Legal

Pensioner’s $1m gift to lawyer to be reviewed in court

A superannuitant who gave $1 million to a lawyer she was “mesmerised” by has secured the right to take him to court in an effort to get her money back.

Christine Jessie Russell, in her late 70s, is pursuing the return of $1 million plus interest from practising lawyer Lawrence Herzog through the Auckland High Court.

Russell’s case relies on proving that Herzog took advantage of her through unconscionable bargain, undue influence or breach of fiduciary duty.

She also alleges Herzog had breached a contract of loan through non-repayment, however a summary judgment released in July suggests there is inadequate evidence to prove the money was ever loaned.

At the centre of contention is the relationship between Russell and Herzog and whether he acted as her lawyer during the period when she signed over the $1 million.

The pair first met in February 2008 when Russell’s sister recommended she use Herzog as a barrister for High Court proceedings against other members of her family.

The dispute had taken an emotional toll on Russell and she confided in the barrister.

Their relationship continued after the litigation ended and a close friendship blossomed, one that Herzog describes as “mutually affectionate, supportive and caring”.

Russell characterised it differently, saying Herzog was flattering and she soon became “mesmerised” by him.

She said the relationship quickly became sexual and the barrister “offered to have sex with [her] immediately after settling the bill for his services in the family dispute”.

From very early on there was a financial aspect to their relationship beyond that of lawyer and client.

Evidence shows that between 2009-2010 Russell made several unsecured advances to Herzog totalling $410,000. The explanation for these advances is disputed, with Herzog saying he had offered to take the loans to secure higher return investments for Russell.

The pensioner said Herzog had borrowed the money for his own purposes.

Whatever the case, after concerns about the advances were raised by Russell’s accountant, the pair signed a loan agreement in January 2012 stating Russell placed funds with Herzog for “investment purposes”.

The Pukekohe property sale

In late 2014, Russell decided to sell her property in Pukekohe to her niece and niece’s husband, Jessica and Richard Kirkwood, and a sale and purchase agreement was drawn up for $4 million.

Concerned this price was well below market value, Herzog advised Russell to try and get out of it - advice she took.

The Kirkwoods responded with legal action against Russell in mid-2015.

During these proceedings, Russell said Herzog provided “ongoing legal and strategic advice”, a fact disputed by the barrister who said he refused to represent her due to of conflict of interest issues.

Instead of representing her he recommended she engage Turner Hopkins as solicitors and Neil Campbell QC as a barrister, which she did.

While the summary judgment proceedings were taking place, Russell and Herzog began discussing the possibility of Herzog buying the Pukekohe property.

He drew up a sale and purchase agreement, on her request he says, for the price of $8 million, conditional on the cancellation of the existing agreement with the Kirkwoods.

Russell signed the agreement seemingly without independent legal advice on June 28, 2015.

In October 2015 a judicial conference was held to resolve the dispute with the Kirkwoods. Herzog was present but neither of Russell’s legal team were able to attend.

Her barrister, Campbell QC, had earlier said Russell had a good case against the Kirkwoods which was likely to be upheld by the court so it was surprising when Russell was ordered to pay the Kirkwoods $3.5 million in a settlement.

Concerned about her inability to pay the Kirkwoods in the specified timeframe, it became clear she would need to sell her properties to free up her assets.

Around this time Herzog introduced the superannuitant to the director of Pamela Management Limited who offered her $10 million for the property.

Following this offer, Russell and Herzog entered another agreement on October 30 2015, stipulating Russell would reward Herzog for his help securing her a better price for the property by splitting the difference between the $8 million he offered and the final sale price.

Herzog said that initially the pair had spoken about him getting an unspecified “fair amount” for his assistance and it was Russell who had deemed he get half of the difference.

The property eventually sold to Pamela Management Limited for $10 million later that year.

Signing the $1 million away

After the completion of the Kirkwood settlement, Herzog accompanied Russell to Turner Hopkins’ offices, which he says was at her request.

There, Russell gave written instructions for Turner Hopkins to pay $1 million to Herzog with one of the firm's partners recalling they were never given an explanation about the payment.

“When we attempted to question Christine on her instructions she essentially advised us that the decision to make the payment was hers and we were to follow her instructions.”

The partner said the firm had no documentation to support that the payment was a loan, and a text message sent after the transaction from Russell to Herzog indicated the money was his to do with as he pleased.

In 2016, the relationship between the pair deteriorated.

In August, Russell emailed Herzog, seemingly hurt, asking him to repay the $410,000 from their 2012 loan agreement which he promptly did.

The email indicated she was angry Herzog was no longer paying attention to her but two days later apologised for the way that she treated him in the email.

Three months later, Herzog received a letter from Blackwood Hawkins Law, Russell’s new legal representatives stating that Russell could not recall why she had transferred the money.

The letter said Russell was extremely stressed at the time she signed the money over and now “in the cold light of day” she was able to reflect on the substantial sum which she transferred without security taken or “discussions of interest repayment”.

Associate Judge Hannah Sargisson, who presided over Russell’s failed summary judgment application hearing on February 26, said a trial was needed to determine whether Herzog had wronged his former client.

A further hearing was held on September 20 and court proceedings are ongoing. A new court date has yet to be set.