IN THE COURT OF APPEAL OF NEW ZEALAND
CA446/2015
[2016] NZCA 551
BETWEEN
LYNDA ROSE BARRY
Appellant
AND
FRANCIS CARLISLE
Respondent
Hearing:
7 November 2016
Court:
Randerson, Duffy and Whata JJ
Counsel:
R W Ord for Appellant
M G Locke for Respondent
Judgment:
24 November 2016 at 11:30 am
JUDGMENT OF THE COURT
A
An extension of time to appeal is granted.
B
The application by the appellant to adduce further evidence on appeal is
declined.
C
The appeal is dismissed.
D
There is no order for costs since the appellant is legally aided. In terms of
s 45(5) of the Legal Services Act 2011, but for the grant of legal aid, the
Court would have awarded the respondent costs for a standard appeal on a
band A basis with reasonable disbursements.
____________________________________________________________________
BARRY v CARLISLE [2016] NZCA 551 [24 November 2016]
REASONS OF THE COURT
(Given by Randerson J)
Table of Contents
Para No
Introduction
Background facts
The Matakana property
The purchase of the Wairau Valley property
The period from 1998 until the 2002 deed
Mr Carlisle’s ill health
The 2002 deed
Dr Schnabel’s evidence
Ms Barry’s application to adduce further evidence on appeal
Was the Judge correct to find that the 2002 deed could not be
specifically enforced due to lack of consideration?
Was the Judge correct to find that if the deed was enforceable,
it constituted an unconscionable bargain?
Unconscionability — our assessment
Result
[1]
[4]
[6]
[14]
[18]
[22]
[25]
[31]
[37]
[48]
[61]
[65]
[73]
Introduction
[1]
The appellant Ms Barry appeals against a judgment of Brown J in which he
declined to order specific performance of a written agreement with the respondent
Mr Carlisle dated 17 October 2002.1 The agreement related to the ownership of a
property near Blenheim registered in Mr Carlisle’s name. Relying on the agreement,
Ms Barry had sought an order requiring Mr Carlisle to transfer to her a half share in
the property. The essence of the High Court judgment is:
(a)
The agreement was a deed.
(b)
There was no consideration for the deed and, in consequence, the
Court would not order specific performance.
(c)
In any event, the deed was an unconscionable bargain and was
unenforceable for that reason.
1
Barry v Carlisle [2015] NZHC 1554, (2015) 16 NZCPR 449 [High Court judgment].
[2]
On appeal, there is no dispute that the document was a deed even though it
was not described as such. However, Ms Barry challenges the other two findings
made in the High Court.
[3]
There being no opposition, we grant the appellant an extension of time to
appeal.
Background facts
[4]
Over a period of five days, Brown J heard extensive evidence from the
parties as to the nature of their relationship and the events surrounding the 2002
deed.
Ms Barry did not call any supporting evidence but Mr Carlisle did so
including an expert witness who gave evidence of Mr Carlisle’s poor health. In
particular, he was diagnosed in November 2000 with a condition known as
manganese toxicity. We will refer later to this evidence in more detail since it is
directly relevant to the unconscionability issue.
[5]
Although some facts were in dispute in the High Court, the principal conflicts
of evidence were resolved by the Judge. Some of these, such as the nature and
duration of the relationship between the parties and the extent of contributions by
Ms Barry to an earlier property are challenged on appeal. In the main however, the
account that follows is not in dispute.
The Matakana property
[6]
The parties met in 1988.
Between then and 1991 they shared rental
accommodation in several locations in the Auckland area. In 1991 Mr Carlisle
purchased a three-hectare section in Matakana funded from a settlement from a past
marriage. Ms Barry does not suggest she contributed to the purchase price. A few
months later, Mr Carlisle approached the Bank of New Zealand to obtain a loan in
order to build a house on the property. Mr Carlisle accepts that about this time he
was in a de facto relationship with Ms Barry. He invited her to become a joint
borrower. The bank advanced the parties $63,000 secured by a mortgage over the
land. At that stage, Ms Barry was a covenanting party to the mortgage.
[7]
It is common ground that, for a period, Ms Barry met the mortgage payments
of approximately $800 per month from her earnings. Mr Carlisle paid all other
outgoings in connection with the property as well as all other living expenses.
Ms Barry agreed they were each working and contributing approximately equal
amounts to the relationship during this time. Mr Carlisle acknowledges that, at this
stage, he agreed they would ultimately own the Matakana property as tenants in
common relative to their respective contributions. Ms Barry had no recollection of
this and no written agreement was ever drawn up.
[8]
The Judge found that Ms Barry made the mortgage payments on the
Matakana property for almost a year until about August 1992 when Mr Carlisle
assumed sole responsibility for the payments. It was necessary for Mr Carlisle to
refinance the mortgage, which he did.
[9]
Ms Barry now asserts that after the initial period in 1991–1992 she paid half
the mortgage payments until 1995. She appears to link this to a trip she made to
Australia in the first half of 1996. The dates for that trip were established at trial
from passport information, apparently at the suggestion of the Judge. Both parties
had mistakenly deposed in earlier affidavits that the trip was several years earlier.
We do not consider there is any valid basis to depart from the finding of the Judge
about the period during which Ms Barry paid the mortgage. She did not produce at
trial any documentary evidence to support her assertion. The only bank statements
for Ms Barry’s account were produced by Mr Carlisle. They related to the period
21 October 1991 to 9 June 2005 but were incomplete. They reveal that, at least in
the initial period in Matakana, Ms Barry was receiving direct credits from her
employer. But they do not show any withdrawals from her account which could
relate to the mortgage payments either before or after 1992.
[10]
Ms Barry’s oral evidence at trial as to how long she continued the mortgage
payments was vague. She did not specify any particular date when she ceased
making these payments. In her evidence, she acknowledged getting into financial
difficulty and that Mr Carlisle had taken over the mortgage payments. She could not
remember exactly when this happened. She said she took over contributions such as
food and the telephone bill. On the evidence, the Judge was justified in accepting
Mr Carlisle’s evidence that Ms Barry’s payments on the Matakana mortgage
continued for no longer than 11 or 12 months.
[11]
Ms Barry’s bank statements confirm that after she returned from her trip to
Australia in 1996, she obtained a social welfare benefit. She did not work again
apart from giving horse riding lessons for some years commencing about 2000 or
2001. The earnings from this source were kept below the level at which her benefit
would start to abate. According to Ms Barry’s evidence, she went off the benefit
from about 2003, after the date of the 2002 deed.
[12]
The nature and duration of the relationship between the parties was the
subject of a substantial amount of evidence at trial.
The Judge preferred the
evidence of Mr Carlisle that their de facto relationship ended about the time
Ms Barry ceased making any payments on the Matakana mortgage.
Brown J
considered Ms Barry’s evidence on this topic to be vague. In contrast, Mr Carlisle’s
evidence was consistent with his own conduct in the period prior to the execution of
the 2002 deed and was supported by a number of statements made or attributed to
Ms Barry. The Judge canvassed these in some detail in his decision. We see no
basis upon which his finding could be disturbed.
[13]
From the point of view of contributions made to the Matakana property by
Ms Barry, the important point is that any mortgage payments provided by her ceased
no more than 12 months from the date the mortgage was obtained. Mr Carlisle
accepts Ms Barry continued to live at the Matakana property on a periodic basis but
says she did so purely as a flatmate or friend. It is common ground that the parties
did not share accommodation continuously. The parties agreed, for example, that
Ms Barry moved out of the Matakana property, although they differed as to how long
this continued. Ms Barry recalled it was for about eight months while Mr Carlisle
said it was longer.
The purchase of the Wairau Valley property
[14]
In September 1997 the parties travelled to Blenheim to inspect properties in
that region. Mr Carlisle was attracted to a 12-hectare property in the Wairau Valley
near Blenheim. An agreement to purchase the property was signed on 5 September
1997.
Both parties were described as the purchasers.
The purchase price of
$128,000 plus GST was funded wholly by Mr Carlisle from the net proceeds of sale
of the Matakana property. The title was registered in Mr Carlisle’s name alone.
[15]
The circumstances surrounding the purchase were disputed but the Judge
expressed a clear preference for Mr Carlisle’s evidence. Mr Carlisle said that while
looking for properties in the Blenheim area, Ms Barry “tagged along” with him.
When the purchase of the property was being discussed, Ms Barry expressed an
interest in jointly owning the property with him. She did not have any money to
contribute at that stage but she told Mr Carlisle she could obtain the money from her
father. Mr Carlisle remembered a discussion with Ms Barry about owning the
property as tenants in common based on their respective financial contributions, as
they had discussed in relation to the Matakana property. He agreed in principle to
this provided Ms Barry contributed her share of the price. However, when she did
not contribute any cash, Mr Carlisle’s evidence was that it was clearly understood
the plan to jointly own the property was at an end. Ms Barry was still living
elsewhere and he had no idea of her intentions. According to his evidence, Ms Barry
turned up again at the property early the following year, 1998.
[16]
The Judge rejected Ms Barry’s account of the reasons for the absence of her
name on the title to the Wairau Valley property. In particular, the Judge rejected her
explanation that, because she was in Auckland at the time the purchase was to be
settled, she was unavailable to sign the necessary papers to complete the transaction.
Rather, the Judge found the reason was that she did not wish to be registered for
GST. She had given evidence to that effect in earlier Family Court proceedings and
the same reason was stated in the 2002 deed itself.
[17]
In early 1998 the parties took up residence at the Wairau Valley property.
Initially they lived in a caravan and horse truck on the site but, in due course, a loan
of $22,000 was obtained from the Bank of New Zealand to fund the building of a
house on the property. Mr Carlisle granted a mortgage over the property to secure
the loan on 18 May 1998. Ms Barry does not suggest she contributed to the purchase
of the property, or to the mortgage payments or any other outgoings on the property.
Any contributions she made appear to have been limited to payment of living
expenses although the extent and duration of any such expenses were not defined.
The period from 1998 until the 2002 deed
[18]
It is not in dispute that, after the Wairau Valley property was purchased, there
was substantial disharmony between the parties over a period of approximately five
years leading to the execution of the 2002 deed. The Judge found there was a series
of incidents resulting either in attendance by the police or the initiation of court
processes. In January 1998 there was an incident in which Ms Barry was identified
as a suspect and Mr Carlisle as the victim; in August 2000 Ms Barry obtained an
ex parte protection order that was made final in November of that year; in March
2001 Mr Carlisle served a trespass notice on Ms Barry warning her to stay away
from the property; at the same time, Mr Carlisle filed an application to the District
Court for an occupation order, and later to discharge the protection order. It appears
these applications were not ultimately pursued. Mr Carlisle also commenced a
romantic relationship with another woman in early 2001 which appears to have
continued for up to two years.
[19]
Despite the evident disharmony, there were several indications during this
period that Mr Carlisle might be willing to enter into some form of property
agreement with Ms Barry. At trial, an unsigned copy of a document prepared in
1998 was produced purporting to contain an acknowledgement by Mr Carlisle that
he held a three-eighths share of the Wairau Valley property in trust for Ms Barry. At
the time of trial, both parties accepted this agreement had not been signed. However,
since trial Ms Barry has obtained a signed copy of the agreement and seeks to
adduce it in evidence. For reasons we canvass below, we are not willing to grant her
application to introduce this document or other material she sought to adduce.
[20]
In April 2001 Mr Carlisle signed two handwritten documents. The first
indicated he would allow Ms Barry to remain on his property at his discretion. The
second stated that, upon the removal of the protection order Ms Barry had obtained
and the removal of a caveat she had registered over the property, he would enter into
an agreement with her as tenants in common. Shortly afterwards, Mr Carlisle’s
solicitors wrote to Ms Barry’s lawyer that Mr Carlisle was prepared to enter into a
property agreement but he first wished the Court to determine his application for an
occupation order and to have the protection order discharged.
[21]
Mr Carlisle’s explanation for the handwritten notes and his solicitor’s letter at
this time was that he was very unwell from the manganese poisoning; he was being
harassed and threatened by Ms Barry for allegedly breaching the protection order
and he just wanted her out of his life once and for all. He added that he had no
interest in gifting Ms Barry a half share in his property. He had always told her that
if she wanted an interest in the property she would have to come up with the money.
Mr Carlisle’s ill health
[22]
In November 2000 Mr Carlisle was diagnosed with phase one manganese
toxicity. Brown J recorded that he was an engineer who had spent some 30 years
engaged in electric arc welding. This involved a significant amount of stainless steel
welding, often in confined spaces with no respiratory protection or effective
ventilation. Over a period of time, Mr Carlisle began to experience mood swings,
headaches and insomnia.
Following an assessment on 17 March 2001, a
neuropsychological report from Dr Black stated that Mr Carlisle was showing
symptoms of both the first and third stages of manganese neurotoxicity. The report
stated:
First stage symptoms, which are expected to last approximately 13 months
after exposure has ceased, are psychiatric-like symptoms of fatigue,
anorexia, insomnia, and manganese induced aggression dubbed “manganese
mania”. Third or final stage neurotoxicity symptoms may include frontal
lobe dysfunction, cognitive deterioration and emotional lability, which
Mr. Carlisle has.
He ceased metallic exposure only some six months ago so first stage
symptoms of manganese neurotoxicity may be expected to remain for
another seven months or so. Thus there should be improvement with time
with regard to fatigue, anorexia, insomnia and verbally aggressive behaviour.
The third stage symptoms of frontal lobe dysfunction cognitive deterioration
may persist and a neuropsychological reassessment in six to nine months is
recommended to monitor this.
In terms of return to work his present level of cognitive functioning is at a
borderline level which means that if there were no other difficulties he could
be expected in some seven months time to return to the workforce doing
simple manual work. Whether he was able to do this would be dependent on
his level of fatigue and his emotional state.
[23]
The Judge referred to a further neuropsychological report from Dr Black
dated 15 July 2002 showing Mr Carlisle’s condition had deteriorated since the first
assessment. The conclusions included:
The third, or final stage neurotoxicity symptoms may include frontal lobe
dysfunction, cognitive deterioration and emotional lability, and these were
present when Mr. Carlisle has assessed a year ago. They have since got
worse. While this may be contributed in part to the continuing presence of
manganese which he reports is still in his body, a major contribution is likely
to be the psychological difficulties he has in coping with physical conditions
and his life circumstances. His emotional and behavioural functioning needs
to stabilise before a reliable measure of his cognitive functioning can be
made. In his present state he is not fit to return to work.
[24]
Mr Carlisle was treated in Christchurch with chelation therapy for a week in
June 2002 and again in August 2003.
We discuss below the expert evidence
Mr Carlisle called at trial as to his mental state at the time of the 2002 deed.
The 2002 deed
[25]
On 17 October 2002 the parties signed the agreement relating to the Wairau
Valley property. Their signatures were both witnessed by a Deputy Registrar at the
District Court in Blenheim. The agreement stated:
AGREEMENT ON PROPERTY AT WAIRAU VALLEY
LEGAL DESCRIPTION
ESTATE:
AREA:
LOT:
DP:
CT:
12.1406 HA
PT SEC 5
BLK 1 AVON SD
1A/190
Lynda Barry and Francis Carlisle entered into agreement of the purchase of
the above property. This was signed 5 September 1997. Possession date
was on 30 September 1997.
Lynda does not have her name on the Title of this property because she did
not wish to be Registered for G.S.T.
However, Lynda does have a half share in this property.
And is entitled to run her business from it and to live in the house as an equal
tenant in common.
This letter is to confirm Lynda’s legal right as a half owner in
LOT: PT SEC 5, DP: BLK 1 AVON SD, CT: 1A/190
In the event that Lynda requests a legal transfer of a half share in the
Certificate of Title to herself, THEN Francis shall sign all necessary
documents and make the Certificate of Title available to enable registration
of the Transfer.
The parties acknowledge that they both have received separate legal advice
before signing this agreement.
Signed …
[26]
The circumstances in which the 2002 deed came into existence are unusual
and, in important respects, obscure. According to Ms Barry, a draft of the agreement
came into existence no later than February 2002. She linked this to an entry in her
diary for 28 February 2002 in which she recorded advice from her solicitor that
separate legal advice was needed in order to form a binding agreement. The Judge
was clearly sceptical about Ms Barry’s evidence on this subject. He questioned her
about how the diary entry could be referring to a document yet to be created. Her
explanation was that the document had been worked on over previous months.
When she moved back into the property near the end of August 2002 she was busy
and “didn’t even think of this property agreement”. It was not until Mr Carlisle
suggested they sign it in October that “we pulled it out of its file, wherever it was,
and did something with it”.
[27]
Ms Barry recalled attending at the Blenheim courthouse to sign the document
after which the parties had a meal together in Blenheim. For his part, Mr Carlisle
had no recollection at all of signing the document or sharing lunch afterwards. No
evidence was called to confirm that either party had received legal advice concerning
the terms of the agreement or of the circumstances which led to its preparation.
Ms Barry said her lawyer had helped to prepare the agreement but she had “chosen
not to call her when she reportedly knows nothing now”.
Ms Barry had no
recollection of receiving legal advice about the deed before it was signed. As the
Judge found, there are some elements of legal formality about the agreement.
However, in our view, it was clearly not prepared by a lawyer. Rather it has the
appearance of a document drawn up by a layperson although it contains some legal
phraseology. Precisely how the document came about remains unclear.
[28]
Ms Barry left the Wairau Valley property “for good” by November 2011,
although she had never resided there continuously since it was acquired. It was not
until early 2014 that steps were taken by Ms Barry to enforce the 2002 deed. She
explained that, after the death of a relative around that time, she was removing a
photograph from a binder. In the process she came across the 2002 deed which she
had forgotten about entirely. She instructed solicitors to represent her and a formal
claim was made by letter of 3 February 2014. Liability was denied and proceedings
were issued in the High Court on 8 April 2014 based solely upon the 2002 deed.
Ms Barry sought an order for specific performance requiring Mr Carlisle to transfer
to her a half share in the property.
[29]
It is relevant to record other steps taken by Ms Barry to claim an interest in
the Wairau Valley property. On or about 19 October 2000 she lodged a caveat on the
property alleging she had an interest in it by way of constructive trust. Mr Carlisle
brought proceedings in 2013 seeking an order that the caveat lapse. Ms Barry did
not oppose the application and the caveat lapsed.
[30]
In July 2013 Ms Barry lodged a notice of claim of interest under s 42 of the
Property (Relationships) Act 1976.
The notice of claim was based on an alleged
de facto relationship with Mr Carlisle.
Ms Barry had brought proceedings in the
Family Court under the Property (Relationships) Act but these were withdrawn. The
notice of claim was also withdrawn and was replaced with a caveat relying on the
2002 deed. We understand this caveat is still registered on the title.
Dr Schnabel’s evidence
[31]
Mr Carlisle called
a
clinical
psychologist
and neuropsychologist,
Dr Ralf Schnabel, who gave evidence about Mr Carlisle’s mental state and
competency at the time of the 2002 deed. Although Dr Schnabel did not personally
examine Mr Carlisle, he had reviewed a number of medical reports and assessments
over the period from November 2000 until December 2008. Dr Schnabel’s opinion
was that Mr Carlisle was not in a fit and competent mental state when he signed the
2002 deed. We summarise the key points of his evidence-in-chief:
(a)
Mr Carlisle was diagnosed in November 2000 with manganese
toxicity, having ceased work in August 2000, and has remained on
accident compensation ever since.
(b)
The diagnosis of manganese toxicity requires the expertise of several
health disciplines including occupational medicine, psychiatry,
nephrology and neuropsychology. All these disciplines have been
comprehensively involved in the evaluation of Mr Carlisle’s case.
(c)
Three aspects must be considered: neuro-cognitive capacity, mental
health and contextual factors.
(d)
Focusing particularly on neuro-cognitive capacity, Dr Schnabel
referred to Dr Black’s assessments in his reports of 5 April 2001 and
15 July 2002.2 The first of these recorded Dr Black’s finding that
Mr Carlisle was suffering from impaired concentration, information
processing, abstract verbal comprehension, short term memory and
executive functions.
Symptoms of depression, anxiety and
impulsiveness were also noted. He had concluded that the multiple
cognitive,
emotional/behavioural,
and
functional
changes
in
Mr Carlisle could be attributed to manganese neuro-toxicity.
(e)
In the assessment in July 2002 Dr Black found Mr Carlisle’s cognitive
impairment had worsened.
Amongst other cognitive problems,
Dr Black highlighted severe problems with poor decision-making,
impulsiveness, mood swings and periods of low moods.
(f)
A neuropsychological assessment conducted by Mr Webb in 2004
noted an impaired performance on most tests to levels substantially
below those found by Dr Black. Given that Mr Carlisle had not been
exposed to magnesium since ceasing work in 2000, Mr Webb had
concluded that psychological and psychiatric factors had significant
2
Mr Carlisle was examined by Dr Black for the purposes of the second report on 6 June 2002.
impact on Mr Carlisle’s test performance, in addition to the
manganese-related cognitive problems.
(g)
Dr Schnabel’s conclusion in relation to the results of the
neuro-cognitive testing undertaken between 2001 and 2004 was that
Mr Carlisle was suffering from considerable cognitive impairment.
Although the underlying causes appeared to have shifted from a
substantially brain organic disorder to a mixed psychological/organic
presentation, the level of incapacity, irrespective of causation, was
considered to be high. Core functions for rational decision-making
had been compromised including poor comprehension, impulsiveness,
problems with planning/executive functions, and mental slowness.
(h)
Mental health disorders secondary to magnesium toxicity had been
noted in several reports over the period 2001 until 2006.
Dr Schnabel’s evidence was that there was consensus among the
experts who had examined Mr Carlisle over this period that he
suffered from significant mental health disturbances with pronounced
emotional instability, irrational decision-making and, at times,
dangerous behaviour.
(i)
With reference to contextual factors, Dr Schnabel’s evidence was that
the cognitive and emotional/behavioural problems already described
had led to advanced social isolation. This left Ms Barry in a powerful
position as Mr Carlisle’s only focus point for emotional and social
interaction.
In this state of dependency, it was expected that
Mr Carlisle would have been particularly receptive to requests made
by Ms Barry without critically examining the implications or
receiving independent advice.
[32]
In conclusion, Dr Schnabel said:
26.
Considerable and concurring medical evidence was provided to me
establishing that Mr Carlisle was suffering severe cognitive and
emotional/behavioural effects of manganese toxicity.
Well
documented symptoms included poor judgment, impulsive/irrational
behaviour, and mood disturbances. It appears from 2001 to 2004 the
severity of his problems has been acknowledged by Ms Barry who
had provided in-depth collateral information to Dr Black and
Mr Webb for establishing Mr Carlisle’s impaired everyday function.
[33]
27.
Pronounced problems with anger management, poor boundary
keeping, and impaired impulse control are further evidenced by the
protection order, Ms Barry had taken out against Mr Carlisle which,
I understand, had numerous call outs of the police as Mr Carlisle was
in breach of this order.
28.
In the context of unhelpful context factors, comprising social
isolation and emotional dependency, I have formed my opinion that
Mr Carlisle was not in a position to make a rational decision with
regards to the transfer of half of his property to Ms Barry.
Dr Schnabel was cross-examined at considerable length by Ms Barry’s then
counsel. Dr Schnabel acknowledged that his opinion was based on all the material
and information he had received. He acknowledged that, if the information he had
been given (for example, on contextual matters) was incorrect, then he would be
willing to re-consider his opinion. However, he pointed out there was a high degree
of consensus amongst those who had prepared the many reports he had reviewed. As
well, Ms Barry had herself been present at a number of the interviews and had
confirmed symptoms described in the reports such as Mr Carlisle’s problems with
social functioning.
[34]
He also agreed that Dr Black’s three stage analysis of the effects of
manganese toxicity, while widely used at the time of his assessments in 2001 and
2002, was not necessarily a helpful analysis. That was because there were often
overlaps between symptoms and there was no clear pathway of progression for every
client. However, Dr Schnabel said the actual test results supporting Dr Black’s
neuro-cognitive findings were important.
[35]
He disagreed with counsel’s proposition that people suffering from
manganese toxicity may begin to improve over time. Dr Schnabel’s opinion was that
people suffering from a gradual process injury over 30 years do not usually “come
right”. He agreed with Dr Black’s assessment in his second report of 15 July 2002
that the worsening of Mr Carlisle’s condition was unexpected and suggested there
were psychological difficulties in addition to the neurotoxicity symptoms such as
frontal lobe dysfunction, cognitive deterioration and emotional lability.
[36]
Dr Schnabel was asked about Mr Carlisle’s mental state at the time the
2002 deed was signed. He agreed that the fact the deed had been signed at the
District Court by the parties suggested it was not a random impulsive step by
Mr Carlisle. However, he had no other information about the extent to which the
document had been considered and discussed as “a more purposefully planned
thing”. He agreed that Mr Carlisle would have the ability to comprehend the content
of the deed but in his opinion Mr Carlisle’s judgment in making decisions rationally,
strategically and effectively was compromised. The Judge clarified this point in
these terms:
Q.
— I just want to be absolutely clear. You’ve got two statements in
your brief about one sort of at the beginning and one at the end about
his state at the time. So in paragraph 8 you say that you believe he
was not in a fit and competent mental state in 2002, and then in
paragraph 28 you say he was not in a position to make a rational
decision. Now I’m not seeking to put words in your mouth at all,
but are they, are those paragraphs — do you mean to say the same
thing or are they different points?
A.
I mean to say the same thing.
Q.
Right. And is that a, in terms of that is that, the thing that you’re
saying is the point that we discussed previously that he, you consider
that he would have known at the time that he was signing a
document and also what it said —
A.
Correct.
Q.
— but may not have had the capacity to give it a sort of a prudential
evaluation?
A.
Correct. And consider the implications.
Q.
Right.
A.
And make an informed — thank you.
Ms Barry’s application to adduce further evidence on appeal
[37]
Ms Barry applied for leave to adduce further evidence on appeal. The items
she wished to adduce included the following:
(a)
The completed 1998 agreement we have referred to above at [19].
(b)
Medical evidence relating to her own health.
(c)
A letter from her father about a payment made in respect of the
mortgage over the Wairau Valley property.
[38]
(d)
A letter from the Bank of New Zealand about a life insurance policy.
(e)
Supermarket receipts relating to purchases she says she had made.
(f)
Entries from her 2003 diary.
Mr Carlisle opposed the granting of leave and, as already noted, we declined
Ms Barry’s application. We now set out our reasons.
[39]
The principles relating to applications to adduce fresh evidence on appeal are
not in dispute. The proposed evidence must be fresh, credible and cogent. Litigants
are expected to adduce all relevant and discoverable evidence at trial. Evidence is
not regarded as fresh if it could, with reasonable diligence, have been produced at
trial.3 Where the proposed evidence is not fresh, it should not be admitted unless the
circumstances are exceptional and the grounds compelling.4
[40]
Mr Ord accepted that none of the proposed evidence was fresh in the sense
that it could not have been obtained with reasonable diligence prior to trial.
Nevertheless, he submitted the documents were cogent and credible and it was in the
interests of justice that the application to adduce further evidence be granted. He
submitted that Mr Carlisle’s trial brief of evidence had been delivered late. As well,
the parties had been proceeding on the basis that it was not necessary to show there
was consideration for the 2002 deed. All that changed, it was submitted, when the
Judge issued a minute a few days before trial drawing attention to the proposition
that equity would not permit specific performance of a contractual promise for which
there was no consideration.
[41]
The principal focus of Mr Ord’s argument was on the agreement signed on
17 May 1998. The terms of this agreement are:
3
4
Aotearoa International Ltd v Paper Reclaim Ltd [2006] NZSC 59, [2007] 2 NZLR 1 at [6]; Rae
v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) at 192.
Rae v International Insurance Brokers (Nelson Marlborough) Ltd, above n 3, at 193; Airwork
(NZ) Ltd v Vertical Flight Management Ltd [1999] 1 NZLR 641 (CA) at 650.
AGREEMENT between Francis Carlisle and Lynda Rose Barry.
File number = 1169B
Property at Wairau Valley Road, Wairau Valley:
“30 acres more or less situated in Block 1 Avon Survey District”
Purchased in September 1997 from S. W. Neame
Title transferred to Francis Carlisle, 21 October 1997 at 9.55am
Settlement price = $144,000.00, 30 September 1997
Although there is individual financial interest in the property, it was decided
to transfer the Certificate of Title to F. Carlisle only, as he is GST Registered
+ claimed reimbursement of $16,000.00 for the house (dwelling) site.
Initially, the Title, Mortgage + GST Registration are in F. Carlisle’s name.
These will be altered to both Carlisle and Barry names at a later date.
The individual financial interest of Lynda Barry in the purchase price is
$70,000.
The nature of the mortgage raised by Francis Carlisle is $42,000 (for the
dwelling).
Therefore a 3/8 share of property and dwelling is held in trust for Lynda
Barry by Francis Carlisle.
While there is mutual effort and financial input, the respective shares will
increase in value, as the property value increases.
The above Agreement signed Sunday 17 May 1998
Between Francis Carlisle and
Lynda Rose Barry
(underlining in original)
[42]
The document is handwritten and is signed by both Ms Barry and
Mr Carlisle. It is not witnessed. An unsigned version of this agreement was before
the High Court and both parties made submissions about it. After trial, Ms Barry
made an inquiry of a solicitor (Mr Leggett) who had a signed version of the
agreement in his records.
It appears Mr Leggett has no recollection of the
circumstances in which this agreement was prepared.
[43]
Ms Barry’s complaint about not having sufficient time to locate this
document prior to trial has no substance given that she was aware of the unsigned
version and could have made inquiries about the existence of a signed version quite
simply, as she did after trial. Nor is there any substance in her complaint about the
late filing of Mr Carlisle’s brief of evidence or the Judge’s advice prior to hearing on
the issue of consideration. Both parties had earlier filed substantial affidavits in the
Family Court covering much of the same material as was in issue at trial. Ms Barry
did not raise any objection to the trial proceeding and did not seek an adjournment.
[44]
The introduction of the 1998 agreement on appeal would inevitably give rise
to a range of issues that could not be dealt with satisfactorily on appeal. These
include the circumstances in which the 1998 agreement was prepared and signed.
Mr Carlisle’s evidence at trial was that he could not recall the agreement. He now
accepts he must have signed it but still has no recollection of having done so. It
would be necessary, amongst other things, to consider and, if necessary, call medical
evidence as to whether Mr Carlisle’s mental state was affected in 1998 by
manganese toxicity. That must be at least a possibility given his diagnosis only two
years later and his long term exposure to manganese through his work. Evidence
could also be necessary to determine whether the 2002 deed was intended to replace
the 1998 agreement. Mr Ord accepted that, from a practical point of view, it would
be necessary to refer the matter back to the High Court for consideration if the 1998
agreement were admitted.
[45]
We accept Mr Locke’s submission on behalf of Mr Carlisle that the existence
of a signed version of the 1998 agreement does not materially advance Ms Barry’s
case based on the 2002 deed. At best, it demonstrates that in 1998 Mr Carlisle was
willing to accept Ms Barry had some interest in the Wairau Valley property.
However, he has deposed that if the 1998 agreement were adduced on appeal, his
evidence would be that he was only willing to recognise an interest by Ms Barry if
she had made a financial contribution to the property. There is no evidence she did
so.
[46]
We do not need to dwell at any length on the remaining items Ms Barry seeks
to adduce on appeal. Not only is the evidence not fresh, it lacks cogency. We are
unable to discern how evidence relating to Ms Barry’s state of health could be
relevant to contributions allegedly made to the property.
It is accepted that
Ms Barry’s father made a payment of $1,589.23 in reduction of the mortgage on the
Wairau Valley property; Ms Barry claims this was her money but the source of the
funds used is immaterial. The evidence about Ms Barry’s life insurance does not
demonstrate that it was continued after 1992 for anyone’s benefit but Ms Barry. The
miscellaneous receipts for supermarket purchases do not demonstrate anything of
significance to the case, and the 2003 diary entries post-date the 2002 deed.
[47]
It was for these reasons that we declined the application to adduce further
evidence.
Was the Judge correct to find that the 2002 deed could not be specifically
enforced due to lack of consideration?
[48]
It was common ground in the High Court that equity would not specifically
enforce a contractual promise for which there is no consideration unless the promise
is embodied in a deed which came into operation on or after 1 January 2008.
Although, at law, damages may be awarded for breach of a contract made under seal,
without consideration no remedy was available in equity prior to 1 January 2008.5
[49]
The date of 1 January 2008 assumes relevance because of s 18 of the
Property Law Act 2007, which provides:
18
Specific performance of voluntary promises made by deed
(1)
A court—
(2)
[50]
(a)
may make an order for the specific performance of a
voluntary promise made by deed; but
(b)
must not refuse to do so because there was no valuable
consideration for the promise.
Subsection (1) applies to deeds coming into operation only on or
after 1 January 2008.
Mr Ord argued that the 2002 deed did not come into operation in terms of
s 18(2) until steps were taken to enforce the agreement in 2014. We do not accept
that submission. That the deed came into effect immediately when it was signed is
evident in at least two important respects.
Under the agreement, it was
acknowledged that Ms Barry “does have a half share in this property” and was
5
Terry Sissons “Specific Performance” in Andrew Butler (ed) Equity and Trusts in New Zealand
(2nd ed, Thomson Reuters, Wellington, 2009) at [24.2.4(1)].
“entitled to run her business from it and to live in the house as an equal tenant in
common”. Section 18 does not therefore apply and the issue becomes whether the
Judge was right to find there was no consideration for the 2002 deed.
[51]
The Judge accepted that extrinsic evidence is admissible to prove
consideration even where the document does not record the fact of any
consideration.6 He noted Mr Locke’s submission that any contributions Ms Barry
had made in respect of the Matakana property were made over 10 years prior to the
2002 deed and, as such, could have no causal nexus with Mr Carlisle’s entry into the
deed. Counsel submitted that if such contributions amounted to consideration it was
past consideration and that was insufficient.
[52]
The Judge referred to the following passage in Law of Contract in
New Zealand:7
If the defendant makes a promise, subsequent to and independent of the
transaction, it must be regarded as a mere expression of gratitude for past
favours or as a designated gift, and no contract will arise. It is irrelevant that
he or she may have been induced to give the new promise because of the
previous bargain. The fact is that it is not part of any bargain: the act of the
plaintiff was not done in response to such a promise. In such a case the
promise is declared, in traditional language, to be made upon past
consideration; or, more accurately, to be made without consideration at all.
[53]
Brown J recognised there may be circumstances where a promisee’s conduct
prior to the giving of a promise by the promisor may confer some benefit which may
amount to consideration for the promise. He cited the following passage from
Lord Scarman’s speech in the Pao On case:8
The Board agrees with [the submission of counsel for the plaintiffs] that the
consideration expressly stated in the written guarantee is sufficient in law to
support the defendants’ promise of indemnity. An act done before the giving
of a promise to make a payment or to confer some other benefit can
sometimes be consideration for the promise. The act must have been done at
the promisors’ request: the parties must have understood that the act was to
be remunerated either by a payment or the conferment of some other benefit:
and payment, or the conferment of a benefit, must have been legally
enforceable had it been promised in advance. All three features are present
in this case. The promise given to Fu Chip under the main agreement not to
6
7
8
Pao On v Lau Yiu Long [1980] AC 614 (PC) at 631.
John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand (5th ed,
LexisNexis, Wellington, 2016) at [4.2.1(b)].
Pao On v Lau Yiu Long, above n 6, at 629–630.
sell the shares for a year was at the first defendant’s request. The parties
understood at the time of the main agreement that the restriction on selling
must be compensated for by the benefit of a guarantee against a drop in
price: and such a guarantee would be legally enforceable. The agreed
cancellation of the subsidiary agreement left, as the parties knew, the
plaintiffs unprotected in a respect in which at the time of the main agreement
all were agreed they should be protected.
(emphasis added)
[54]
After recording counsel’s submissions on the consideration point, the Judge’s
conclusions were expressed in these terms:9
[115] I agree with Mr Locke that the nature of the acts said to comprise
consideration were not particularly significant and certainly not of a measure
which might be expected as the quid pro quo for the transfer of a half interest
in land of the order of the Wairau Valley property. In so concluding I am
mindful of the fact that consideration which is sufficient in law may be
materially inadequate in the eyes of equity and that the consideration relied
upon in this case can fairly be viewed as “unbalanced” in equitable terms.10
[116] However on the evidence presented, in my view the hurdles which
the plaintiff’s claim must inevitably fail to surmount are the first and second
features identified by Lord Scarman. There is no evidence that the activities
relied upon as amounting to consideration were undertaken at the
defendant’s request. Nor was there evidence that the performance of such
acts was to be remunerated by a transfer of a half share of the property to the
plaintiff. A mere expectation on the part of the plaintiff in the absence of
those two features does not provide a basis for a claim to enforce a promise
which is unsupported by consideration.
[117] Indeed on the plaintiff’s own evidence it is very questionable
whether she held any expectation as to a transfer of a share in the property in
return for her performance of services or her making contributions
subsequent to the purchase of the Wairau Valley property. The tenor of her
evidence appeared to be that her entitlement to a half share was already
extant at the date of purchase. That is the thrust of the Agreement itself,
containing as it does the GST-based explanation for the absence of her name
from the title and the confirmation of her “legal right” as a half-owner of the
property. I consider that the wording of the Agreement is inconsistent with
the contention that consideration for the promise in the Agreement flowed
from acts done subsequent to the purchase at the request of the defendant.
[118] Consequently I uphold the defendant’s objection that there is no
consideration for the promise in the Agreement.
9
10
High Court judgment, above n 1 (footnote in original).
Attorney-General for England and Wales v R [2002] 2 NZLR 91 (CA) at [100] and [103].
[55]
The Judge added that while Ms Barry had the opportunity to participate in the
purchase of the Wairau Valley property, she did not in fact do so due to lack of funds
and Mr Carlisle became the sole owner.
[56]
Mr Ord submitted that the Judge was wrong to conclude that the
contributions made by Ms Barry to the mortgage on the Matakana property were not
made at Mr Carlisle’s request. We agree the evidence shows Mr Carlisle did ask
Ms Barry to meet the mortgage payments on the Matakana property and that she did
so for a period the Judge found was perhaps 12 months. Ms Barry may have made
the mortgage payments (while Mr Carlisle paid all living expenses) for a short period
in the expectation of shared ownership, but any such expectation was not sustainable
after their relationship ended and Mr Carlisle assumed sole responsibility for the
mortgage payments.
[57]
There is no other evidence of any direct contribution by Ms Barry towards
the property other than the payment of $1,589.23 to reduce the mortgage on the
Wairau Valley property. Neither party was able to recollect at trial how this payment
came to be made. Certainly, there is no evidence that it was made at the request of
Mr Carlisle. Mr Ord referred to life insurance payments made by Ms Barry but, as
earlier noted, the evidence on this point does not demonstrate that any payments
Ms Barry made were other than for her own benefit.
[58]
The Judge recorded a submission by Ms Barry’s trial counsel to the effect
that most of the contributions she made were in the form of:
… less measureable things like paying for groceries; the provision of the car
which she purchased with the money which her father gave her following
her mother’s death; the provision of transport for the defendant, particularly
when he was unable to drive but needed to be driven to various
appointments, or for errands in town to see specialists or ACC; paying for
diesel for the car or generator; with care of the defendant’s children at
various times and with household companionship, performance of chores
and all the various incidents which go towards the domestic relationship.
The defendant and his witnesses downplayed the plaintiff’s performance of
chores but … the defendant admitted in paragraph 6 of his affidavit of
3 April 2001, that: “She did not pay me any money but she did things around
the house and helped with various household chores.”
[59]
We accept Mr Locke’s submission that contributions of this kind could not
amount to consideration in terms of Lord Scarman’s criteria cited above at [53]
since, even if they were done at Mr Carlisle’s request, Ms Barry could not have
understood she would be remunerated by a payment or the conferment of some other
benefit, let alone one that could have been legally enforced if it had been promised in
advance. At best for Ms Barry, the contributions she made may have given rise to
some minor interest in the property on the principles set out in Lankow v Rose,11 but
any claim on this basis was not pursued.
[60]
We conclude, essentially for the reasons given by the Judge, that there was no
consideration provided by Ms Barry that could have supported a claim for specific
performance of the 2002 deed.
Was the Judge correct to find that if the deed was enforceable, it constituted an
unconscionable bargain?
[61]
Mr Carlisle pleaded three affirmative defences: duress, undue influence and
unconscionable bargain. The Judge rejected the first two defences but found that if
contrary to his view, the 2002 deed was enforceable, he would uphold Mr Carlisle’s
defence that the deed amounted to an unconscionable bargain and was unenforceable
for that reason as well.
[62]
In the circumstances the Judge dealt with this issue relatively briefly. He
cited the relevant principles relating to unconscionable bargains as set out by this
Court in Gustav & Co Ltd v Macfield Ltd.12 The Judge’s conclusions were expressed
in these terms:13
[132] It is plain in my view that the plaintiff was fully cognisant of the
defendant’s poor state of health. Affidavits which she filed in Family Court
proceedings in 2001 clearly evidence that knowledge. The circumstances of
this case are such that the burden falls on the plaintiff to show that the
transaction was fair and reasonable and should be upheld.
11
12
13
Lankow v Rose [1995] 1 NZLR 277 (CA).
Gustav & Co Ltd v Macfield Ltd [2007] NZCA 205 at [30].
High Court judgment, above n 1.
[133] This transaction, which would involve the defendant assigning to the
plaintiff a half share in the Wairau Valley property, was in no measure fair
and reasonable. The plaintiff had made no financial contribution to the
purchase price of the land or to the cost of construction of the house. Indeed,
far from contributing, she had derived significant benefits, both residentially
and in the operation of her horse riding business.
[63]
In reaching this conclusion, the Judge did not make any specific finding
about Mr Carlisle’s state of mind at the time of the 2002 deed nor did he refer to the
evidence given by Dr Schnabel. However, the Judge accepted Mr Carlisle’s working
history as a fact and that, over a period of time, he began to experience mood swings,
headaches and insomnia. As well, the Judge also appeared to accept as a fact that
Mr Carlisle was diagnosed as suffering from manganese toxicity in November 2000.
This diagnosis was not disputed before us. The Judge also cited passages from
Dr Black’s findings in 2001 and 2002 without any adverse comment.
[64]
We have set out above at [31] to [36] in some detail the evidence of
Dr Schnabel.
Unconscionability — our assessment
[65]
Equity has jurisdiction to intervene to relieve a party from the rigours of the
common law in respect of an unconscionable bargain. As this Court said in Gustav,
the jurisdiction is not intended to relieve parties from hard bargains or to save them
from their own foolishness.14 Rather, equity operates to protect from exploitation
those who enter into agreements while under a significant disability or disadvantage.
[66]
The key passages in Gustav relevant to what constitutes a qualifying
disability state:15
3
14
15
A qualifying disability or disadvantage does not arise simply from an
inequality of bargaining power. Rather, it is a condition or
characteristic which significantly diminishes a party’s ability to
assess his or her best interests. It is an open-ended concept.
Characteristics that are likely to constitute a qualifying disability or
disadvantage are ignorance, lack of education, illness, age, mental or
physical infirmity, stress or anxiety, but other characteristics may
also qualify depending upon the circumstances of the case.
Gustav & Co Ltd v Macfield Ltd, above n 12, at [30].
At [30].
[67]
4
If one party is under a qualifying disability or disadvantage (the
weaker party), the focus shifts to the conduct of the other party (the
stronger party). The essential question is whether in the particular
circumstances it is unconscionable to permit the stronger party to
take the benefit of the bargain.
5
Before a finding of unconscionability will be made, the stronger
party must know of the weaker party’s disability or disadvantage and
must “take advantage of” that disability or disadvantage.
Having reviewed Dr Schnabel’s evidence and the critical reports of Dr Black
in 2001 and 2002, we are satisfied Mr Carlisle was suffering from a significant
disability or disadvantage at the time he signed the 2002 deed and that he had been
doing so for at least two years prior to that time. There is no doubt he was suffering
from manganese toxicity which gave rise to significant cognitive impairments and
compromised his executive functioning. His condition had worsened by the time of
Dr Black’s second examination in 2002 about three months before the 2002 deed
was signed. We accept Dr Schnabel’s opinion that although the underlying causes of
Mr Carlisle’s condition had by then shifted from a substantially organic brain
disorder to include psychological factors, his level of incapacity, irrespective of
cause, was considered to be high. The symptoms also included depression and mood
swings.
[68]
Mr Carlisle’s cognitive disabilities were not such as to preclude him from
understanding the terms of the 2002 deed but we accept Dr Schnabel’s view that his
condition impaired his ability to make sound or prudent decisions. This conclusion
is supported by the background of disharmony by the parties over a period of several
years prior to the time the deed was entered into, the obscure circumstances in which
the deed was prepared and signed, and the gross imbalance between Ms Barry’s
contributions and those of Mr Carlisle.
[69]
There can be no doubt that the disharmony in the relationship between the
parties in the period from 1998 until the agreement of 2002 was serious. It led to the
intervention of the police and involved solicitors on each side as well as the Family
Court. It is reasonable to conclude that Mr Carlisle’s ill health was a significant
factor contributing to his behaviour during this period and his willingness to
entertain the possibility of some form of property agreement with Ms Barry despite
the dissension between them, the admitted absence of any financial contribution by
Ms Barry to the acquisition or maintenance of the Wairau Valley property, and her
minimal contribution to the earlier Matakana property.
[70]
On the Judge’s findings, which we accept are soundly based, the de facto
relationship between the parties had come to an end about 12 months after the
Matakana mortgage was obtained. Thereafter, Mr Carlisle took over the mortgage
entirely. Any expectation of an interest in the property Ms Barry may have had
thereafter could not have been reasonably held given Mr Carlisle’s evidence, which
the Judge accepted, that she would not have any interest in the property except to the
extent she was willing to contribute funds. Thereafter, the parties were free to
establish other relationships and did so.
[71]
Their association from that point was appropriately described as one of
friends or flatmates. Although they continued to occupy the same accommodation
for a number of years, this was not on a continuous basis. There is no evidence
Ms Barry made any significant contributions after the initial 12 months at Matakana
that could be regarded as a contribution to the properties. Rather they are properly
characterised as contributions to a common household that are adequately
compensated by the benefits of accommodation and, in Ms Barry’s case, the
opportunity to use the Wairau Valley property for her horse riding business.
[72]
We agree with the Judge that Ms Barry was well aware of Mr Carlisle’s
disability and we are satisfied she took advantage of it in persuading him to enter
into a bargain that could only be regarded as improvident.
The Judge was
undoubtedly correct to find that the 2002 deed was “in no measure fair and
reasonable” and that it could not, in equity, be upheld.
Result
[73]
For the reasons given, the appeal is dismissed. The appellant is legally aided
so that no costs award may be made against her. In terms of s 45(5) of the Legal
Services Act 2011, but for the grant of legal aid, the Court would have awarded the
respondent costs for a standard appeal on a band A basis and reasonable
disbursements.
Solicitors:
Rob Ord, Nelson for Appellant
Lundons Law, Blenheim for Respondent