Causer by her litigation guardian Antunovich v Causer HC Whangarei CIV 2008-488-830 [2011] NZHC 957 (31 August 2011)

BETWEEN EDNA DOREEN CAUSER BY HER LITIGATION GUARDIAN JULIE CATHERINE ANTUNOVICH Plaintiff

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This judgment was delivered by me on 31 August 2011 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar

	Para
Introduction	[1]
Factual background	[7]
Factual summary	[103]
Valuation evidence	[104]
The issues on the pleadings	[117]
Fiduciary duty	[125]
Undue influence	[135]
Unconscionable bargain	[140]
Independent legal advice	[145]
The value of Mrs Causer’s share	[159]
The affirmative defences	[170]
_Result	_[179]

2001 by which the plaintiff, Mrs Edna Causer (Mrs Causer), agreed to transfer one share in Causer Farms Limited (Causer Farms), a family farming company at Maungaturoto in Northland, to her only son, the first defendant, Gary Causer (Gary) and to discharge a mortgage of $7,000 over the farm property and take out a new mortgage of $90,000. Mrs Causer claims that the Deed is invalid and should be set aside because Gary was in breach of his fiduciary duties to her in permitting her to enter into the Deed, that the share was transferred as a result of Gary’s undue influence over her, and that the bargain was unconscionable.

[2] Mrs Causer’s share in Causer Farms was originally an ―A‖ share with 30,000 votes. Gary and his wife held the other 99 shares in the company, the 99 shares having one vote each. Mrs Causer was bequeathed the ―A‖ share by her late husband in 1980. Although, following the enactment of the Companies Act 1993, the voting rights in the ―A‖ share were lost in 1997, Mrs Causer may possibly have been unaware of this until early 2000 when she sought legal advice which led to a meeting on 1 March 2000 at which she agreed to sell the share to Gary.

[3] Mrs Causer’s claim is based on Gary’s alleged failure to ensure that the ―A‖ share was retained in 1997 or subsequently reinstated so that when she agreed to transfer the share to him on 1 March 2000 its value, calculated on the basis of Holt v Holt,1 should then have been approximately $214,000. Holt v Holt involved a wife’s claim under the Matrimonial Property Act 1976 in respect of a somewhat similar ―A‖ share owned by the husband in a farming company. The Court of Appeal and the Privy Council upheld a High Court decision that 20% to 25% of the market value of the company’s assets represented the ―fair value‖ for control.

for either $214,000 in today’s terms ($555,060.89) or for the value of the ―A‖ share

[5] While Mrs Causer, who is now aged 87 is the plaintiff, her claim is being brought on her behalf by one of her daughters, Mrs Julie Antunovich, who was appointed her litigation guardian by Associate Judge Bell in a decision dated

13 September 2010 on the ground that she was an incapacitated person in terms of rule 4.29 of the High Court Rules who by reason of mental impairment was unable to give instructions on the conduct of the proceeding.

[6] Gary defends his mother’s claim on the grounds that none of the three causes of action against him is made out on the evidence, particularly as before his mother signed the Deed of 2 May 2001 she was aware that the rights attached to the ―A‖ share had been lost in 1997. She took no steps then to have them reinstated notwithstanding the fact that she had taken independent legal advice. Gary also disputes the application of Holt v Holt to the valuation of the share and raises the defences of accord and satisfaction and laches (delay).

[7] The factual background, which is based on an agreed bundle of documents, the evidence adduced at the trial and an agreed chronology of events, is largely undisputed. It is convenient to summarise the background in chronological sequence.

[8] The Causer family farm at Maungaturoto, Northland, was a 416 acre mixed farm, originally owned by Gary’s grandfather. Gary’s father, the late Charles Causer (the late Mr Causer) who was born in 1915, worked on the farm as a young boy and throughout his life apart from when he was overseas during the Second World War. As a result of wounds received during the war, the late Mr Causer received a war pension during his lifetime which his widow has continued to receive since his death in 1980.

[9] The late Mr Causer and Mrs Causer had four children: Gail (born in 1949), Julie (born in 1950) (Mrs Antunovich), Gary born in 1952, and Lynette born in 1953. All the family helped on the farm. Mrs Causer assisted her husband with milking and the accounts. Their daughters also assisted with milking, calving, feeding-out,

haymaking, docking, lambing and shifting cattle until they left home. Lynette left home in 1969 when she was 16.

[10] Gary left school in 1967 at the age of 15 to work on the farm. His father needed help to run the farm because he had only one leg and suffered from asthma. Gary remained on the farm until recently when as a result of an injury he leased the farm and pursued his separate contracting business.

[11] On 5 October 1973 Mrs Causer made a Will appointing Mr Ian McMurchy her sole executor and trustee and leaving her estate to her three daughters equally. Gary was not a beneficiary under this Will.

[12] On 31 October 1973 the late Mr Causer, acting on advice, incorporated Causer Farms with a capital of $100. The company had 100 shares: one ―A‖ share held by the late Mr Causer and 99 shares transferred to Gary for a nominal payment.

[13] The Articles of Association of Causer Farms contained the following provisions:

66A. NOTWITHSTANDING anything elsewhere in these Articles contained the share subscribed for by CHARLES JULIAN CAUSER as an

―A class‖ share shall be and is henceforth known and called an ―A class‖

share but shall be an ordinary share EXCEPT THAT such share shall carry with it on a poll thirty thousand votes so long as it is held by the said

[14] The late Mr Causer was also appointed Governing Director of Causer Farms by article 66B. These provisions in the Articles of Association meant that the late Mr Causer had effective control of Causer Farms.

[15] In May 1974 the late Mr Causer transferred the family farm to Causer Farms and took a mortgage back for the purchase price of $82,800. Apart from two gifts of

$12,000 each made by the late Mr Causer in 1976 and 1977, the mortgage was not repaid to the late Mr Causer. Nor did he receive any interest on the mortgage from Causer Farms. On his death in 1980 the mortgage was transferred to his widow.

[16] Two different reasons for transferring the farm to the company were suggested in evidence. Mr Ian McMurchy, who worked at the time for his father, Mr Tom McMurchy, the late Mr Causer’s accountant and close family friend, said in his evidence for Mrs Causer that the company had been set up to avoid death duties. Gary, however, said that Mr Tom McMurchy had suggested the company as a means to gift the farm to him. As the farm had insufficient income to maintain two families, Gary would otherwise have had to take other employment, possibly as a sharemilker, to earn enough money to purchase the farm. He was at that time being paid $10 per week plus keep. Although it is not necessary to resolve this issue, it is likely that the reasons suggested by Mr Ian McMurchy and Gary both played a part in the setting up of the company.

[17] There is no dispute that, following the setting up of the company and the transfer of the farm to it, the ―A‖ share gave the late Mr Causer power to keep control over the day-to-day running of the farm and that he continued to do so as before. Gary continued to work on the farm for his father. Over time Gary assumed greater responsibility for the day-to-day running of the farm.

[18] At about the same time as Causer Farms was set up in October 1973, it appears that a new Will was drafted for the late Mr Causer. After bequeathing the proceeds of an insurance policy to his daughters Julie and Lynette, the late Mr Causer appears to have intended to leave his estate, including the ―A‖ share in Causer Farms, to Mrs Causer if she survived him for 14 days. If she did not, the late Mr Causer intended to leave each of his daughters $5,000 with the rest of the estate going to his son Gary who was also to be appointed his sole executor and trustee.

[19] Both the late Mr Causer and Mrs Causer made new Wills on 16 July 1976. The late Mr Causer’s Will, which was in fact his last Will, was in similar form to the draft 1973 Will. Gary was still appointed sole executor and trustee and the estate, including the ―A‖ share in Causer Farms, was still left to Mrs Causer. The only change made was to increase the legacies payable to his daughters to $10,000 each in the event that Mrs Causer did not survive him for 14 days.

[20] Under Mrs Causer’s Will dated 16 July 1976 her estate was left to her husband if he survived her for 14 days, but if not Gary was appointed sole executor and trustee, and, after legacies of $10,000 to each of her daughters, her estate was left to Gary. Under this Will Gary would have acquired the single ―A‖ share.

[23] The late Mr Causer died on 14 February 1980 aged 64. Under the terms of his last Will dated 16 July 1976 Mrs Causer received the ―A‖ share in Causer Farms

―for her absolute use and benefit‖ and the mortgage over the farm which then stood at $58,800 also passed to her. The proceeds of the life insurance policy left to Julie and Lynette had been paid out when Lynette turned 21.

[24] After the death of the late Mr Causer, Mrs Causer, then aged 55, remained on the farm and continued to assist with Causer Farms’ matters such as writing cheques and keeping accounts, but Gary, then aged 28, was in charge of the day-to-day running of the farm and management. It also appears that Mrs Causer became depressed after the death of her husband and over time took less interest in the running of the farm. Farm workers, who stayed with her, were employed.

[25] Mrs Causer and Gary became directors of Causer Farms and the mortgage was transferred to Gary as executor and then to Mrs Causer.

[26] On 9 June 1986 Mrs Causer made a new Will which reflected the fact that her husband had died since her 1977 will. Under her new Will Mrs Causer retained Gary as her sole executor and trustee, but then expressly bequeathed him the ―A‖ share in Causer Farms free of all duties. She left pecuniary legacies of $10,000 each to her three daughters by five ―free of interest‖ consecutive annual payments of

$2,000 each with the first payment on the first anniversary of her death. Then, after

leaving her personal possessions to her daughters and $1,000 to each of her grandchildren, she left the residue of her estate to Gary.

[27] On 18 July 1986 Mrs Causer made a further new Will. There were two significant changes between the two 1986 Wills. First, the bequest to Gary of the

―A‖ share in Causer Farms was subject to his paying the pecuniary legacies of

$10,000 to her three daughters. Second, the residue of her estate was left to her daughters and not to Gary. Although there was no evidence to explain these changes, it is perhaps reasonable to assume that Mrs Causer considered that, as the farm was likely to be more valuable than the residue of the estate, her daughters rather than Gary should receive the residue and that Gary, who, with the transfer of the ―A‖ share, would have full control of Causer Farms, should pay the pecuniary legacies.

[28] Mrs Causer continued to live on the farm and to do the accounts for Causer Farms during the 1980s and the 1990s until about 1997. During the late 1980s, however, Mrs Causer found that the GST section of the accounts was too much for her and so Gary’s wife took over doing the six monthly GST calculations and returns.

[29] Throughout this period (1980s – 1990s) Gary continued to run the farm with assistance from his wife. The farm supported Gary, his wife and family of three children, and his mother, Mrs Causer. The accounts for Causer Farms for the year

[30] On 8 September 1993 Gary transferred 49 of his 99 shares in Causer Farms to his wife. Gary and his mother remained the directors of the company.

[31] During 1993 Parliament enacted new legislation relating to companies in New Zealand. The Companies Act 1993 and the Companies Reregistration Act 1993 had been introduced during 1990-1991, received the assent on 28 September 1993 and were to come into force on 1 July 1994. Under the new legislation there was a transition period for companies such as Causer Farms which had been incorporated under the Companies Act 1955. They remained governed by that Act until 30 June

1997 when, unless they were reregistered under the new Act, they were deemed to be so reregistered with the cancellation of their Memorandum and Articles of Association with the consequence that rights attaching to different classes of shares would disappear: s 13 and Schedule of the Companies Reregistration Act 1993.

[32] Although there was no evidence expressly linking the introduction of the new companies legislation in 1993 with steps taken by Gary and Mrs Causer in 1993 and

1994, correspondence from their new solicitor, Mr Colin Binsted of Binsted Davies

& Co, was produced which referred to discussions relating to Mrs Causer’s ―A‖

We recently received from Connell Rishworth Gerard several documents pertaining to your affairs. After discussions with your son we understand that you wish to review various matters and consider reorganising your interest in Causer Farms Limited and possibly make a new Will.

On perusing a copy of the Company Accounts and various other documents pertaining to the Company we understand that the following is the situation:

2. The Company owes you a debt of $58,000.00. This debt is secured by way of Mortgage over the Company property. Initially we understand that the debt was for $82,000.00.

If you wish to discuss these matters could you please contact the writer and we can arrange a convenient time at our Maungaturoto offices to full discuss any reorganisation of your affairs that you may wish to make.

[34] It appears that Mr Binsted did not hear back from Mrs Causer in 1993 because in letters to Gary dated 24 September 1993 and 18 November 1993 he advised that no instructions had been received from her concerning her directorship of Causer Farms or the transfer of her ―A‖ share. At the same time, however, it appears that in 1994 Mrs Causer did discuss the ―A‖ share with Mr Binsted because in a Trust Account Statement from Binsted Davies & Co to Causer Farms dated

RE: COMPANY REORGANISATION – “A” SHARE RELEASE OF DEBT OWED BY COMPANY TO E.D. CAUSER

TO	Our fee
	- receiving instructions
	- perusing Articles of Association
	- discussing with E.D. Causer effects of ―A‖ share
	- receiving her advice that she did not want to give up ―A‖
	share
	- discussing matter with Accountant
	- all matters incidental thereto	150.00

[35] The reference in the Trust Account Statement to the release of the debt owed by Causer Farms to Mrs Causer is confirmed by a letter dated 21 July 1994 from Mr Binsted to Bavage & Chapman, the accountants for Causer Farms, recording

Mrs E.D. Causer has instructed us that she wishes to give to her son the Mortgage she holds over the Company land. At present the amount secured has been reduced from $82,800.00 to $58,800.00. As we see this proposal there are several ways it can be done. There may be others and we seek your advice.

(a) Transfer of Mortgage to Gary Causer for $58,800.00. Gary execute a Deed of Debt back to E.D. Causer and E.D. Causer gradually gift off the Debt.

(b) Causer Farms limited repay the debt to E.D. Causer. E.D. Causer then loans money to Gary (secured by Deed of Debt) and Gary advances the money back to the Company (thus enabling the initial repayment). The Deed of Debt be gradually gifted off.

[36] Then in a reporting letter to Gary dated 26 October 1994 enclosing the Trust

We have written to the Company Accountants and have asked for their opinion in respect of the gift that E.D. Causer wishes to make to Causer Farms Limited. For your information we enclose herewith a copy of that letter.

The question of gifting off that debt has yet to be settled and we look forward to receiving your instructions in respect of same.

[37] The certificate of title for the farm properties shows that on 26 September

1994 a new mortgage to The National Bank of New Zealand Limited was registered which took priority over the mortgage to Mrs Causer.

[38] Gary gave unchallenged evidence that the balance of the mortgage to his mother was gifted to him by way of an off-set against her rent payment and taxes. Mrs Causer retained her ―A‖ share at this stage and remained a director of Causer Farms until 6 February 2001.

[39] Gary was cross-examined extensively about the correspondence from Mr Binsted and his recollections of his discussions in 1993 and 1994 with Mr Binsted and his mother about the new companies legislation, the ―A‖ share and the mortgage of $58,800. Notwithstanding the cross-examination, which focused closely on the correspondence and the likelihood of discussions between the parties, Gary was unable to recall receiving the correspondence addressed to him or Causer Farms or any discussions with Mr Binsted or his mother on these matters. He did not take issue with the contents of the correspondence and the discussions to which they referred. He simply had no recollection of these events now. He explained that he was running the farm and was not really ―a book keeper type of person‖. He left the accounts to his mother and wife. He acknowledged the significance of the ―A‖ share, but was adamant that he had not been involved in the discussions between Mr Binsted and his mother referred to in the Trust Account Statement. Gary also confirmed his evidence on this aspect of the case in response to questions from me. I found Gary a straightforward and genuine witness whose evidence was credible and

reliable given the passage of time and his understandable acceptance of the documentary evidence.

[40] Neither Mrs Causer nor Mr Binsted was called to give evidence. Reference was made to an affidavit sworn by Mrs Causer on 14 July 2010 in support of the application for the appointment of Mrs Antunovich as her litigation guardian, but, in view of the date of the affidavit, the grounds of the application and the absence of any opportunity for the cross-examination of Mrs Causer, her affidavit evidence should not be given any weight.

[41] On 14 March 1997 a legal executive of Binsted Davies & Co, Mr Roger Ashford, sent a standard letter to the Directors of Causer Farms, c/- E D & G C Causer, giving advice about the implications of the new companies legislation and the consequences of not reregistering a company, previously registered under the Companies Act 1955, under the new legislation. The letter included advice that if nothing was done by 30 June 1997 the company would be deemed to be reregistered with its existing Memorandum and Articles of Association cancelled and rights attaching to different classes of share would disappear. Gary and Mrs Causer were asked to let Binsted Davies & Co know as soon as possible whether they wished to undertake the reregistration of Causer Farms.

[42] Mr John Chapman of Bavage Chapman Knight Ltd, Causer Farms’ accountants, gave evidence that a similar standard letter was sent to his firm’s clients about the implications of the new companies legislation before it came into force in

1994. Gary gave evidence that he received and read the letter from the accountants, but could not recall having read the letter from Binsted Davies & Co.

[43] There was no evidence that Mrs Causer herself received or read the standard letters from Binsted Davies & Co and Bavage Chapman Knight Ltd. Two of Mrs Causer’s daughters, Lynette Causer and Julie Antunovich, gave evidence that they did not believe their mother would have received or read the letter from Binsted Davies & Co because she did not open mail addressed to Causer Farms. Their evidence about the mail was corroborated by unchallenged evidence from a Donna

[44] Gary’s evidence was that he received the standard letter from Bavage Chapman Knight Ltd in 1997, rather than in 1994, and that he recalled taking his mother to meet Mr Chapman to discuss what they should do. Gary said that as his mother agreed that the ―A‖ share should become an ordinary share they did not have to do anything because it would lapse by virtue of the new Act. He also said that it had never occurred to him or his mother that an ―A‖ share would have extra value for control. Under cross-examination Gary confirmed his evidence about the meeting with his mother and Mr Chapman in 1997.

[45] Mr Chapman’s evidence was that he received no instructions from Causer Farms to take any steps to protect the ―A‖ share from reverting to an ordinary share and that, while he met Mrs Causer on ―perhaps a couple of occasions‖, it was a long time ago and he could not remember clearly what it was they discussed. Mr Chapman gave no evidence-in-chief about the meeting referred to by Gary and was not cross-examined on this issue.

[46] No steps were taken to reregister Causer Farms under the new companies legislation before 30 June 1997. This meant that Causer Farms was deemed to be registered under the new legislation with the consequences advised by Binsted Davies & Co. The Articles of Association of Causer Farms were cancelled and the

30,000 voting rights attached to the ―A‖ share therefore ceased to exist by 1 July

1997. At the same time Mrs Causer still held the single share in Causer Farms so that the bequest of the share to Gary in her 1986 Will remained effective.

[47] Gary’s evidence was that the disappearance of the ―A‖ share made no difference to the running of the farm. He and his mother carried on the farming activities in the same way as before. There was no change. He still worked on the farm and they received the same income from the company. Gary’s evidence about their income was confirmed by the Causer Farms accounts for the years ended

31 May 1999 and 31 May 2000 which showed the following shareholders’ salaries:

	1998	1999	2000
G C Causer	$8,676	8,752	29,240
L E Causer	8,676	8,752	29,240
_{E D Causer}	_6,500	_3,804	_11,500

[48] No evidence was adduced for Mrs Causer to suggest that Gary’s evidence that nothing changed in the running of the farm after the ―A‖ share lapsed was incorrect.

[49] Both of Gary’s sisters, Lynette Causer and Julie Antunovich, who were called as witnesses for Mrs Causer, gave evidence that in 1999 they had a family discussion with Gary about their mother, who was then aged 75, moving into a retirement home. Both sisters gave evidence that when they suggested to Gary that their mother’s house on the farm be rented out to obtain income to pay for the retirement home he said that he owned the house and that if their mother stayed on in it she would need to pay rent for it. Both sisters said that they were shocked by this news and recalled earlier comments by Gary that he owned the farm and controlled their mother’s assets and they would no longer be inheriting anything when she died. Lynette Causer gave evidence that their mother was surprised when told that she no longer had any control of Causer Farms and wanted to take steps to rectify the matter. Arrangements were made for their mother to meet Mr Ian McMurchy who told her about the effect of the changes in the companies legislation. Julie Antunovich acknowledged in cross-examination that if their mother’s house had been rented out the income would have gone to Causer Farms.

[50] Gary took issue with the evidence of his sisters about family discussions relating to their mother moving to a retirement home. Gary’s evidence was that his sisters organised to move their mother from the farm without his knowledge. He denied any discussion about renting out their mother’s house on the farm because there was no need for her to have a rental income. He said that it was possible that at some stage he referred to his mother arranging with Mr Chapman for the balance of the loan owed to her by Causer Farms being repaid by deducting a rental for the house rather than gifting the balance owed to Causer Farms.

[51] As none of the witnesses was cross-examined in any detail about the alleged family discussion, it is not appropriate to resolve the differences in their evidence. It is also unnecessary to do so because there is no dispute that in early 2001

Mrs Causer did leave her house on the farm for a nursing home and then a retirement village in Maungaturoto and that her house was then rented out by Causer Farms. There is also no dispute that Mrs Causer remained a director of Causer Farms until

2001 and, as already noted, she continued to receive an income from Causer Farms in 1999 and 2000. Under the terms of her 1986 Will her daughters had not been disinherited.

[52] Although there was no direct evidence from Mrs Causer herself about her concerns at this time, there was documentary evidence in the form of a letter to her dated 24 February 2000 from Mr Stephen Sundvick, an associate of Coast to Coast Law, formerly Binsted Davies & Co, that she had seen him about her concerns on

We saw you at our Maungaturoto office on the 23rd of February 2000 at which time you expressed concern that you may not now hold your 1 ―A‖ class share which you received from your late husbands estate. You also expressed concern regarding your current Will.

In relation to your Will, we obtained your Will along with other documents from your former solicitors Connell Rishworth in 1993. At this time we sent you a copy of that Will and no new Will was made. The current Will was made on the 18th of July 1986 and we enclose a copy for your information.

In 1993 new legislation was enacted replacing the Companies Act 1955. The new Companies Act provided that all companies existing at that time (which included Causer Farms Limited) either had to voluntarily re-register under the new Act, or would be deemed to be re-registered using standard provisions in the new Act.

We contacted Causer Farms Limited and enquired whether voluntary re- registration would be done, and if we could do this for the company. We did not receive instructions to re-register the company.

As a result, Causer Farms Limited was deemed to be re-registered under the new Companies Act. The effect of this is that there are no separate classes of shares in the company anymore, all of the shares having equal rights. Prior to the new Companies Act there were 100 shares, 99 held by Gary and his

wife, and one held by you. Your share however was equal to 30,000 shares when voting on any matter. After the new Act your share is worth 1 share when voting on any matter.

If a voluntary re-registration was carried out the different classes of share could have been provided for in a company constitution.

To rectify the matter and restore the share structure to how it was prior to the

Should you wish us to do this, or if you have any queries, please contact the writer.

[53] Mr Ian McMurchy initially gave evidence that he did not believe that Mrs Causer had seen this letter from Mr Sundvick because, if she had, she would have discussed it with him and she did not do so. Other evidence, however, established that Mrs Causer must in fact have received Mr Sundvick’s letter because she gave it to her new lawyer, Mr Bruce Wyber of Sellars & Co, who referred to it in a subsequent letter dated 23 March 2000 to Mr Grant Davies of Coast to Coast Law. When confronted in cross-examination with this evidence, Mr McMurchy acknowledged that his evidence-in-chief was wrong.

[54] In the meantime, however, another meeting was arranged at the Maungaturoto office of Coast to Coast Law. It was held on 1 March 2000 and attended by Mrs Causer, Mr McMurchy, Gary and his wife, and Mr Davies of Coast to Coast Law. Apart from Mrs Causer, all the other attendees at the meeting gave evidence about their recollections of what occurred and were cross-examined about their recollections. Mr Davies also made a file note dated 1 March 2000 recording the outcome of the meeting and wrote follow up letters dated 3 March 2000 to Mrs Causer and Gary and his wife about ―the agreement reached‖ at the meeting.

[55] It appears that the meeting may have been arranged by Mrs Causer herself. That was the evidence of both Mr McMurchy and Gary. Under cross-examination Gary accepted that it was ―something quite out of character‖ for his mother to call the meeting, but rejected the suggestion that he should have discussed her concerns without a meeting. He thought it would be best to have the meeting with Mr McMurchy and Mr Davies present.

[56] It also appears that at the meeting Mrs Causer’s unhappiness at losing her

―A‖ share in Causer Farms was discussed. Again that was the evidence of both Mr McMurchy and Gary. It was also the evidence-in-chief of Mr Davies, but under cross-examination he suggested that he was in error and then later acknowledged that because the meeting had been held 11 years ago it was possible that Mrs Causer’s unhappiness had been discussed. The fact that Mr Sundvick’s letter of

24 February 2000 referred to Mrs Causer’s concerns about the loss of her ―A‖ share and there is the evidence that she called the meeting means that it is more likely than not that her concerns were discussed.

[57] Mr Davies, Gary Causer and his wife gave evidence that advice was then given by Mr Davies that the ―A‖ share could be reinstated and that Mrs Causer said she was not interested in having it reinstated because the farm was Gary’s. All three were cross-examined on their evidence on this issue, Mr Davies extensively, but all remained adamant that the advice about reinstatement had been given and that Mrs Causer had said she was not interested. Mr McMurchy’s evidence-in-chief was that Mr Davies had not given any advice about reinstatement of the ―A‖ share at the meeting, but under cross-examination he acknowledged that his memory was not

―the flashest these days in some respects‖ and that if Mr Davies had given that advice it had not ―come through clear to me‖. Bearing in mind that Mr Sundvick’s letter of 24 February 2000 referred to the possibility of reinstatement of the ―A‖ share and that Mrs Causer’s concerns about the loss of her ―A‖ share had given rise to the meeting, it is more likely than not that Mr Davies would have given advice about the possibility of reinstatement of the ―A‖ share at the meeting.

[58] Whether Mr Davies’ advice included reference to the need for Gary’s consent, as Mr Sundvick had mentioned in his letter of 24 February 2000, is not clear. Gary’s evidence was that he had no recollection of Mr Davies referring to the need for his consent, but that he would have been happy then for that to have occurred. Gary’s wife agreed under cross-examination that she had no recollection of any reference to Gary’s consent being required. Mr McMurchy’s evidence-in- chief was that Mr Davies had not referred to the constitution being changed ―if Gary agreed‖. Mr McMurchy said that, if Mr Davies had, ―it would have been an entirely different meeting‖. Mr McMurchy was not cross-examined specifically on this

point. Mr Davies did not suggest in his evidence-in-chief that he had referred to the need for Gary’s consent, but agreed under cross-examination that Gary was at the time ―happy to reinstate the share‖.

[59] Once Mrs Causer indicated that she was not interested in having the ―A‖ share reinstated, the meeting moved on to consider the sale of Mrs Causer’s share in Causer Farms to Gary’s wife and arrangements to enable Mrs Causer to leave her daughters legacies of $30,000 each, secured by way of a new mortgage for $90,000. Gary’s evidence was that it was Mr Davies’ idea that Mrs Causer should sell her share to Gary. Mr Davies’ evidence-in-chief was that the idea came from Mrs Causer, but he agreed under cross-examination that Gary may well have been right. Either way there was no suggestion that the idea had come from Gary or his wife.

$30,000 for each of Mrs Causer’s daughters, had come from Mrs Causer or Mr McMurchy. There was no dispute that once Mrs Causer had indicated that she did not seek to have the ―A‖ share reinstated the focus shifted to her wish to increase the legacies for her daughters. There was also no dispute that no consideration was given to the question of the value of Causer Farms or Mrs Causer’s share. Mr Davies agreed that the figure of $90,000 appeared to have been ―plucked out of the air‖ by Mrs Causer and Mr McMurchy after a brief discussion. Mr McMurchy confirmed that it was common ground at the meeting that $90,000 would be made available for Mrs Causer to use for the benefit of her daughters.

[61] There was no dispute that at the meeting the proposal was that the $90,000 would be secured by way of mortgage and repaid to Mrs Causer within five years. The evidence of Mr McMurchy and Gary was that the existing mortgage back to Mrs Causer was not discussed at the meeting, but Mr Davies was initially adamant that it had been and that he had correctly recorded the position in his file note of

1 March 2000, but when pressed further in cross-examination accepted that he may have been mistaken.

I saw Edna, Gary and Lyn [Lynne] Causer and Ian (Edna’s friend) on Wednesday the 1st of March 2000. The matter was discussed at considerable length and the following was agreed by all parties:

Edna is to transfer her one share in the company to Lyn so that Lyn and Gary will own the 100 shares 50% each, and they will have full ownership and control of the company. The consideration for the transfer of the share will be $31,200.00 so that this, together with the $58,800.00 already secured under the existing mortgage will total $90,000 – the intention being that this

$90,000.00 be applied $30,000.00 each to the three sisters. The $31,200.00 will be secured by way of variation of the existing mortgage bringing the balance to $90,000.00. The money will be paid by the 31st of May this year with a view to having the total mortgage repaid within approx 5 years.

As a further part of this package Causer Farms will do a licence to occupy in favour of Edna of the property she currently occupies, with Causer farms paying all the rates, insurance maintenance, power and telephone rental. This licence to occupy will not involve any payment, and will be for as long as Edna chooses to live there.

I also discussed with them all the need for them to do fresh wills, and Edna in particular came back a bit later and asked if I could do a will to make provision for her three daughters.

They asked me to send them out a letter explaining what we had discussed, and with drafts of the various documents, so that they may further consider the matter before the documents are signed.

[63] There was no dispute that the information in the file note relating to the consideration for the transfer of the share of $31,200 based on a balance of $58,800 under the existing mortgage was incorrect and that the intention was that the consideration should be secured by a new mortgage of $90,000.

3 March 2000 to Mrs Causer and Gary and his wife. The letter to Mrs Causer read:

3. Causer Farms Limited will execute a licence to occupy the property you are currently in to you, with Causer Farms Limited paying all rates, insurance, maintenance, power (up to $100.00 per month) and telephone charges. This licence will be for as long as you wish to remain, and we have enclosed a draft licence for your perusal.

Please note that in this matter we have agreed to act for Causer Farms Limited and that we therefore, for the purposes of this matter, suggest that you see another solicitor and obtain independent advice as to this scheme. We note that you wish to complete a fresh Will, and we will of course be happy to do this for you.

We have forwarded a letter similar to this to Gary and Lyn and await both your confirmation and theirs that the above is acceptable prior to taking this matter further.

[65] Although both letters, like his file note, referred to the ―agreement‖ reached at the meeting on 1 March 2000, Mr Davies’ evidence was that there was a

―preliminary agreement‖, ―an agreement in principle‖ or ―heads of agreement‖ which was subject to Mrs Causer obtaining independent legal advice before there was any formal agreement. In this context he did not consider that the enclosure of a draft variation of mortgage was significant because it was ―a very simple document‖. Mr Davies was unable to explain the ―huge difference‖ between the reference in the file note to payment by 31 May and the reference in the letters to payment on the death of Mrs Causer. Mr Davies acknowledged that while he had suggested that Mrs Causer should obtain independent legal advice she remained his client for the purpose of her proposed new Will.

[66] Mrs Causer must have received the letter of 3 March 2000 from Mr Davies, together with the enclosures, because her daughter Julie Antunovich dropped them off to Mr McMurchy for his advice. Mrs Antunovich’s covering note read:

It appears that the reference to ―Clause 4‖ was a reference to the draft licence

Julie has dropped into me the letter in relation to the above, and I understand you wish me to peruse these documents and comment on them in relation to what transpired at the meeting held with Grant Davies at their Maungaturoto offices.

Clause 1 – I agree that this is exactly what was discussed as regards the shareholding.

Clause 2 – I did not agree that the intention was ―that on your death‖ the mortgage will be applied equally between Gary’s sisters. As I recall Gary and Lyn [Lynne] were going to approach their Bankers or Accountant with the intention of raising a mortgage to pay out the mortgage of $90,000.00 at the earliest practicable date, and once these monies were in your hands you could then decide when you paid these funds over to your daughters. Gary

& Lyn actually stated that they would prefer to pay these monies out now and not in 15 to 20 years down the track on your death.

I suggest it would only be fair and equitable to all concerned that if they were not to pay out the monies within short period of time (say 2 months) then interest should be paid on the mortgage at bank rates to preserve the value of the capital.

Clause 3 – I suggest that the last sentence should read ―This licence will remain in existence until the date of your death‖.

Having commented on the clauses above, I suggest that the draft agreement be redone in order to reflect the above if you consider the above comments acceptable to you. Clause 3.1 needs amending, Clause 4.1 needs amending and I suggest another Clause 4.2 be added something along these lines- ―The licensee may rent the house out should she be confined to alternative accommodation as of necessity until her death or by arrangement with her or her legally appointed agent.‖

When I refer to a legally appointed agent I’m referring to someone you appoint now as your Power of Attorney to act on your behalf should your health deteriorate at any time to render you incapable of acting for your own interests (your solicitor should advise you on this).

Edna I think that Grant’s suggestion that you see another solicitor and obtain independent legal advice as to this scheme is important, and you should do this. Perhaps with the suggestions I have made here, together with your own thoughts about this agreement and your new will, everything can be sorted out.

I trust Edna that everything will end in a satisfactory and amicable conclusion for you. If you require me to explain anything in further detail please do not hesitate to contact me.

[68] Mrs Causer accepted the advice that she had received from both Mr Davies and Mr McMurchy to obtain independent advice from another solicitor. On

22 March 2000 she consulted Mr Bruce Wyber of Sellars & Co in Wellsford. Mrs Causer was taken to the meeting by her daughter Lynette and her son-in-law (Lynette’s husband). While it appears from Mr Wyber’s file note of the meeting and his evidence that Lynette and her husband attended the meeting, Lynette had no recollection of doing so or what was said at it.

[69] Mr Wyber, who therefore gave the only evidence about the meeting, said in his evidence-in-chief that Mrs Causer was concerned about the administration of her late husband’s estate and her standing in Causer Farms. He said he was advised that Mrs Causer and her son Gary owned the shares in the company and that she had agreed to transfer her share to Gary in consideration for the mortgage owed to her by the company being increased to $90,000. He was told that Mrs Causer was also to be given a licence to occupy the property she currently lived in on the farm. He was asked to act for Mrs Causer in carrying out this agreement. He said that his instructions were ―simply to implement the agreement that had been reached‖ between Mrs Causer and Gary. Mr Wyber also said that he was advised that Mrs Causer’s ordinary share had previously been converted from a class ―A‖ share with special entitlements, but he was not asked to advise on this.

Attendance with Edna Causer, her daughter Lyn and her son-in-law Rad. Edna is extremely concerned about the administration of her late husbands Estate and in particular her standing in Causer Farms Limited.

I said that I would have a look into this matter and in particular obtain some background information before we proceeded any further.

I have received instructions from Mrs Causer in relation to her affairs and in relation to Causer Farms Limited.

2000 and the 3rd March 2000 and I will reply once I have had an opportunity to consider this matter and to take further instructions from my client.

In the meantime would you please forward to me any documentation which you may be holding on behalf of my client. Would you please also provide me with a copy of the Probate in respect of her late husbands Estate.

[72] It is clear from this letter that Mr Wyber had been given copies of the letters from Coast to Coast Law dated 24 February 2000 and 3 March 2000. Under cross- examination Mr Wyber acknowledged that he would have received these letters from Mrs Causer before he wrote to Coast to Coast Law and that he would have been aware of their advice that, with Gary’s consent, Mrs Causer’s ―A‖ share might be reinstated. When asked why he did not advise her and write to Coast to Coast Law about the possibility of reinstatement, Mr Wyber first suggested that he was told that Gary had said he would not agree. Mr Wyber then said that the scope of his instructions from Mrs Causer was to give effect to the agreement that had been reached for the sale of her share. Finally, Mr Wyber agreed that the ―real reason‖ why he did not take up the possibility of reinstating the ―A‖ share was because Mrs Causer’s instructions were always on the basis that she was not interested in the administration of the farm or the loss of the ―A‖ share and that all she wanted to do was to secure a legacy for her daughters.

[73] Mr Wyber confirmed in response to questions from me that he was not asked to investigate the background as to how the ―A‖ share had lost its voting rights or take any steps to have it reinstated. After the meeting his inquiries were directed at simply verifying or establishing that the ―A‖ share had lost its voting rights. He also confirmed that he had not given Mrs Causer any advice about the possibility of rectifying the position without Gary’s consent and that he did not raise the issue in his letter to Coast to Coast Law because the main purpose of the letter was to let them know that Mrs Causer had seen him and to uplift her documentation.

[74] After a follow up letter from Mr Wyber, Mr Davies of Coast to Coast Law provided Mr Wyber under cover of a letter dated 12 April 2000 with Mrs Causer’s Wills, the memorandum of mortgage, a share transfer, a variation of mortgage, a licence to occupy and a copy of the late Mr Causer’s Probate. Mr Davies recorded in

his letter that he understood from Gary and his wife that there had been further discussions between the parties and that agreement had been reached.

[75] Mr Wyber referred the Coast to Coast letter, the mortgage and the licence to Mrs Causer and asked her to contact him. He also clarified with Mr Davies that the balance of the mortgage, which was originally $82,800, had been reduced to about

[76] Mr Wyber then met with Mrs Causer again on 3 May 2000. He recorded his meeting with her in a file note that reads:

Attendance with Edna Causer to discuss the proposed arrangement. Existing Mortgage:

I told her that I understand that the existing mortgage which the company owes to her is now approximately $24,000 and that principal reduction is of

$3000 per annum might be made to her and that she has been receiving interest. Edna advised me that she is not receiving any money.

At present she is living free of rent, rates, power and phone and also insurance. All outgoings except her toll account are paid for by the company. I wonder whether this has been offset by the payments which should have been made to her.

Edna is in a sound position. She has approximately $65,000 worth of savings and is adamant that if she does need to go into a rest home she will go into a resthome at Maungaturoto and the cost of this is approximately

If Edna enters into the arrangement she would like to specifically provide for the fact that if she is not able to live in the home for a period of say 6 months then and only in that case would Causer Farms Limited be entitled to relet the property.

That the company continue to pay all outgoings in respect of the same. Mortgage:

I stressed that she should have the right to demand early repayment of the mortgage and the right to demand interest if required.

I gather from my discussions with Edna that really there is no basis, from a practical point of view, as to how they have arrived at the figure of $90,000. Edna simply believes that she feels comfortable with each of her 3 daughters receiving the sum of $30,000 each.

Edna would like to give her daughter Julie Catherine Antovich [sic] a Power of Attorney in relation to the property and personal care and welfare.

She would like the proceeds of the $90,000 mortgage to be divided equally between her 3 daughters.

She would then like the residue of her Estate to be divided equally between her 4 children.

I discussed several other possible options with Edna in relation to her situation. I said that one option is to subdivide the house property off the main farm and try to have this property transferred to her name alone. Edna did not want to do this.

[78] Following his meeting with Mrs Causer, Mr Wyber wrote to Mr John Chapman of Bavage & Chapman, the accountants for Causer Farms, seeking the most recent set of financial accounts for the company in order to check the arrangements in place for repayment of the mortgage. He also sent a progress report to Mr Davies of Coast to Coast Law.

[79] By letter dated 12 May 2000 Mr Davies sent Mr Wyber a copy of the certificate of title, showing where Mrs Causer’s house was located, to be put with the licence to occupy and confirmed that the balance outstanding under the mortgage was $24,595 as at 1 June 1999 with a further $3,000 paid off since that date.

[80] On 15 May 2000 Mr Wyber called Mr Chapman who said that he would drop off the last 10 years’ accounts for the farm. Mr Chapman also advised Mr Wyber that when the late Mr Causer died he had a current account balance of $58,800 that at present stood at approximately $17,700. Mr Chapman told Mr Wyber that Causer Farms was required to pay FBT (Fringe Benefit Tax) and charged rent and outgoings against Mrs Causer’s current account balance. Mr Chapman also said that he was concerned about the proposed way the $90,000 payment to Mrs Causer was to be documented because of the need to avoid the erosion of the lump sum and to protect the company’s tax position. Mr Wyber recorded his telephone conversation with Mr Chapman in a file note dated 15 May 2000.

[81] Mr Chapman explained his reference to FBT in his evidence in chief, pointing out that the legislation, which was introduced in 1985, meant that if a shareholder or employee received a benefit from a company FBT was payable. Living in a house owned by the company and not paying rent and associated costs would be subject to FBT. To avoid this, a market rental allowance was charged through the shareholder’s current account, which happened in Mrs Causer’s case. This was still the case with 95% of farming companies where the shareholders live in a company house. Under cross-examination Mr Chapman acknowledged that the question of the valuation of the ―A‖ share was not mentioned in Mr Wyber’s file note, but otherwise was not questioned about the conversation or his explanation of the reference to FBT.

[82] Mr Wyber met with Mrs Causer again on 14 August 2000. He recorded his meeting in a file note that read:

I went through the accounts with her and explained that the mortgage balance now in fact probably standing at $7,000.00.

The company had been offsetting the outgoings for the property against the current balance secured under the mortgage.

Edna was not aware of this. She adamant that her husband always maintained that she would have the right to live in the property for the remainder of her life free of rent and outgoings.

[83] Following this meeting Mr Wyber wrote to Mr Davies of Coast to Coast Law by letter dated 22 August 2000 in the following terms:

I refer to my earlier correspondence and advise that my client is agreeable in principle to the proposal whereby she transfer her one share in Causer Farms Limited (―the company‖) to your clients in return for the sum of $90,000.00.

The position of the existing mortgage, being mortgage number 171216.2, between my client and the company is different to that envisaged by you and your clients.

The sets of financial accounts which I have been provided with shows that as far back as 1978 that the principle sum secured under the mortgage stood at

In the 1996/97 set of accounts the company transferred the mortgage from a fixed liability to my client’s current account and has since this time offset outgoings, tax and rent against the principle sum.

The reasons for this being I gather was for the company to avoid pay fringe benefit tax. The financial effect for my client has been that the amount secured under the mortgage, has regularly been reduced by approximately

I estimate that the balance owing to my client according to the companies accounts at the end of the 1999/2000 year will be approximately $7,000.00.

My client was unaware of the position and had always been of the view and understanding that she was to have the use of the dwelling in which she resides free of rent and outgoings.

If the existing mortgage is simply varied to record an increased principle sum the company will most likely continue to treat the mortgage balance as part of my client’s current account balance and continue to offset any outgoings associated with the dwelling.

If your clients wish to proceed with the transfer of the share it would need to be on the basis that:

2. That any fringe benefit tax associated with this will need to be paid by the company and would not be offset against the amount owing to my client.

3. That the sum of $90,000.00 being the purchase price of the one share, be secured by way of a new mortgage, rather than by way of a variation.

4. That consideration now be given as to whether my client be refunded the $58,800.00.

[84] Mr Wyber sent a copy of the letter to Mrs Causer explaining that the question as to how the company had been dealing with the mortgage balance needed to be dealt with before proceeding any further. There was no suggestion that Mrs Causer disagreed with Mr Wyber’s letter of 22 August 2000, particularly its advice that she was ―agreeable in principle‖ to the transfer of her share in Causer Farms to Gary for

2000, under cross-examination Gary did not recall receiving or reading the letter. It appears, however, that Mrs Causer may have discussed the letter with Gary because in a file note dated 30 August 2000 Mr Wyber recorded a further discussion with Mr Chapman in the following terms:

He said that my letter had inflamed the situation. I told him that this was a load of rubbish and that we were simply covering the issues which had been raised and which needed to be addressed.

The letter was not intended to, nor was it deflammatory [sic]. It was simply setting out the position as it stood.

Apparently Edna Causer had gone home and spoken to Garry and the whole situation had flared up. I said that there was nothing that I could do about that.

We spoke about the arrangement and I indicated to him that I have no doubts that the figure of $90,000 had been plucked out of the air.

[86] Under cross-examination Mr Chapman said that he presumed that he had been told by Gary that the letter had inflamed matters between Gary and his mother,

but he had no recollection of a conversation in 2000. Under cross-examination he confirmed that, apart from the reference to the figure of $90,000 having been

―plucked out of the air‖, there was no reference to the valuation of the ―A‖ share. Gary disputed that there had been any flare up between himself and his mother. Gary also said that his mother ―was happy with the situation‖. Mr Davies acknowledged in cross-examination that he had probably discussed Mr Wyber’s letter of 22 August 2000 with Gary and Mr Chapman, but he did not think that the letter had inflamed the situation and he had no recollection of hearing that from Gary.

[87] As Mr Wyber had not received a reply from Coast to Coast Law to his letter of 22 August 2000, he wrote to Mrs Causer on 24 October 2000 in the following terms:

I advise that I have received no reply from Cost [sic] to Coast Law regarding my letter dated the 22nd August 2000.

The situation from your point-of-view is unsatisfactory and apart from now having a clear picture of exactly what the position is regarding your shareholding in the Company, little progress has been made to formalise the arrangement initially proposed.

Without receiving any form of reply from Coast to Coast Law, I am unable to progress this matter at this stage any further for you.

May I suggest that you discuss the matter with Gary & Lyn [Lynne] and see whether they have had an opportunity to instruct Grant Davies further.

I take this opportunity to enclose a note of my costs for my attendances to date.

[88] Mr Wyber acknowledged in cross-examination that he would not have suggested to Mrs Causer that she discuss the matter with Gary and his wife if there had been any suggestion that they were trying to bully her or use undue influence.

[89] On 7 November 2000 Mr Davies of Coast to Coast Law wrote to Mr Wyber in the following terms:

Further to earlier correspondence and discussions, it would appear as if agreement has been reached in this matter. I write now to confirm details of

the agreement as I understand it, and this largely corresponds with my letter to the parties, of the 3rd of March 2000.

2. Causer Farms Ltd will execute a fresh mortgage in favour of your client in the sum of $90,000.00. This mortgage will be interest free and repayable upon the death of your client. The existing mortgage will be allowed to be ―eroded‖ in the present manner, until it reaches a nil value;

3. Causer Farms Ltd will execute a licence to occupy the property Edna is currently in, to her, with Causer Farms Ltd paying all the rates, insurance, maintenance, electrical power up to $100.00 per month and telephone rental charges. This licence will be for a long as your client wishes to remain in the property. I enclose draft licence for your perusal.

Would you please confirm with me that the above is acceptable to you and your client, and we can then proceed with the necessary documentation.

[90] Mr Davies agreed under cross-examination that, instead of addressing the points raised by Mr Wyber in his letter of 22 August 2000, he was putting forward a

―new deal‖. Mr Davies also agreed that everything he understood about what might or might not have been agreed came from Gary or his wife. Gary, on the other hand, did not accept that there had been ongoing discussions with his mother. He denied that there was any private agreement with his mother. It was not put to him in cross- examination that he had influenced or unduly influenced his mother to reach agreement. He believed that the agreement was reached between the lawyers.

[91] Following a further discussion between Mr Wyber and Mr Davies, Mr Wyber sent a copy of Mr Davies’ letter of 7 November 2000 to Mrs Causer and met with her on 22 November 2000. She came with her daughters, Julie Antunovich and Lynette Causer. Mr Wyber’s evidence was that the daughters expressed anger and concern that Gary appeared to have received the family farm and was doing well from that while Mrs Causer was left with very little. Mr Wyber said, however, that the fact remained that ―we were now negotiating in the context of Edna [Mrs Causer] holding one share having no greater worth than any other in the company‖.

confused by the previous meeting and so he again went through the proposed arrangement with her. She instructed him to do as best as could be done in the circumstances she was now in. Mr Wyber recorded this meeting with Mrs Causer in an undated handwritten file note that read:

Attendance with Edna and her friend Lois from Waipu. We went through the whole scenario again and Edna was as pleased as she could be with the proposal. She is no longer living in the house on the farm. She will come back next week to finalise remaining documents.

Under cross-examination Mr Wyber said that, while Mrs Causer was not ―completely

satisfied‖ and still had concerns, she wanted to see a resolution more than anything.

29 November 2000 that he had met with Mrs Causer on two occasions and that ―in principle [she] is agreeable to transferring her one share in Causer Farms Ltd‖. He also suggested that there be a new registered mortgage, with an agreed priority amount in the first mortgage, securing a $90,000 loan repayable on sale of the property, 12 months’ written notice by Mrs Causer or within six months of her death. Confirmation that there would be no rental payment for the house under the occupation licence was sought.

[94] Mr Davies replied on 5 December 2000 indicating agreement with the registered mortgage, priority under a bank mortgage and repayment of the loan within six months of Mrs Causer’s death, but not on the other events. Mr Davies confirmed that there was no question of Mrs Causer paying any rent under the licence.

[95] After reporting to Mrs Causer and taking her further instructions, Mr Wyber advised Mr Davies in a ―without prejudice‖ fax dated 19 December 2000 that she accepted a mortgage of $90,000 on the basis that it was repayable within six months of her death and that once the mortgage priority issue was resolved he would prepare a new mortgage.

mortgage, powers of attorney and a draft will for Mrs Causer. As Mrs Causer had left the farm property, the occupation licence was no longer needed.

[97] Mr Wyber met with Mrs Causer and a friend on 26 April 2001 on execution of the documentation, including her Will, a Deed of Agreement (the Deed of Acknowledgment) between herself, Gary and Causer Farms Ltd, and a share transfer. The Deed and mortgage were subsequently executed by Gary and Causer Farms. The previous second mortgage was discharged. Mr Wyber reported to Mrs Causer on 9 July 2001 that all matters had been completed.

[98] Under her new Will dated 26 April 2001 Mrs Causer appointed Gary and her three daughters as executors and trustees. After leaving her personal effects to her daughters and $1,000 each to her grandchildren, Mrs Causer left $30,000 to each of her daughters from the $90,000 mortgage over Causer Farms repayable within 12 months of the date of her death. The residue of her estate was also left to her daughters. In clause 7 of her Will Mrs Causer recorded that: she had been fully advised of the provisions of the Family Protection Act 1955; she had given careful consideration to her family responsibilities; she was of the opinion that the distribution of her estate in terms of her Will was just, fair and equitable in all the circumstances; and adequate provision had been made for Gary during her lifetime.

[99] In response to questions from me, Mr Wyber confirmed that he acted as Mrs Causer’s lawyer from March 2000 through to May 2001, when she signed the agreement for the sale of her share, and that throughout that period he was giving her independent legal advice on the matters she had consulted him on. Mr Wyber also confirmed that throughout that period he was satisfied that Mrs Causer appreciated and understood the advice that he was giving to her and that he had no concerns about her ability to give instructions and receive advice. In particular, Mr Wyber was satisfied that Mrs Causer knew what she was doing when she signed the Deed of Acknowledgment and that it was in her best interests to do so.

[100] Mr Wyber also told me that he believed that Mrs Causer was ―under pressure‖ from all her children to get things resolved. He did not consider that she was under pressure from any one of her children in particular.

[101] The claim by Mrs Causer against Gary and Causer Farms alleging breach of fiduciary duty, undue influence and unconscionable bargain was filed on

19 November 2008. No evidence was adduced at the hearing to explain why Mrs Causer did not bring her claim making these allegations and challenging the validity of the Deed dated 2 May 2001 for over seven years.

[102] The delay in bringing the proceeding meant that Mrs Causer herself was unable to give evidence. It also meant that there was no evidence from Mr Binsted about the events of 1993-1994. His files for that period were not available and there was no contemporary evidence about the valuation of the ―A‖ share. The recollections of all witnesses were affected by the passage of time. The contemporary documents were therefore the best evidence of relevant events.

(a) At all times it was the intention of the late Mr Causer and Mrs Causer that Gary should inherit the farm. This intention was confirmed by the steps taken to set up Causer Farms, Gary’s shareholding in the company and the provisions of their Wills. There was never any suggestion that their daughters should have any interest in the farm or the company.

(b) It was the intention of the late Mr Causer and Mrs Causer that their daughters should receive pecuniary legacies of $10,000 each. That figure remained constant from 1976 until 2001 when Mrs Causer increased it to $30,000 each in the Will she made after she sold her share to Gary’s wife.

(c) Gary worked on the farm from 1967 and, after the death of his father in 1980, assumed principal responsibility for running the farm. While the value of the farm would have increased over the years as a result of the rise in land value, the capital value would also have increased

partly as a result of the efforts of Gary. Mr Grace accepted in the course of his closing submissions for Mrs Causer that she would have reduced the amount payable for the share in 2000-2001 to reflect Gary’s contributions to the value of the farm over the 30 year period and that there was no evidence before the Court to assist with the calculations which would have been involved in valuing Gary’s contributions.

(d) After the death of her husband, Mrs Causer continued to live on the farm until 2001 and continued to receive an income, as both a shareholder and director, from Causer Farms.

(e) The ―A‖ share, with its 30,000 voting rights, conferred effective control of Causer Farms first on the late Mr Causer and then, on his death, on Mrs Causer.

(f) The voting rights to the ―A‖ share lapsed by 1 July 1997. Although there was evidence in the form of the Binsted Davies & Co Trust Account Statement of 26 October 1994 that Mrs Causer did not want to give up the ―A‖ share, there was no evidence from Mr Binsted or Mrs Causer to explain her instructions further or what steps, if any, were contemplated at the time.

(g) Mrs Causer’s concern about her ―A‖ share resurfaced in early 2000 when she saw Mr Sundvick who provided her with the advice about the possibility of rectifying the position with Gary’s consent. This led to Mrs Causer consulting Mr Ian McMurchy and arranging for the meeting on 1 March 2000. There is no doubt that at this time Mrs Causer knew that the ―A‖ share had lapsed.

(h) While those who attended the meeting had differing or incomplete recollections of what transpired and Mr Davies’ file note was inaccurate in one respect, it was more likely than not that Mrs Causer’s concerns were discussed and advice was given about the

possibility of reinstatement of the ―A‖ share. There is little doubt that, once Mrs Causer had indicated that she was not interested in having the ―A‖ share reinstated, agreement was reached, at least in principle, that Mrs Causer would transfer the share to Gary’s wife and that to enable Mrs Causer to leave her daughters legacies of $30,000 each there would be a new mortgage of $90,000.

(i) Before any agreement was finalised, however, Mr Davies and Mr McMurchy quite properly recommended that Mrs Causer should take independent legal advice. Mr Davies’ letter to Mrs Causer stated explicitly that she should ―obtain independent advice as to this scheme‖. This statement, together with the subsequent negotiations which occurred, confirmed that the ―agreement‖ at the meeting on

(j) Acting on the advice of Mr Davies and Mr McMurchy, Mrs Causer obtained independent legal advice from Mr Wyber, who acted for her from March 2000 until she signed the Deed of 2 May 2001. There is also little doubt that throughout this period she in fact received independent legal advice from Mr Wyber who conducted a course of correspondence, and had discussions, with Mr Davies and Mr Chapman, the accountant for Causer Farms, to obtain background information and to negotiate the terms of the Deed. There was no suggestion that Mr Wyber was hindered in any way from obtaining information or that he was prevented from raising any matter with those representing Gary and Causer Farms, including the possibility of reinstating the ―A‖ share or having Mrs Causer’s share valued. While Mr Wyber may have believed that his instructions were limited to negotiating the terms on which Mrs Causer’s share was to be transferred to Gary’s wife, there was no reason why he could not have given Mrs Causer advice about the reinstatement or valuation of the share or raised the issue with Mr Davies. Mr Wyber did not hesitate to raise other issues about the proposed agreement between

Mrs Causer and Gary in his correspondence with Mr Davies. Mr Wyber’s file note of 3 May 2000 recorded that he had discussed the absence of any basis for the figure of $90,000 with Mrs Causer who was ―comfortable‖ with her daughters receiving $30,000 each.

(k) The reason why Mr Wyber did not raise the question of reinstatement of the ―A‖ share was because Mrs Causer’s instructions were to secure the legacy for her daughters and she was no longer concerned about the share. Mr Wyber’s acceptance under cross-examination that this was ―the real reason‖ made sense, as did his evidence that Mrs Causer sought a resolution because of the pressure she was under from all of her children.

(l) There is no reason to suppose that during the period up until she signed the Deed of 2 May 2001 Mrs Causer was not able to give instructions and receive advice. Mr Wyber had no doubt that the agreement was in her best interests at the time.

(m) There was no evidence that Gary did in fact exercise any undue influence over his mother. The allegation was not put to him in cross- examination. On the contrary, the evidence was that she was happy with the agreement which she entered into. Mr Wyber had no hesitation in suggesting that she discuss the matter with Gary and his wife, Lynne. As he acknowledged, he would not have made this suggestion if he had been concerned that they were trying to bully her or use undue influence.

2001, particularly clause 7, that she had given careful consideration to the question of the fairness of the distribution of her estate as between Gary and her daughters.

of Causer Farms or the ―A‖ share at any time before the Deed was executed. It was for this reason that expert evidence was adduced at the hearing as to the value the ―A‖ share would have had if it had still existed with its 30,000 voting rights in March 2000. There was no suggestion that prior to the execution of the Deed anyone was aware of the subsequent valuations. Mr Grace acknowledged in the course of his closing submissions for Mrs Causer that there was no evidence before the Court as to what she might have done then if she had been told that the share was worth $214,000.

[104] For Mrs Causer, Mr Gary McLoughlin of WHK Corporate Finance, a division of WHK (NZ) Limited, a specialist litigation services consultant, with wide experience in share and business valuation, gave independent expert evidence as to the ―fair value‖ of the ―A‖ voting share in Causer Farms as at 1 March 2000 and as at the date of the hearing on the assumption that it still existed. In his valuation report Mr McLoughlin distinguished between the concepts of ―fair value‖, which applies where the parties are not free to go to market, and ―fair market value‖. Adopting a net asset approach, Mr McLoughlin, by reference to the reported financial positions of Causer Farms as at 31 May 2000 and 31 March 2009, assessed this value for all of the shares at 1 March 2000 as $855,000 and at the date of the hearing as $2,200,000. Applying the principles from the decisions of the Courts in Holt v Holt, Mr McLoughlin ascribed 25% to 30% of the overall net asset value of Causer Farms to the ―A‖ class share with the result that the value of the share in March 2000 would have ranged from $214,000 to $256,000 and at the date of the trial would have ranged from $550,000 to $660,000.

[105] Mr McLoughlin also calculated that, after allowing for the ―time-value-of- money‖ and other offsets, the effective net purchase price based on the agreed price of $90,000 ranged from $1,433 to $27,791.

[106] Mr McLoughlin disagreed with the evidence of Mr Chapman for Gary because he had proceeded on the basis that Mrs Causer’s share had no voting rights.

Mr McLoughlin also disagreed with the valuation evidence of Mr Jai Basrur of Christmas Gouwland Basrur Consulting Limited, the independent expert called for Gary and Causer Farms, essentially on the ground that in calculating a premium of

3% to 5% he had ignored Holt v Holt. In Mr McLoughlin’s opinion the ―A‖ share with 30,000 votes gave ―absolute unfettered complete control‖, whereas the remaining 99 shares had no voting rights and could never be sold. The ―A‖ class shareholder could have altered the constitution of the company to issue a further 300

confirmed that in his view the fair value of the ―A‖ share today would have been

(a) There was no evidence that the late Mr Causer or Mrs Causer had ever used their voting rights;

(b) If they had done so in breach of their duties as directors to minority shareholders, they would have run the risk of litigation;

(e) Gary was under no obligation to pay $660,000 and might have decided to run the risk that his mother would do what she could; and

[108] Mr McLoughlin explained that his valuation endeavoured to follow the approach in Holt v Holt which involved a hypothetical negotiation between a notional vendor and a purchaser uninfluenced by purely sentimental matters and any questions of personal impecuniosity or affluence. He did not consider that there was any basis for distinguishing Holt v Holt on the ground that it was a relationship

property case, but accepted that the upper range of the premium in the present case should be 25% rather than the 30% he had used.

[109] In response to my questions, Mr McLoughlin confirmed that if it were ultimately decided that Mrs Causer had accepted the outcome in 1997, namely that the ―A‖ share should have passed to Gary, her one share on 1 March 2000 would have been valued at $8,550. The agreed payment of $90,000 would have been

[110] Although not called as an independent expert witness, Mr Chapman, accountant for Gary and Causer Farms, expressed the following views on the value of the shares in Causer Farms:

(b) An ―A‖ share only gives the right to management. The ordinary shares stand equal to the ―A‖ share in distribution of capital and/or profits. It follows the ―A‖ share has no greater rights than the ordinary shares on liquidation;

(c) Unlike a business valuation of an ongoing concern based on future revenue streams where the ―A‖ share would have a higher value, a farming business is always valued on a net tangible asset or notional liquidation basis because farming profits are invariably low compared with net asset backing. So in a farming company we have to ask what is the real value of an ―A‖ share compared with ordinary shares apart from the fact an ―A‖ share controls the acquisition of other major assets, and the sale of the farm itself;

(d) In the event that the property were sold or the shareholders were to disagree over management, the ordinary shareholders could force a sale and would receive 99% of the sale proceeds. In these circumstances it is hard to imagine a third party would pay much

[111] Under cross-examination Mr Chapman acknowledged that the ―A‖ shareholder, with power to change the articles of association, could change the share structure, issue more capital or appoint new directors, but only as long as the changes did not impinge on the rights of the other shareholders. He also explained that when he said the ―A‖ share gave the right to ―management‖ he also meant the right to ―control‖.

[112] For Gary and Causer Farms, Mr Jai Basrur, a director of Christmas Gouwland Basrur Consulting Limited, with wide experience in corporate finance and valuation advice, gave independent expert evidence as to the ―fair value‖ of the ―A‖ share in Causer Farms as at 31 March 2010 on the basis that it was held by Mrs Causer. Mr Basrur assessed the fair value of the ―A‖ share as at that date to be in a range of

(a) Fair value is ―the price that fairly compensates an owner who was involuntarily deprived of the benefit of his/her ownership interest where there is neither a willing buyer nor a willing seller‖;

(b) The ―A‖ share in Causer Farms was entitled to the same level of financial benefits as ordinary shares, it was not transferable by Mrs Causer and it would cease to have any special voting rights over time. The late Mr Causer’s position as Governing Director was not transferable or associated with the ―A‖ share. While the special voting rights would have been of some benefit to the late Mr Causer, no evidence has been provided that they were ever exercised.

(c) There were substantial differences between Holt v Holt and the present case. In Holt v Holt the husband managed the farm and had power to transfer the ―A‖ share. Like the late Mr Causer, the husband had power to derive benefits from owing the ―A‖ share which were not available to Mrs Causer;

(d) The pro-rata value of each of the 100 shares represents its control value. Ownership of the ―A‖ share would enable ordinary shareholders to overcome any perceived discount associated with non- ownership of the share. The benefit to the ordinary shareholders from owning the ―A‖ share is therefore the value of the discount that their shares currently suffer in totality, and which they stand to overcome by owning or controlling the ―A‖ share;

(e) Empirical studies indicate that premiums associated with differential voting rights vary from 5% to 10%, but in those cases the shares were transferable and potentially capable of yielding enduring benefits. In Estate of Simplot v Commissioner of Internal Revenue2 the US Ninth Circuit Court concluded that there should be no voting premium attached to superior voting rights; and

(f) In the present case it was reasonable to include a premium ranging from 3% to 5% to reflect the control associated with the voting rights in the ―A‖ share and the implied discount associated with the ordinary shares. This recognised the lack of transferability and the limited period over which any discount could potentially exist.

[114] In response to my questions, Mr Basrur explained that the difference between his assessment and that of Mr McLoughlin arose because, whereas Mr McLoughlin

_{adopted a notional or hypothetical ―fair market value‖ on
the basis of Holt v Holt, he}

2 Estate of Simplot v Commissioner of Internal Revenue [2001] USCA9 316; 249 F 3d 1191 (9th Cir 2001).

(Mr Basrur), adopted ―a fair value‖ that took into account the actual circumstances of the actual ―A‖ shareholder and the other shareholders in this particular case, on the basis that Holt v Holt should be distinguished on the grounds that it used ―a fair market value‖ for the valuation of the husband’s ―A‖ share in a relationship property matter.

[115] Mr Basrur was cross-examined at length on his valuation and the differences between his approach and that of Mr McLoughlin. He was questioned closely on the similarities between Holt v Holt and the present case, particularly the ownership features of the ―A‖ share which affected its value, the need to disregard limitations on the transferability of the share and the age and life expectancy of the shareholder, the ability to alter the articles of association and to control and manage the company. But Mr Basrur remained adamant that the circumstances of Holt v Holt, where ―a fair market value‖ was justified, should be distinguished from the present case where in order to determine ―a fair value‖ the practical situation for the parties in question was relevant.

[116] The questions whether and, if so, how the differences in valuation approach between Mr McLoughlin and Mr Basrur are to be resolved in this case are addressed later in the judgment.

[117] The factual background relating to the Causer family and the incorporation of Causer Farms is largely undisputed on the pleadings. To the extent that there were issues, they have been resolved by the evidence summarised in the earlier section of the judgment.

(a) The purpose of the incorporation of Causer Farms was not only to avoid death duties but was also to assist in the transfer of the farm to Gary over time. There was no ―arrangement‖ by which the late

Mr Causer and Mrs Causer held the ―A‖ share in order to be able to determine the interest in the farm of their daughters.

(b) It was not established that Mrs Causer did not know or understand the legal implications of failing to reregister Causer Farms under the Companies Act 1993. There was evidence in the Binsted Davies & Co Trust Account Statement of 26 October 1994 that she had received advice and given instructions and there was evidence in the letter dated 24 February 2000 from Mr Sundvick that she was subsequently concerned about the loss of the ―A‖ share, but in the absence of any evidence from Mrs Causer herself or Mr Binsted it is not possible to be satisfied on the balance of probabilities that she did not know or understand the position.

(c) After the death of his father, Gary assumed principal responsibility for the farm business. Mrs Causer continued to be involved, but to a gradually diminishing extent over time.

(d) Mrs Causer had independent legal advice in relation to the Deed of Acknowledgment dated 2 May 2001 from her own lawyer, Mr Wyber, who acted for her from March 2000. Whether that advice was adequate and, if not, whether its inadequacies provide any basis for Mrs Causer’s claims against Gary and Causer Farms are considered later.

(e) Gary agreed to pay $90,000 for the transfer of the share to him within six months of the death of Mrs Causer. Whether that consideration was inadequate in the circumstances is also considered later.

(f) Gary did not in fact exercise any undue influence over his mother in respect of the agreement. In the absence of any cross-examination of Gary on this issue and in the absence of any evidence from

[119] Mrs Causer’s first cause of action is against Gary for breach of fiduciary duty. At issue on the pleadings are:

(a) whether Gary in his role as a director of Causer Farms owed a fiduciary duty to his mother to acquire the share at a value which reflected the value of the information known to him;

―arrangement‖, to act in good faith and in her best interests, to act honestly, not to act for collateral purposes, and not to act so as to place himself in a position in which his personal interests did or might conflict with his mother’s interests;

(c) if so, whether Gary was in breach of his duties in acquiring his mother’s share for no value or at an undervalue, in failing to exercise due skill and care to take all necessary steps to reregister Causer Farms under the Companies Act 1993, and in failing to ensure adequate and sufficient information was provided to her to protect her position; and

(d) if so, whether as a result Mrs Causer lost the ―fair value‖ of her single share in Causer Farms and the ability to confer on her daughters a benefit corresponding to that received by Gary.

[120] Mrs Causer’s second cause of action is against Gary for undue influence. At

(a) whether Mrs Causer placed trust and confidence in Gary in relation to the financial management of the farm and Causer Farms;

(b) whether Gary initiated and brought about the transaction recorded in the Deed of Acknowledgment of 2 May 2001;

(c) whether Mrs Causer entered into the Deed of Acknowledgment and transferred her share in Causer Farms to Gary in reliance on his advice that the transaction was beneficial to her and to Causer Farms; and

(d) whether the transaction entered into as a result of the alleged undue influence has caused loss to Mrs Causer.

[121] Mrs Causer’s third cause of action is against Gary for an unconscionable

(c) whether Gary took advantage of his mother’s lack of commercial knowledge or expertise and reliance on him in causing and/or accepting the transfer of the share on the basis that it rated equally with the other 99 shares; and

(d) whether, as a result of the transfer of the share, Gary acquired a significant asset, being the entire shareholding of Causer Farms for no or inadequate consideration.

[122] Mrs Causer seeks relief in the form of a payment representing the ―fair value‖ of the share, an order setting aside the transaction recorded in the Deed of Acknowledgment, general damages and costs.

[123] In addition to denying the allegations pleaded by Mrs Causer, which give rise to the issues identified, Gary pleads that:

(a) Even if he was in a fiduciary relationship with his mother (which he denied), there was no breach of his fiduciary duties;

(b) In the event that there was no or inadequate consideration (which he denied), the transfer was in accordance with the wishes of Mrs Causer and he was not under an equitable obligation to pay adequate or any consideration.

[124] In the course of the hearing it became apparent that counsel were in general agreement as to the legal principles applicable to the three pleaded causes of action and that the issues between the parties arose in the context of the application of the legal principles to the facts of this case. It also emerged that there were two particular issues that would have a significant impact on the case, namely whether Mrs Causer had obtained adequate independent legal advice from her lawyer, Mr Wyber, and whether there was any basis for requiring Gary to have accepted in

2000 that he should have paid more for Mrs Causer’s share in Causer Farms. I therefore turn to consider each of the pleaded causes of action in turn before considering separately the issues of independent legal advice and the value of Mrs Causer’s share.

[125] For Mrs Causer, Mr Grace submitted on the basis of the decisions in Coleman v Myers, Thexton v Thexton and Chirnside v Fay4 that Gary owed his mother a fiduciary duty not to acquire her share in Causer Farms without telling her that the share had lost its value as an ―A‖ share and inviting her to take legal advice before the agreement reached at the meeting on 1 March 2000. Mr Grace relied in

_{particular on the decision in Thexton v Thexton which concerned
the interpretation}

4 Coleman v Myers [1977] 2 NZLR 225 (CA); Thexton v Thexton [2002] 1 NZLR 780 (CA); and

and application of s 149 of the Companies Act 1993. Mr Grace submitted that, as Gary had information known to him in his capacity as a director of Causer Farms, namely that the ―A‖ share had lapsed, he was obliged to abstain from acquiring the share other than for ―fair value‖.

(1) If a director of a company has information in his or her capacity as a director or employee of the company or a related company, being information that would not otherwise be available to him or her, but which is information material to an assessment of the value of shares or other securities issued by the company or a related company, the director may acquire or dispose of those shares or securities only if,—

(a) In the case of an acquisition, the consideration given for the acquisition is not less than the fair value of the shares or securities; or

(b) In the case of a disposition, the consideration received for the disposition is not more than the fair value of the shares or securities.

(2) For the purposes of subsection (1) of this section, the fair value of shares or securities is to be determined on the basis of all information known to the director or publicly available at the time.

(3) Subsection (1) of this section does not apply in relation to a share or security that is acquired or disposed of by a director only as a nominee for the company or a related company.

(4) Where a director acquires shares or securities in contravention of subsection (1)(a) of this section, the director is liable to the person from whom the shares or securities were acquired for the amount by which the fair value of the shares or securities exceeds the amount paid by the director.

(5) Where a director disposes of shares or securities in contravention of subsection (1)(b) of this section, the director is liable to the person to whom the shares or securities were disposed of for the amount by which the consideration received by the director exceeds the fair value of the shares or securities.

[127] In Thexton v Thexton the Court of Appeal held that the policy behind s 149 was ―abstain or pay fair value‖. If a director had, as a director, information material to the value of the share which was not generally available, he or she could only deal in those shares at a fair value. This obligation did not cease because the information was disclosed to the other party to a transaction, nor if the parties willingly agreed to a price other than the fair value. But the Court of Appeal made it clear at [13]-[14] that in terms of s 149(1) the obligation did not arise if the information was publicly available because then the information was available to the director otherwise than through his or her position with the company. Publicly available information will not be confidential information.

[128] There are two fundamental difficulties for Mr Grace in seeking to impose the obligation under s 149(1) on Gary:

(a) The fact that the ―A‖ share had lost its value in 1997 was publicly available information discoverable from a search of the Register of Companies. It was not confidential information known only to the directors of Causer Farms.

[129] As there was no suggestion that Gary had any other information in his capacity as a director material to an assessment of the value of the shares in Causer Farms, Mrs Causer’s claim based on the application of s 149 of the Companies Act

1993 must fail. The absence of any confidential information distinguishes her case from Thexton v Thexton and Coleman v Myers.

[130] Mrs Causer’s broader claim of breach of fiduciary duty depended on establishing a fiduciary relationship between Gary and herself, fiduciary duties arising from that relationship and breach of those duties. There was no dispute that a fiduciary relationship may arise in the context of a closely-held family company between a director and shareholder when the director acquires shares from a shareholder or sells shares to a shareholder while in possession of material

information about the value of the shares which is not disclosed to the shareholder: Coleman v Myers, Thexton v Thexton5 and Andrew S Butler (ed) Equity and Trusts in New Zealand.6 There was also no dispute that a fiduciary relationship may arise outside the established categories of fiduciary relationship when one party is entitled to place trust and confidence in the other not to act in a way which is contrary to the first party’s interests: Chirnside v Fay at [80].

[131] In the present case, while the relationship between Gary and Mrs Causer arose in the context of a closely-held family company, it did not involve the acquisition of shares by a director from a shareholder while the director was in possession of undisclosed material information about the value of the shares. Here both Gary and Mrs Causer were directors of Causer Farms and both possessed the same information about Mrs Causer’s share in the company, namely that it was no longer an ―A‖ share. No question of any ―information asymmetric assessment‖ was required: cf Thexton v Thexton (CA) at [23]. The decisions in Coleman v Myers and Thexton v Thexton (HC) relied on by Mr Grace are therefore distinguishable.

[132] Similarly, this is not a case where a fiduciary relationship should be recognised on the basis that Mrs Causer was entitled to place trust and confidence in Gary not to take advantage of her by acquiring her share in Causer Farms without telling her that it lost its value as an ―A‖ share. Gary was not in a position to take advantage of his mother because:

(c) she had the opportunity to seek to have the ―A‖ share reinstated or to have her share valued on the basis that it was an ―A‖ share before she

6 Andrew S Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington,

(d) she had the benefit of independent legal advice before she executed the Deed of Acknowledgment. The issue whether the advice was adequate is considered later in the judgment.

[133] As Mr MacLean submitted for Gary, if the ―A‖ share had been reinstated and if Mrs Causer had sought to exercise her voting rights to amend the constitution of Causer Farms to confer benefits on her daughters, other issues might well have arisen, including the possibility of claims by Gary against Mrs Causer for breach of her fiduciary duties to him or for the court ordered winding up of the company on the basis of either oppression (under s 174 of the Companies Act 1993) or the just and equitable ground (under s 241(4)(d) of the Companies Act). If Mrs Causer had asked Gary to pay $214,000 for the reinstated ―A‖ share, it is unlikely that he would have acquired it. Bearing in mind the intention of the late Mr Causer and Mrs Causer that Gary should inherit the farm, implemented by the provisions of Mrs Causer’s Wills relating to the ―A‖ share, there is no reason to suppose that Mrs Causer would have considered it necessary to proceed with its sale prior to her death. The evidence indicates that she was content to reach agreement on a sale price for the share which enabled her to increase the legacies to her daughters significantly. The issue of the value of Mrs Causer’s share is also considered later in the judgment.

[134] In the circumstances of this case, which include my later findings on the issues of the adequacy of the legal advice obtained by Mrs Causer and the value of her share in Causer Farms, no fiduciary relationship was established between Gary and Mrs Causer under which he owed her any relevant fiduciary duties. This cause of action therefore fails.

[135] For Mrs Causer, Mr Grace submitted on the basis of the decisions in Royal

Bank of Scotland Plc v Etridge (No. 2) and Attorney-General for England & Wales v

_R7 _{that the sale of the
share should not be allowed to stand because Gary, who had}

7 Royal Bank of Scotland Plc v Etridge (No. 2) [2002] 2 AC 773 (HL) at [9]-[11] and [13]-[19]; and

the capacity to influence his mother, did so by unfairly persuading her that the sale was beneficial to her when it was not. Mr Grace submitted that Mrs Causer placed trust and confidence in Gary and entered into the Deed of Acknowledgment and transferred the share to him in reliance on his advice that the transaction was beneficial to her and to Causer Farms.

[136] There was no dispute that a transaction may be set aside on the basis that it was the result of the undue influence of one person over another. Certain categories of relationship may invite a presumption that one person had influence over another. In other circumstances it will have to be positively demonstrated. Proof that a complainant placed trust and confidence in the other party in relation to the management of the complainant’s financial affairs, coupled with a transaction which called for explanation, will normally be sufficient, failing satisfactory evidence to the contrary, to discharge the burden of proof and for the court to infer, in the absence of a satisfactory explanation, that the transaction can only have been procured by undue influence: Royal Bank of Scotland Plc v Etridge (No. 2) and Attorney-General for England & Wales v R.

[137] In the present case there was no suggestion of a presumption of influence, no evidence of undue influence in fact by Gary over his mother in respect of the agreement for the sale of her share in Causer Farms recorded in the Deed of Acknowledgment dated 2 May 2001 and no basis for drawing an inference that the transaction could only have been procured by his undue influence. I have made findings to this effect based on:

(c) the evidence of Mr Wyber that he would not have suggested in his letter to Mrs Causer of 24 October 2000 that she discuss the matter with Gary and his wife if there had been any suggestion that they were trying to bully her or use undue influence;

(d) the absence of any evidence of any undue influence from Mrs Causer herself; and

(e) the fact that the transaction was explicable following Mrs Causer’s acceptance of the lapsing of the ―A‖ share and the agreement reached which enabled her to transfer her share to Gary and increase the legacies to her daughters. In this respect my later findings on the issue of the value of Mrs Causer’s share are also relevant.

[138] The absence of the exercise of any undue influence by Gary over his mother in this case may be also reinforced by the fact that she had independent legal advice from Mr Wyber before she executed the Deed of Acknowledgment. As held in Royal Bank of Scotland Plc v Etridge (No. 2) and Attorney-General for England and Wales

v R,8 proof of outside advice does not of itself necessarily show that the subsequent

completion of the transaction was free from the exercise of undue influence. It is a question of fact to be decided having regard to all the evidence in the particular case. The issue is whether the independent legal advice was adequate, having regard to the substance of the transaction.

[139] Mr Grace accepted that the claim of undue influence might be answered if Mrs Causer had obtained adequate independent legal advice before she entered into the transaction. As the issue of the adequacy of the independent legal advice also arises in the context of the claim based on ―unconscionable bargain‖, it is convenient to deal with the issue separately.

Contractors Bonding Ltd v Snee and Gustav & Co Ltd v Macfield Ltd9 that the transaction for the sale of the share in Causer Farms by Mrs Causer to Gary was an

8 Royal Bank of Scotland Plc v Etridge (No. 2) at [20]; Attorney-General for England and Wales v R at [23]; Snell’s Equity John McGhee (ed) (32nd ed, Sweet & Maxwell, London, 2010) at 271-272; and Equity and Trusts in New Zealand Andrew Butler (ed) (2nd ed, Thomson Reuters, Wellington, 2009)

9 Contractors Bonding Ltd v Snee [1992] 2 NZLR 157 (CA); and Gustav & Co Ltd v Macfield Ltd

―A‖ share to lose its rights, the failure to advise Mrs Causer that those rights could

be reinstated and acquiring the share on the basis that it rated equally with the other

99 shares, Gary took advantage of Mrs Causer’s lack of commercial knowledge or expertise and reliance on Gary in such matters. It would therefore be unconscionable to permit Gary to take the benefit of the bargain in all the circumstances.

[141] The basis on which a court may set aside a transaction as an unconscionable bargain is settled by the decision of the Supreme Court in Gustav & Co Ltd v Macfield Ltd where in the judgment of the Court delivered by Tipping J it was said:

[6] .... Equity will intervene, when one party in entering into a transaction, unconscientiously takes advantage of the other. That will be so when the stronger party knows or ought to be aware that the weaker party is unable adequately to look after his own interests and is acting to his detriment. Equity will not allow the stronger party to procure or accept a transaction in these circumstances. The remedy is conscience-based and, in qualifying cases, the court intervenes and says that the stronger party may not take advantage of the rights acquired under the transaction because it would be contrary to good conscience to do so. The conscience of the stronger party must be so affected that equity will restrain that party from exercising its rights at law.

The Supreme Court also made it clear that the correct approach is to examine whether the transaction was unconscionable at the date it was entered into.10

[142] In the present case the evidence did not establish that when Mrs Causer executed the Deed of Acknowledgment dated 2 May 2001 she was ―the weaker party‖ who was unable adequately to look after her own interests and was acting to her detriment. Nor did the evidence establish that Gary had taken advantage of his mother in the manner alleged. On the contrary, the evidence established that at the relevant time Mrs Causer knew that the ―A‖ share had lapsed and that steps could have been taken to have it reinstated. There was no evidence that in these circumstances Gary had taken advantage of his mother’s ―lack of commercial knowledge or expertise‖ or that she in fact relied on him in such matters. At the relevant time she had the benefit of independent advice from her friend,

[143] Mr Grace accepted that the claim of unconscionable bargain might also be answered if Mrs Causer had obtained adequate independent legal advice. It is well- established that if the weaker party received full independent legal advice it is unlikely that any issue of unconscionability will arise: Gustav & Co Ltd v Macfield Ltd.11

[144] I therefore turn to consider whether in the present case Mrs Causer obtained adequate independent legal advice.

[145] It was common ground at the hearing that in equity where a disadvantaged party is represented by a lawyer the court is unlikely to find undue influence or unconscionable bargain: Nelson Enonchong, Duress, Undue Influence and Unconscionable Dealing.12

[146] It was also common ground at the hearing that in ―exceptional circumstances‖ the fact that the disadvantaged party was represented by a lawyer would not prevent the court from finding undue influence or unconscionable bargain: Nelson Enonchong, Duress, Undue Influence and Unconscionable Dealing.13 This will be so where the quality of advice given by the solicitor was inadequate and the stronger party was aware of it. For example, the transaction may be so extravagantly

improvident that no competent solicitor could have advised his client to enter into it.

[147] There was no reference at the hearing to the decision of the Supreme Court in GE Custodians v Bartle14 where the issue of independent legal advice was considered in the context of a claim under s 120 of the Credit Contracts and Consumer Finance Act 2003 to reopen a credit contract on the ground that it was

―oppressive‖. I therefore gave counsel for the parties an opportunity to provide further submissions on the Supreme Court’s decision on this issue and its possible

_{application to the present case. Counsel did so by memoranda dated 18
and 20 May}

12 Nelson Enonchong, Duress, Undue Influence and Unconscionable Dealing (Sweet and Maxwell, London, 2006), at ch 19.

13 _{Nelson Enonchong, Duress, Undue Influence
and Unconscionable Dealing at [19-006].}

2011 respectively. Mr Grace for Mrs Causer submitted that the decision should be distinguished, while Mr MacLean submitted that the decision should be applied in the present case.

[148] In GE Custodians v Bartle the borrowers, Mr and Mrs Bartle, had obtained advice from an independent lawyer who had negligently failed to advise them on

―the rather glaring disadvantages and risks‖ involved in what became known as the Blue Chip investment scheme. The lender, GE Custodians, was not, however, aware of the Bartles’ financial position at the time of the loan to them or that the loan was to be a Blue Chip investment. It was held in the circumstances of the case that there was no basis for concluding that the loan contracts were oppressive.

[149] In reaching this conclusion the Supreme Court accepted that the scope of oppression under the Credit Contracts and Consumer Finance Act 2003 was broader than the equitable doctrine of unconscionability.15 This supports the view that the Court’s approach to the issue of the independent lawyer would be equally applicable in the present case.

[150] On the issue of the independent lawyer the Supreme Court in its judgment delivered by Blanchard J said:

[48] Even when a lender has knowledge of circumstances which might otherwise cause it to suspect something about the borrower or the borrowing which might make the borrowing highly improvident, it will ordinarily be excused from making inquiry if it is also aware that the borrower is being advised about the transaction by an independent lawyer. The lender is entitled to assume that a lawyer instructed by the borrower will not have accepted that instruction if any conflict of interest exists and so will give dispassionate advice on whether and on what terms the borrower should proceed with the transaction, including the borrowing. The lender is also entitled to assume that the advice given to the borrower by the lawyer is competent advice and that the borrower has chosen to enter into the transaction on a fully informed basis, and so that all risks associated with it have been pointed out.

[49] It is not for the lender to question the competence or independence of the lawyer. Hoffmann LJ commented in Bank of Baroda v Rayarel that:60

[T]he ... legal department [of a lender] is not obliged to commit the professional discourtesy of communicating directly with the solicitor’s client and tendering such advice itself. Nor is it obliged to inform the solicitor of his professional duties. This will be a fortiori the case when the documents submitted by the bank to the [borrower’s] solicitor contain a certificate that she has been advised of the effect of the document and her right to have independent legal advice.

Notwithstanding this, however, there may be exceptional cases, as the Court of Appeal noted in Wilkinson v ASB Bank Ltd:61

But if an outside observer, knowing only what the financier knows, would conclude that the solicitor's independence has been compromised, the financier may not be able simply to rest on the certificate. And, if the financier had good reason to believe that the solicitor was unaware of crucial facts, known to the financier, about the transaction and the risk to which the [borrower] was being exposed, consultation with the solicitor may well not have allayed the suspicion of undue influence or misrepresentation. Therefore, before accepting a certificate the financier may sometimes need to ensure that the advising solicitor had access to certain information.

There may be rare cases where the substance of the transaction or a term of the [loan] or security is so disadvantageous that no solicitor could properly advise signature. A financier will be unwise in these exceptional circumstances to rely upon the appearance of independent advice. At the very least, it should consider obtaining a certificate from the independent solicitor that the particular matter has been pointed out to the [borrower].

[50] In other than such unusual cases the presence and role of an independent solicitor for the borrower will discharge the lender from the need to make inquiry. As a consequence, unless the lender or its agent already has knowledge of circumstances which render the lending in breach of reasonable standards of commercial practice the credit contract on which the borrower had independent legal advice should not be treated as oppressive under Part 5.

60 Bank of Baroda v Rayarel [1995] 2 FLR 376 at 386. Hoffmann LJ was addressing the situation of a guarantor but his words apply equally to a borrower.

[151] On the basis of this approach, which I consider may be applied by analogy in cases of undue influence and unconscionable contract, a court is unlikely to find for a disadvantaged person who is represented by an independent lawyer unless there are

―exceptional circumstances‖. As pointed out by Professor Nelson Enonchong,16 the

_{reason for this view in equity is that the independent advice is likely
to redress the}

relational imbalance which would otherwise exist by reason of the special disability of the weaker party. Independent advice helps to establish a reasonable degree of equality between the parties.

[152] As the Supreme Court recognised in GE Custodians v Bartle, ―exceptional circumstances‖ will include cases where the stronger party knows or ought to know that:

(c) the substance of the transaction is so disadvantageous for the other party that no lawyer could properly advise signature.

[153] For Mrs Causer, Mr Grace submitted that in the circumstances of the present case the decision of the Supreme Court should be distinguished on the grounds that:

(a) In contrast to the fact situation before the Court in GE Custodians v Bartle, the transaction between Mrs Causer and Gary was not a standard commercial transaction.

(b) Gary had more knowledge about the transaction forming the basis of the Deed of Acknowledgement than either Mrs Causer or her solicitor. Mr Wyber’s evidence was that his instructions were to document the transaction whereby Mrs Causer transferred her single share in Causer Farms Limited to Gary for payment of $90,000. He was not asked to give advice on the merits or risks associated with the transfer or the consideration for it.

(c) At the time Mrs Causer sought advice from Mr Wyber, her single share had already lost its class ―A‖ rights and Mr Wyber was not asked to advise on the circumstances in which this occurred.

(d) Gary had express knowledge of the matters which rendered the transaction unconscionable such as the circumstances in which Mrs Causer’s single share had lost its class ―A‖ rights and the lack of any valuation to support the supposed $90,000 consideration. On the basis of the evidence of Mr McLoughlin, the consideration actually paid was more in the region of $14,612.

(e) Gary not only had express knowledge of these matters he (either actively or passively) participated in the circumstances by which Mrs Causer’s single share lost its class ―A‖ rights and she agreed to sell it for $90,000 without any underlying valuation to support that figure (which ultimately wasn’t paid). This renders the ultimate transaction unconscionable or the subject of undue influence regardless of the legal advice Mrs Causer received.

(f) As in L.E.A.D. Training Trust Ltd v Evans,17 where the fact that the victim of the influence obtained legal advice did not ―cure the effect of the undue influence‖, the transaction into which Mrs Causer entered was not wholly commercial in nature or between commercial parties.

(g) Mr Wyber was not asked to advise on the matters which preceded the agreement reached at the 1 March 2000 meeting. Therefore no advice was given to Mrs Causer about the meaning and effect of the Deed of Acknowledgment as a whole, particularly in the context of the ―A‖ share having lost its ―A‖ voting rights.

(h) The evidence shows that influence continued to be exerted over Mrs Causer during the time she was being advised by Mr Wyber. By letter dated 12 April 2000, Mr Davies advised Mr Wyber that ―further

17 L.E.A.D. Training Trust Ltd v Evans HC Hamilton, CIV 2010-419-832, 16 February 2011.

(i) When Mr Wyber wrote by letter dated 22 August 2000 inquiring into the circumstances pursuant to which the mortgage to Mrs Causer had been offset against outgoings he was met with a telephone call from Causer Farms’ accountant saying that his letter had inflamed the situation. He was told that when Mrs Causer went home and spoke to Gary ―the whole situation had flared up‖. Following a long delay Mr Wyber then received a letter dated 7 November 2000, ignoring the matters raised in his letter of 22 August 2000 and advising that an agreement had again been reached between Mrs Causer and Gary.

(j) On 29 November 2000 Mr Wyber raised with Coast to Coast Law the possibility of repayment of the $90,000 loan:

(k) Coast to Coast Law responded by letter dated 5 December 2000 advising that Gary would only agree to the mortgage being repayable within six months of Mrs Causer’s death. Mr Wyber wrote to Mrs Causer inviting her to telephone him to discuss this aspect. Then Mr Wyber received a telephone call from Mrs Causer simply advising that ―she agrees with the papers‖.

(l) Mr Wyber’s evidence was that there were a number of discussions between Mrs Causer and Gary and/or other members of the family in relation to the agreement to which he was not a party. Mr Davies also gave evidence of discussions taking place between Mrs Causer on the one hand and Gary and Lynne on the other.

advice she obtained did not cure the effect of the undue influence or unconscionable bargain.

[154] It was not submitted for Mrs Causer that her lawyer, Mr Wyber, was not an independent lawyer or that his independence was compromised in any way. In particular, it was not submitted that in the period from March 2000 to May 2001 he did not have the opportunity to advise Mrs Causer on all aspects of the Deed of Acknowledgment dated 2 May 2001 and to negotiate any changes to the terms of the deed, including the consideration for the transfer of the share, in accordance with his advice and his client’s instructions. Any such submissions would have been inconsistent with the facts of the case which have already been set out and summarised. This is not a case where the opportunity for Mr Wyber to advise Mrs Causer could be described as ―cursory‖: cf L.E.A.D. Training Trust Ltd v

[155] I do not accept the implication in the submissions for Mrs Causer that Mr Wyber was unaware of crucial facts known to Gary. Mr Wyber was aware of the background to the loss of the ―A‖ share in 1997. He had received from Mrs Causer the letter dated 24 February 2000 from Mr Sundvick which not only described the background, but also referred to the possibility of rectifying the matter. Mr Wyber obtained Companies Office records relating to Causer Farms and other background information from the company’s lawyers and accountants. He was therefore as well informed as Gary and his professional advisers on these issues.

[156] Like Gary and his professional advisers, Mr Wyber knew that no valuation of the ―A‖ share had been obtained and that the figure of $90,000 had been ―plucked out of the air‖. It was open to Mr Wyber to advise Mrs Causer to obtain a valuation of her share before agreeing to the terms of the transfer. No-one was aware in the period March 2000 to May 2001 that Mr McLoughlin would subsequently give the

[157] The fact that Mr Wyber’s instructions from Mrs Causer were to accept that her share in Causer Farms should be transferred to Gary’s wife and that he may not have been asked to give advice on the possibility of reinstating the ―A‖ share or negotiating a better price does not mean that Mrs Causer did not have the benefit of an independent lawyer who was able to advise her on these matters and to negotiate different terms or that he was unaware of crucial facts known to Gary. In these circumstances Mrs Causer was at liberty to give Mr Wyber such instructions as she saw fit and, subject to his responsibility to advise her not to enter into the Deed if he

considered that it was ―extravagantly improvident‖ or ―disadvantageous‖ for her,20

he was obliged to accept her instructions. It was not submitted for Mrs Causer that, in not obtaining a share valuation or giving such advice, Mr Wyber was in breach of his responsibilities to her. It has not been claimed by or for Mrs Causer that Mr Wyber acted negligently at any time during the period he was her independent lawyer. In these circumstances it cannot be suggested that Gary was aware or ought to have been aware that Mrs Causer was receiving inadequate advice from Mr Wyber.

[158] This leaves for consideration the issue whether, notwithstanding the fact that Mrs Causer had the benefit of an independent lawyer, Gary knew or ought to have known that the substance of the transaction was so disadvantageous for her that Mr Wyber could not properly have advised her to sign the Deed. In other words, does Mr McLoughlin’s valuation of the ―A‖ share mean that steps ought to have been taken to reinstate the share in March 2000 or to negotiate a better price for the transfer of Mrs Causer’s share? This issue requires consideration of Mrs Causer’s position in March 2000.

[159] For Mrs Causer, Mr Grace submitted that Gary was required to pay the ―fair value‖ of the single share in Causer Farms that he received from Mrs Causer, valued as if it were the sole voting share in the company. Mr Grace submitted that the ―fair value‖ of the share should have been calculated at $214,000 in March 2000 on the

_{basis of the decisions in Holt v Holt and the evidence of Mr
McLoughlin. On that}

12 months of Mrs Causer’s death was inadequate. To restore Mrs Causer to her rightful position Gary should be required to pay her today between $401,707.42 and

$555,060.89, depending on the interest rate used, or between $550,000 and $600,000

[160] Mr Grace submitted that with her ―A‖ share Mrs Causer controlled Causer Farms. With the share, she had ―limitless‖ possibilities, including the power to alter the Articles of Association, transfer her share to anyone, sell the farm and change the nature of the company’s business, elect to take substantial remuneration or wind up the company. These possibilities were taken into account by the courts in valuing the similar voting rights ―A‖ share in Holt v Holt.

[161] There are, however, several fundamental difficulties with these submissions for Mrs Causer.

[162] First, the share held by Mrs Causer in March 2000 which was transferred to Gary on 2 May 2001 was not the ―A‖ share in Causer Farms. It was an ordinary share in the company valued by Mr McLoughlin at $8,550 and by Mr Chapman at

[163] Second, for Mrs Causer to have sold the ―A‖ share in Causer Farms in March

2000 it would either need to have been reinstated then or Mrs Causer and Gary would need to have agreed that it ought to have been treated as though it were an

―A‖ share. It was established on the evidence that by March 2000 Mrs Causer knew that she had lost the ―A‖ share in 1997 and that it would have been possible to have taken steps then to have the share reinstated. She did not do so. There was no evidence that Mrs Causer wanted to have the ―A‖ share reinstated or that she wanted to have her ordinary share treated as though it were an ―A‖ share. On the contrary, it is reasonable to draw the inference from her decisions not to seek reinstatement of the ―A‖ share and to transfer her ordinary share to Gary that Mrs Causer had decided that she did not want the share to be treated as though it were an ―A‖ share.

[164] Third, if the ―A‖ share had been reinstated in March 2000, there was no evidence from Mrs Causer as to what steps she might then have taken. The available evidence does not suggest that she would in fact have exercised any of the

―limitless‖ possibilities referred to by Mr Grace. On the contrary, the evidence suggests that Mrs Causer would have maintained her intention to transfer the share to Gary on her death so that he inherited the farm.

[165] Fourth, if, with the ―A‖ share reinstated, Mrs Causer had taken the unlikely step of exercising her voting rights in the manner suggested by Mr Grace, then, as already noted, she might well have faced claims by Gary for breach of her fiduciary duties to him or for the court ordered winding up of the company. As the Supreme Court pointed out in Fong v Wong:21

In cases such as the present, where the shareholders in a closely held quasi- partnership company have fallen out, the primary alternative to one shareholder purchasing the other’s shareholding is a court ordered winding up; this on the basis of either oppression4 or the just and equitable ground.5

In the event of a winding up, the assets of a company are distributed in strict proportion to shareholdings.

If Causer Farms had been wound up in 2000, Mrs Causer would not have received more than her pro rata distribution for her one share, even if it had been reinstated as an ―A‖ share.

[166] Fifth, there is no basis for assuming that Gary would have agreed to acquire the reinstated ―A‖ share for anything more than what he in fact agreed to pay in March 2000. He would have been under no obligation to acquire the share then at all. He could simply have waited for the death of his mother to receive the share and inherit the farm as intended by his parents.

[167] It is the absence of any obligation on Gary to have acquired the reinstated

―A‖ share at all, let alone for its ―fair value‖ with a 20% to 25% premium as calculated by Mr McLoughlin, that distinguishes this case from cases where such

_{valuations are required. As already noted, this is not a case where s
149(1) of the}

Companies Act 1993 was applicable: cf Thexton v Thexton and Fong v Wong. Nor is it a case, such as Holt v Holt, where it was necessary to value a similar ―A‖ share for matrimonial or relationship property purposes. There is no statutory or contractual price fixing provision requiring a ―fair value‖ to be assessed for the share in this case: cf Fong v Wong at [8]. Mr Grace, who relied solely on the decisions in Thexton and Holt, which are inapplicable here, did not suggest any other basis for Mrs Causer’s claim. For completeness, I also note that the Court of Appeal has recently expressed reservations about the application of the valuation approach in Holt v Holt to a farming company in a claim under the Family Protection Act 1955 where neither party had an interest in the company which was able to be ―attractively marketed‖:

[168] For these reasons therefore I do not accept that Gary was required to pay any more than he did for Mrs Causer’s single share in Causer Farms. Mrs Causer did not wish to have the ―A‖ share reinstated and she was content to sell her ordinary share to Gary on the terms set out in the Deed of Acknowledgment of 2 May 2001. These terms enabled her to leave each of her daughters a legacy of $30,000. There was no evidence that Mrs Causer herself was dissatisfied with this outcome at the time.

[169] Consequently, the substance of the transaction was not so disadvantageous for Mrs Causer that Mr Wyber could not properly have advised her to sign the Deed. The fact that Mrs Causer had received advice from an independent lawyer before executing the Deed meant that in this case there was no basis for her claims against Gary for undue influence and unconscionable bargain and they therefore fail.

[170] In view of the conclusion I have reached in respect of Mrs Causer’s claim, it is unnecessary for me to consider the affirmative defences raised for Gary by Mr MacLean, but for completeness I record that if the challenge to the terms of the Deed of Acknowledgment had been successful I would not have upheld the defence

_{of ―accord and satisfaction‖ because, as Mr Grace submitted,
the Deed was not an}

accord and satisfaction of Mrs Causer’s claims which were raised in respect of the

[171] In respect of the defence of laches (delay), Mr Grace submitted, on the basis of the decision of the Supreme Court in Eastern Services Ltd v No 68 Ltd,23 that it should be rejected as no prejudice had been caused to Gary by the time taken to bring Mrs Causer’s claim. No evidence had been lost in the case and Gary had suffered no prejudice as a result of any delay. On the contrary, he, with his wife, had had the benefit of being the sole shareholders and directors of Causer Farms.

[172] The nature and scope of the defence of laches is settled for present purposes by the decision of the Supreme Court in Eastern Services Ltd v No 68 Ltd where the following principles were accepted:

(b) The doctrine of laches requires a balancing of equities in relation to the broad span of human conduct. In the abstract, facts and the weight to be given to them are infinitely variable. But in a particular case they have to be identified and weighed for what they are, as a singular

(d) The question of prejudice resulting from unavailability of evidence necessarily involves some degree of speculation, but it is not a question of pure speculation. The issue is not whether evidence may have been lost but whether evidence which may have cast a different

(e) The question is whether it would be unconscionable to grant relief in the light of the reasonable expectations of the parties.28

[173] In the present case there is no doubt that there was an unexplained delay of more than seven years between the execution of the Deed of Acknowledgment of

[174] Contrary to Mr Grace’s submission, there is also no doubt that as a result of the delay evidence has been lost. In particular, there has been no evidence from Mrs Causer herself or her previous lawyer, Mr Binsted, and his files relating to the loss of the ―A‖ share in Causer Farms and Mrs Causer’s instructions, if any, were not available. The recollections of all witnesses as to the events of 2000 were also affected to a greater or lesser degree by the passage of time. While the contemporary documents were the best evidence of relevant events, they could not provide a complete picture, particularly in relation to Mrs Causer’s actual understanding and appreciation of her position in the period 1993 to 2001.

[175] The short point is that if, contrary to my decision, Mrs Causer’s claims had been established on the available evidence, in this case the lost or unavailable evidence might well have cast a different light on the matter. For instance, such evidence might have shown or confirmed that:

(b) Her concerns in 1999-2001 were motivated by the wishes of her daughters to obtain increased legacies from her estate.

(d) Once she had arranged for the legacies to be increased, she was quite prepared to transfer her share to Gary in terms of the Deed of Acknowledgment.

(e) She would never have contemplated asking Gary to pay her $214,000 for her share in Causer Farms in 2001.

(f) She would have reduced the amount payable for the share then to reflect Gary’s contributions to the value of the farm over the 30 year period he had worked on it.

[176] This lost or unavailable evidence would have caused prejudice to Gary as it would have prevented him from answering the claims by Mrs Causer.

[177] Alternatively, if Mrs Causer’s claims had been raised by Mr Wyber on her behalf in early 2000 following the ―in principle‖ agreement reached at the meeting on 1 March 2000, it is quite possible that the ―A‖ share might have been reinstated and simply retained by Mrs Causer to pass on her death to Gary in terms of her then current Will dated 18 July 1986. The delay in bringing the claim for Mrs Causer challenging the Deed of Acknowledgment of 2 May 2001 has deprived Gary of the opportunity of responding by accepting reinstatement of the ―A‖ share and the status quo under Mrs Causer’s Will. Any steps by Mrs Causer then to alter her Will and to leave the ―A‖ share to anyone other than Gary (or his wife) would no doubt have been met on her death by claims by Gary under the Law Reform (Testamentary

Promises) Act 1949 and the Family Protection Act 1955: cf Cronin v Mackintosh.29

[178] Accordingly, when the equities are balanced in this case, it would be unconscionable to grant the relief sought by Mrs Causer in this proceeding in the light of the probable expectations of the parties and the prejudice to Gary as a result

[179] For the reasons given, the claims by Mrs Causer for breach of fiduciary duty, undue influence and unconscionable bargain have not been established. The relief sought in the statement of claim is formally declined.

[180] I see no reason why costs should not follow the event and why the defendants should not be entitled to their costs on a category 2 basis as fixed by Associate Judge Robinson in his minute of 31 March 2009, with disbursements to be fixed by the Registrar. If, however, the parties are unable to agree on quantum, the defendants are to file and serve their memorandum within 14 days and the plaintiff is to file and

High Court of New Zealand Decisions

Causer by her litigation guardian Antunovich v Causer HC Whangarei CIV 2008-488-830 [2011] NZHC 957 (31 August 2011)