer to the Trust.

2.6 The transfer of Keith's current and all future Jacques Martin superannuation entitlement (to a bank account nominated by the Trust) to the Trust.

2.7 The transfer of (or sale proceeds thereof) of the following assets (at the agreed value) to the Trust:

(a) Small outboard boat, fishing gear	$500.00
(b) Suzuki Vitara	$10,000.00
(c) Trailer	$400.00
(d) Tools and Workshop items	$1,000.00
(e) Kitchen and household furniture	$5,000.00
(f) Home appliances	$1,000.00
(g) Electronic items and TVs etc	$2,000.00
(h) Garden tools	$500.00
Total	$20,400.00

3. Keith will be jointly responsible with Gwen for all maintenance and upkeep of the [House] together with any associated costs.

4. Any capital works are to be approved by the Trust in advance; capital works being any alteration of the grounds and/or building located on the [p]roperty.

5. Keith together with Gwen will be responsible for the following payments in respect of the [House]:

5.1 All insurance policies

5.2 Rates

5.3 Utilities (including power and phone).

The costs incurred in respect of clauses 5.1 and 5.2 are to be paid directly by Keith and Gwen to a Bank account nominated by the Trust who will pay these costs on Keith and Gwen's behalf.

15 The term of the Agreement to Occupy was 30 years or until such time as the agreement was dissolved or Keith died. The Trust retained the right to sell the House at any time at its sole discretion but acknowledged that it had to provide suitable alternative accommodation (excluding full time rest home and/or medical care requirements for Keith).

16 Clause 12 of the Agreement to Occupy governed what was to happen if there was a breakdown in the relationship between Keith and Gwen. That clause provides:

12. Keith acknowledges that should Gwen's behaviour impact adversely upon his cohabitation with Gwen that the Trust shall be entitled to review and alter the terms of the Agreement on its own account. Further, Keith agrees that should his behaviour impact adversely upon their cohabitation that the Trust shall be entitled to review and alter the terms of the Agreement on its own account.

17 The Deed of Acknowledgement of Debt recorded Keith as owing the sum of $115,729.00 for the right to occupy. The principal sum was repayable on demand. Interest was charged at 4.25 per cent per annum commencing on 23 October 2009. Penalty interest accrued at 6 per cent per annum. Interest was to be paid on 1 January of each year if demanded by the Trust on 30 November of the previous year.

18 Gwen also signed an agreement to occupy. The provisions of that agreement were substantially the same as the agreement entered into with Keith except for the provision as to consideration for Gwen's occupation. The relevant terms of that agreement provide:

2. There shall be no rental payable in respect of the Agreement, however, consideration for this Agreement is provided as follows:

2.1 The transfer of $158,989.50 from Gwen to the Trust.

2.2 A payment of $147,195.00 being made in respect of her right to occupy the Property for her life as recorded in the Agreement.

2.3 A Deed of Acknowledgment of Debt for $11,787.50 being entered into by Gwen in favour of her.

2.4 The transfer of fifty percent of Gwen's current and all future full Jacques Martin superannuation entitlement (to a bank account nominated by the Trust) to the Trust.

19 Gwen's payment of $147,195 for the occupation right was discharged by setting off a debt owed by David to Gwen, with a credit back to Gwen in the sum of $11,787.50. A deed of acknowledgement of debt for this sum was executed by the Trust and Gwen.

20 Keith and Gwen also...