Hi Lianne,
This sounds like a tough situation and it’s good to know that you are involved in having already spoken to your friend. It’s a very tough situation and it’s difficult to know how far you can push. It may not be feasible to surrender or re-home the older dog as many people are hesitant to adopt a dog with health problems and shelters or rescue groups are often overburdened with residents. You could try to reach out to your friend, maybe with help from their family, to better reason with him. As far as adding the puppy, people will do what they choose to do for various reasons, including how they spend their money. It may also be a way for them to manage any guilt or grief they might be having over the impending loss of the older dog. Only through delicate conversation can you better understand where they are coming from. As a last resort, you could contact your local animal control or SPCA but be prepared to lose your friend in the process.
Best of luck.
Dr. Ryan Llera