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Son takes advantage of elderly father - Court grants redress

18 December 2017

The law requires parties to a contract to honour their obligations, even if the bargain is clearly unwise or unfair. Despite this, the law will intervene and set aside a transaction in certain circumstances. Two examples of such circumstances are where the transaction is shown to result from the “undue influence” of one person over another or where it is shown to be an “unconscionable bargain”. Before the law will intervene, however, the claimant must meet the criteria for a finding of undue influence or unconscionable bargain as laid down in cases decided by the courts in the past.

Undue influence

Undue influence is found where the person being influenced does not exercise free will. There is not necessarily wrongdoing by the person exerting influence. Undue influence can be found by proving “actual undue influence” or where there is a presumption of undue influence and the transaction calls for an explanation.  A presumption of undue influence is made where there is a relationship of trust and confidence. This relationship can be proved on the specific facts or it is presumed to exist where certain relationships exist - such as lawyer/client, doctor/patient or parent/child. The presence of independent advice is one factor that may be taken into account in determining whether undue influence is proved.

Unconscionable bargain

An unconscionable bargain is found where a stronger person wrongly takes advantage of a weaker person and knows (or ought to be aware) that the weaker party is unable adequately to look after his or her own interests and is acting to his or her detriment.

In the judge’s words in the recent case of Round v Round, the remedy of “unconscionable bargain” is not intended to relieve parties from “hard” bargains or to save the foolish from their foolishness, it protects from exploitation those who enter into bargains when they are under a significant disability or disadvantage.

Son takes advantage of vulnerable father

Mr Eric Round was 94 and blind. He was also suffering from the beginnings of dementia. Mr Round’s son Martin lived with Eric in his house, ostensibly to care for him, but evidence was presented to the court that Martin was often drunk, the house was squalid and Martin was threatening to leave Eric. Faced with this threat and frightened that Martin would leave and he would have to go into care, Eric transferred his home to Martin. Eric’s attorney (Eric’s son and Martin’s brother) asked the court to vest the property back into Eric’s name.

The judge found the property was transferred to Martin as a result of Martin's actual undue influence. There was also a presumption of undue influence because there was a relationship of trust and confidence between Eric (a blind elderly parent) and his son Martin (who was caring for him). The transaction called for explanation because Eric gave away his most valuable asset, without which he could not afford the only viable alternative of living in a rest home. The judge also found the transaction was an unconscionable bargain. This was because of Eric’s vulnerability and reliance on Martin and Martin had unconscientiously taken advantage of Eric. The court ordered the home to be transferred back to Eric – surely a just and fair result.

 

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles. Keep an eye out for next month's column, where I will discuss another relevant rural legal issue.


Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.

 

Barbara McDermott