Walton v Walton

This is a case of alleged undue influence.

The plaintiff, Ms Lynda Walton, is the youngest sister of the first defendant, Mr Peter Walton.

The plaintiff and the first defendant are two of the six children of the late Mr Ernest Walton (who died in 1984 at the age of 58) and the late Mrs Lillian Walton (who died on 1 June 2012 at the age of 84).

The plaintiff and the first defendant have four other siblings, including Ms Elizabeth Atkinson (known as “Beth”).

The second defendant, Ms Helen Walton, is the first defendant’s wife.

For convenience, and without intending any disrespect, I will refer to these people by their given names.

The proceedings concern a deed dated 25 January 2012, but executed on or shortly prior to 29 November 2011, made between Peter and Helen on the one hand and Lillian on the other (“the Deed”). Pursuant to the Deed, Lillian forgave “any debt owing by Peter and Helen to her”.

The Deed contained the following recitals, which set out the essential background to these proceedings:

Apart from recitals (e) and (n), it is common ground that the recitals set out, accurately, the relevant background. As to recital (e), Mr Anderson, who appeared for Lynda, submitted that the amount owing by Peter and Helen to IMB Limited as at the date of the Deed was not $120,000 but was, rather, $94,138.63. Mr Anderson also submitted that what was stated in recital (n) was false. I understood the basis for that submission to be that the funds referred to were not “dissipated”. I deal with that question below in the context of the misrepresentations that Lynda alleges as a component of her undue influence claim.

The “funds” referred to in recitals (k) and (n) to the Deed comprised $300,000 advanced by Lillian to Peter between November 2003 and February 2004.

There is no direct evidence of these advances.

However, there are in evidence two receipts (both signed by Peter) dated 28 November 2003 and 12 February 2004 from the “Redtail Unit Trust” (being the “trust structure” referred to in recital (g) of the Deed: “the Trust”) acknowledging receipt from Lillian of $100,000 and $200,000 respectively. On those dates, Peter was the sole trustee of the Trust. The Trust was the vehicle through which Peter (originally with Mr Emmett, referred to in recital (g) to the Deed) was hoping to develop a property at Anderson Avenue Mt Pritchard, also referred to in recital (g) to the Deed.

The 28 November 2003 receipt stated that the $100,000 was, as to $62,000, the “full price” of a 1/13th share that Lillian had earlier purchased in the proposed development and, as to the balance of $38,000, a “contribution toward construction of residence within the development”. The 12 February 2004 receipt stated that the $200,000 was for “the balance of construction of one townhouse or villa” within the development.

As stated in recital (l) to the Deed, the proposed development did not proceed. As stated in recital (j) to the Deed, Mr Emmett “relinquished his interest in the proposed development”. Thus, by a deed dated 26 September 2003, Mr Emmett resigned from the Trust and Peter agreed to pay him a total of $312,631.04 by instalments. One payment made by Peter to Mr Emmett was an amount of $100,000 paid on 3 December 2003; five days after the 28 November 2003 receipt referred to in the preceding paragraphs.

For reasons unexplained in the evidence, it took some time for the formalities of Mr Emmett’s resignation from the Trust to be effected. He remained on the title of the Anderson Avenue property for some years.

By transfer dated 14 July 2006, Mr Emmett transferred his interest in 47 Anderson Avenue (which by then had been excised by sub-division from the balance of the proposed development site) to Helen for a stated consideration of $185,000.

In 2010 the balance of the site was sold, undeveloped, to a third party.

Lillian did not acquire any interest in the development. It is common ground that, as a result, as at the date of the Deed, Peter owed Lillian $300,000.

It is not necessary to set out any more detail concerning the circumstances in which Lillian made these advances, as Lynda makes no complaint in these proceedings concerning the making of the advances.

The operative clauses of the Deed were as follows:

Clause 3 of the Deed thus contained a promise by Peter and Helen to care for Lillian at 47 Anderson Avenue. As stated in recital (e) of the Deed, on the date of the Deed, Lillian lived at 47 Anderson Avenue with Peter and Helen. In fact, Lillian had resided with Peter and Helen at 47 Anderson Avenue since 2003, following the sale by her of a property she owned at Yattalunga, on the Central Coast. In late 2011, Beth also moved into 47 Anderson Avenue to help care for Lillian.

Lynda brings these proceedings as a representative of Lillian’s estate. Peter was appointed executor under Lillian’s will but, evidently because of the small size of her estate, has not applied for probate.

Lynda asserts that the execution of the Deed by Lillian was brought about by the exertion of undue influence on the part of Peter and Helen.

The particulars of undue influence given in the Further Amended Statement of Claim, and as pressed in final submissions, are as follows:

Although the Further Amended Statement of Claim does not make this allegation in its terms, Mr Anderson informed me at the outset of the hearing that Lynda’s case was that the alleged representations were false. Ms Hill, who appeared for Peter and Helen, informed me that Peter and Helen understood this to be the case brought against them and were ready to meet it.

In response to a request for further and better particulars, Lynda’s solicitors stated:

The defendants’ response, in their Defence, was, relevantly:

A transaction, such as the Deed, may be set aside in equity if it is shown to have been procured by undue influence: that is, the unconscientious influence of one person over another.

The principles are summarised in P W Young, C Croft and M L Smith, On Equity, (2009, Lawbook Co.) at [5.330] to [5.360] as follows:

There are some relationships (for example, a parent and a child) in which, without more, undue influence is presumed. That is not this case. Although a “parent is presumed to exercise influence over [a] child; there is no presumption in the opposite direction”: Brown v The NSW Trustee & Guardian [2011] NSWSC 1203 at [46] per Brereton J.

This case is concerned with “presumed undue influence” and “actual undue influence” of the kind referred to in the passage I have set out at [29] above.

As to “presumed undue influence” in this sense, in Winefield v Clarke [2008] NSWSC 882 Barrett J said at [27]:

So far as concerns rebutting a presumption of undue influence, Brereton J said in Tulloch (deceased) v Braybon (No 2) [2010] NSWSC 650 at [39] and [40]:

Brereton J went on to discuss the nature of a “special relationship of influence” at [51]:

As I have set out above at [24], Lynda has particularised her claim of undue influence by reference to, first, Lillian’s alleged dependency on Peter and Helen, and, second, by reference to the representations said to have induced Lillian to believe that the money she had advanced to Peter had been lost, and that Peter and Helen would lose their home unless Peter was released from his obligation to repay those advances.

As I understood Mr Anderson’s submissions, the first aspect of Lynda’s claim is one of “presumed undue influence” of the kind I have described and thus seeks to establish not only that Lillian was dependant on Peter and Helen, but that Peter and Helen had assumed a position of ascendency, influence or dominion over Lillian such that her consent to the release contained in the Deed was not truly independent or voluntary. If that circumstance is made out then, as Mr Anderson submitted, and as the authorities I have set out make clear, the onus would rest on Peter and Helen to rebut the presumption of undue influence by showing that Lillian’s execution of the Deed was voluntary and the result of the free exercise by Lillian of her will, uninfluenced by them.

As to the second aspect of Lynda’s claim, concerning the alleged representations, I understood Lynda to be asserting actual undue influence by Peter and Helen over Lillian, such actual undue influence being constituted by the alleged representations.

In view of the conclusions to which I have come, I will deal with the second aspect first.

Before doing so, I will set out further relevant background.

The evidence revealed that, at least from the time Lillian commenced to live with and be cared for by Peter and Helen in 2003, she had a very difficult relationship with Lynda.

Lynda did not dispute that her relationship with Lillian was fraught.

In her affidavit she said:

In cross-examination Lynda gave this evidence about that passage:

On 15 June 2011 Lynda wrote an email to her brother, Phillip, stating:

Lynda gave this evidence concerning that email:

The evidence also strongly suggests that Lillian’s motivation in executing the Deed was her apprehension that, if she did not, and if Peter remained liable to repay her estate the $300,000 following her death, Lynda would cause the estate to seek to recover the $300,000 and thereby cause Peter and Helen financial hardship.

In that regard, Peter gave unchallenged evidence that Lillian said to him words to the following effect:

In the circumstances I describe below, Mr Paul Georgiadis, a solicitor, called on Lillian at 47 Anderson Avenue on 14 October 2011 to discuss the possibility of executing the Deed. Mr Georgiadis gave unchallenged evidence that Lillian said to him:

Lynda called her sister, Beth, as a witness. In her affidavit Beth said that on a number of occasions, Lillian said to her:

There is objective evidence of Lillian’s concern about Lynda’s conduct in statements made about Lillian by health professionals.

For example, on 21 June 2011, whilst Lillian was a patient at Braeside Hospital, Lillian was seen by a psychologist. The hospital notes contain an entry by a psychologist to whom Lillian was referred “with concern around anxiety [about] daughter”. The entry included:

An entry on 23 June 2011 similarly reports:

The Deed was prepared by Mr Georgiadis. Mr Georgiadis had been the solicitor for Peter and Helen for approximately 25 years and acted for Peter in relation to the proposed development at Mt Pritchard.

In his affidavit, Mr Georgiadis gave this evidence concerning the circumstances in which Lillian executed the Deed:

The “precautions” to which Mr Georgiadis referred included referring her to an independent solicitor, Mr Peter Mitchell. Mr Georgiadis also suggested to Lillian that she attend on her treating general practitioner, as well as a consultant physician and geriatrician.

Mr Mitchell swore an affidavit in which he said he visited Lillian at 47 Anderson Avenue. He said:

In a subsequent affidavit, Mr Mitchell described those “certain steps” as follows:

On 29 November 2011 Mr Mitchell wrote a letter to Mr Georgiadis stating:

The evidence of Mr Georgiadis and Mr Mitchell was received without objection. Neither was cross-examined.

It is common ground that, at the time Lillian executed the Deed, she suffered a number of physical ailments. Some years previously she had had 80 per cent of her bowel removed. She suffered from diabetes. She was on anti-coagulant medication, and had angina and hypertension. She was often unable to get to the dining table for meals. She had some incontinence problems. She required assistance showering. She had been declared technically blind (although she could still read). She had kidney failure and central tremors with Parkinson’s disease.

Peter agreed that Lillian was dependant on him and Helen for accommodation.

However, Lillian was, at the time she executed the Deed, mentally alert.

Thus, Lillian’s general practitioner, Dr Upkar Goyal, swore an affidavit in the following terms:

On 25 October 2011, Dr Goyal sent a letter to Mr Georgiadis which was in the following terms:

On 24 October 2011, Dr Mariam Joseph, a Geriatrician and Consultant Physician, provided a letter to Mr Georgiadis which was in the following terms:

The evidence from Mr Georgiadis, Mr Mitchell, Dr Goyal and Dr Joseph was adduced by Peter and Helen and unchallenged by Lynda.

Lynda adduced no medical evidence concerning Lillian’s condition at the time she executed the Deed.

I turn now to Lynda’s case of undue influence commencing with her claim of actual undue influence arising from the alleged misrepresentations.

I am satisfied that Peter did make a representation to this effect to Lillian. I am not, however, satisfied that the representation was false.

In cross-examination, Peter agreed that he had told Lillian that he “had no money”.

Later, Peter said “I’m not sure I used those words” but then gave the following evidence in answer to questions from me:

There is evidence that Lillian did believe that the monies she had advanced to Peter had been lost.

Thus, as I have set out above, she said to Mr Georgiadis on 14 October 2011 that she accepted that the “money is gone” and said to Beth that “Helen and Peter have lost everything” (see [54] and [49] above).

Further, Mr Georgiadis gave evidence that, towards the end of September or early October 2011, prior to preparation of the Deed, Peter had said to him that “there may be problems down the track because Mum’s money was spent or lost”.

The Deed itself recited that the funds advanced by Lillian “have been dissipated or used by Peter” (at recital (n)).

Mr Anderson submitted that it was false of Peter to tell Lillian that the money she had advanced had been “spent or lost” because that money had, first, been used by Peter to pay Mr Emmett $100,000 on 3 December 2003 (see [14] above) and, second, by Helen to acquire Mr Emmett’s interest in 47 Anderson Avenue (see [16] above).

As to the payment made on 3 December 2003 to Mr Emmett, it is true that this payment followed only days after the 28 November 2003 $100,000 receipt (see [14] above). There is, however, no direct evidence of when that $100,000 was paid by Lillian to Peter. If it was paid on or about 28 November 2003, it may be that an inference arises that it was used to fund Peter’s payment to Mr Emmett. But I fail to see how it follows from this that it would be false to say that that part of the money had been “spent or lost”. For what it was worth, Peter had acquired Mr Emmett’s interest in the Trust. However, there is no evidence before me that, as at the date of the Deed, that interest was of any value.

As to the acquisition by Helen of Mr Emmett’s interest in 47 Anderson Avenue, the evidence is sparse indeed. Mr Anderson pointed to two payments of $52,600 made from Peter’s credit union account to Mr Emmett on 29 June 2004. But the transfer of Mr Emmett’s interest in 47 Anderson Avenue to Helen took place over two years later, on 14 July 2006 (see [16] above). My attention was not directed to any evidence showing any link between the two 29 June 2004 payments and the 14 July 2006 transfer. Mr Anderson directed no questions to either Peter or Helen about this subject in cross-examination.

In opening written submissions, Mr Anderson submitted that, following the sale of 45 Anderson Avenue (see [17] above), the Trust received $129,425.85, of which $120,000 was deposited to “the defendants’ IMB mortgage account” on 28 April 2011. However, this matter was not taken up in Mr Anderson’s cross-examination of either Peter or Helen, and not mentioned in Mr Anderson’s final submissions. Further, as Ms Hill pointed out, there is no evidence of the position as at the time of execution of the Deed.

Mr Anderson also pointed to the fact that, at the date of the Deed, something in the order of $333,000 stood to the credit of Peter’s superannuation account with his former employer, Qantas. Mr Anderson submitted that the alleged availability of these funds rendered false the alleged representations. I do not accept that submission for a number of reasons.

First, Peter gave evidence, which I accept, that his state of mind was (and is) that, as he has not yet retired, he is not entitled to access that superannuation. Mr Anderson submitted that I should not accept that evidence. However, having carefully observed Peter when he gave this evidence, I am not satisfied that he was not telling the truth. In any event, even if it is a fact that Peter could have, prior to execution of the Deed, accessed his superannuation, and even if Peter believed that was so, it would not render false his statement to Lillian that the money she had lent him had been “spent or lost”. There is no suggestion that any part of the money advanced by Lillian to Peter found its way into Peter’s superannuation fund.

In those circumstances, I am not persuaded that it was false for Peter to tell Lillian that the money she had advanced had been “spent or lost”.

I am not satisfied that either Peter or Helen made this representation.

There is no direct evidence that either Peter or Helen told Lillian that they would “lose their home” if Lillian did not release Peter from his obligation to repay.

As I have set out above at [54], Mr Georgiadis gave evidence that Lillian said to him, on 14 October 2011:

Further, Beth gave evidence that on the day that Lillian executed the Deed she said to Beth:

That evidence certainly suggests that Lillian was concerned that, but for her execution of the Deed, there was some prospect of Peter and Helen losing their home. It does not necessarily follow, however, that Lillian had this concern because of anything Peter or Helen said to her.

On the contrary, the evidence I have set out above at [47] to [49] of the statements made by Lillian to Peter, Beth and Mr Georgiadis suggests that Lillian’s concern was borne of her apprehension that, unless she released Peter from his obligation to repay the $300,000, Lynda would “make trouble for Peter and Helen after I am gone”.

Nothing that transpired during cross-examination of Peter or Helen causes me to come to any different conclusion. Peter denied telling Lillian that he feared the home would be lost absent a release of his obligation to Lillian. Helen was not asked any questions at all on the topic.

Thus, in cross-examination, Peter gave this evidence:

A short time later, Peter denied telling his mother that he and Helen “might be living on the street” if the “debt wasn’t released” but then gave this evidence in response to questions from me:

However, Mr Anderson did not address any questions to Helen on this subject during his cross-examination of her.

In those circumstances, I am not persuaded that either Peter or Helen made the representation alleged.

For those reasons my conclusions as to the alleged representations are as follows.

First, although Peter said something to Lillian to the effect that the money she had advanced to him had been “spent or lost”, it was not false of him to say. His statement was therefore not a misrepresentation.

Second, I am not satisfied that either Peter or Helen said anything to Lillian to the effect that if she did not release Peter from his obligation to repay the $300,000, they would lose their home.

Accordingly, Lynda’s case based on these alleged representations fails.

As the authorities I have set out at [32] to [34] make clear, in order to establish a case of presumed undue influence, Lynda must establish that Peter and Helen had assumed a position of “ascendency or influence” over Lillian such as would give Peter and Helen “some element of authority or superiority” or “dominion or ascendency” over Lillian.

It is common ground that, at the time she executed the Deed, Lillian was in poor physical health and was, physically, dependant on Peter and Helen.

It is also common ground that, at this time, Lillian reposed trust and confidence in Peter and Helen.

Lynda asserted, and appears truly to believe, that Lillian was treated cruelly whilst living with Peter and Helen.

In cross-examination Lynda was taken to an email that she sent Helen on 24 August 2011 in which she said:

Lynda gave this evidence in cross-examination about that email:

It may be that Lynda truly held the beliefs to which she deposed. However, I find Lynda’s assertion that Peter was treating their mother “cruelly” impossible to reconcile with the objective evidence before me.

Leaving aside the evidence that Peter and Helen gave as to the care for Lillian in the 11 years that Lillian lived with them, there is a large amount of objective evidence to suggest that neither Peter nor Helen exercised dominion or ascendency over Lillian in any way that is relevant to her execution of the Deed.

First, as I have set out above at [54], Lillian told Mr Georgiadis that Beth and Helen looked after her “in tandem” and were “terrific”, and that “Helen has been very good to me”.

Mr Georgiadis gave unchallenged evidence that he had:

Further, as I have set out above at [55], Mr Georgiadis referred Lillian to an independent solicitor, Mr Mitchell, who gave unchallenged evidence as to having followed his usual practice of explaining the nature and effect of documents to be signed and of not proceeding unless satisfied of the relevant person’s understanding of the document to be signed.

Further, Peter and Helen adduced evidence from a number of persons who saw Lillian during the period that she was living with Peter and Helen and who attested to Lillian’s wellbeing and satisfaction with the care she was receiving from Peter and Helen.

For example, Ms Merle Catto, who had known Lillian since “before either of us were married” said that in August 2007 Lillian had said to her:

Similarly, the Reverend Bruce Dingwall, a Minister at the Menai Anglican Church, gave evidence that “Lillian was sharp mentally right up until the last time we saw her in hospital not long before her death” and that Lillian had said to him:

The Reverend Dingwall continued:

Nine other witnesses gave evidence to the same effect. The evidence of all these witness was received without objection. None were cross-examined.

The observations of medical professionals also points strongly to the conclusion that Peter and Helen were not exercising “dominion or ascendancy” over Lillian’s will.

During an admission in April 2012 to Liverpool Hospital, a social worker recorded in Lillian’s Clinical Progress Notes:

Liverpool Hospital Clinical Progress Notes for 30 April 2012 record:

I see no reason to doubt the accuracy of these notes, nor of the reliability of Lillian’s reported assessment of her own position.

This evidence satisfies me, on the probabilities, that, contrary to Lynda’s apprehension, Lillian was well cared for by Peter and Helen, that she was not subject to physical, emotional or financial abuse and was, as she stated at Liverpool Hospital, safe and happy in their care.

In those circumstances, I am not satisfied that Lynda has established that there was a relationship between Peter and Helen on the one hand and Lillian on the other such as would give rise to a presumption of undue influence.

In any event, I am satisfied that Lillian understood, quite clearly, the effect of her entry into the Deed and that the Deed was the “independent, well understood act of a person exercising free judgment” (to adopt the language of the authorities to which I have referred at [32] to [34] above).

I am satisfied that Lillian’s entry into the Deed was her own idea and born of a desire to “be certain that [Lynda] can’t make trouble for Peter and Helen after I am gone” (to adopt the words she used in her conversation with Mr Georgiadis referred to at [48] above).

As the unhappy circumstances of this case show, Lillian’s entry into the Deed did not have the effect that she hoped for.

Lynda has failed to satisfy me that Lillian’s execution of the Deed was brought about by the undue influence of Peter and Helen.

The Further Amended Statement of Claim should be dismissed.

I will hear the parties as to costs.