There was a valid explanation for a family financial arrangement looking at first glance to heavily favour a son and his family trust at the expense of his father the Court of Appeal said, overturning a High Court ruling of undue influence.
Litigation followed a 2009 family arrangement enabling Keith Hingston to remain in occupation of his Welcome Bay home in Tauranga following a Family Court order that he pay his then wife $295,000. Aged in his seventies, Keith was unable to raise finance. In a letter to his father, son David spelt out starkly the options open; financial assistance from David and his family trust or sale of Welcome Bay. The letter set out pros and cons for each option.
The Court of Appeal was told Keith wanted to remain in Welcome Bay until, in his words, he was carried out in a pine box. He became determined to take up his son’s offer of financial assistance as the only option.
The agreed arrangement saw sale of Welcome Bay to David’s family trust with his father retaining rights of occupation under an agreement to occupy. Sale price for Welcome Bay was agreed at a figure the High Court described as being $130,000 less than market value and $55,000 below what a registered valuer determined as being forced sale value. There was an objective basis for this apparently low sale price, the Court of Appeal said. Market prices were depressed, sale costs were avoided and son David was also looking to recover legal costs paid by the Trust on behalf of Keith.
Also questioned in the High Court was the $115,700 owed by Keith for purchase of his lifetime right to occupy Welcome Bay. Based on sale price for Welcome Bay and Keith’s life expectancy, this figure was fairly and objectively calculated, the Court of Appeal said. This $115,700 debt owed David’s family trust includes a contingent liability to pay interest at 4.25 per cent, if demanded.
The arrangement also saw Keith transfer future Jacques Martin pension payments and all his personal property to his son’s family trust. This was explained as providing security for the $115,700 debt. Keith retained possession of his personal property. Pension payments were in reduction of the debt. David’s family trust had borrowed to buy out Keith, having an interest bill to meet and no income since Keith had rent-free occupation of Welcome Bay.
There was conflicting evidence as to whether unnecessary pressure was put on Keith at the time he signed. He said in evidence that son David was present when he signed. The Court of Appeal said the weight of evidence was that David and Keith were in different rooms and in different cities when Keith signed.
There was no undue influence, the Court of Appeal ruled. Keith received independent legal advice. The Court of Appeal emphasised it was ruling only on whether there had been undue influence; it was not commenting on overall fairness of the transaction or whether it was commercially a ‘good deal.’
Separately, the case was sent back to the High Court to resolve disputed claims by each side that the other had not fully honoured terms of the agreement.
Hingston v. Hingston – Court of Appeal (22.11.22)
22.178