Ashworth v Lambie

[2012] NZHC 1110

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2010-409-001986 [2012] NZHC 1110

BETWEEN  NICOLA JAN ASHWORTH AND PHILIPPA MARY DIXON Plaintiffs

ANDPETER JOHN LAMBIE, SUSAN MABEL MURCHISON LAMBIE AND NICOLE COONEY TRUST CO LIMITED

First Defendants

ANDADRIENNE JUNE LAMBIE, PHILIP DALLAS BEAN AND TIMOTHY MICHAEL SILVER

Second Defendants

Hearing:         8 May 2012

Counsel:         S P Rennie for Plaintiffs

G H Nation and A L van Deurs for First Defendants
M J Wallace for Second Defendants

Judgment:      24 May 2012

In accordance with r 11.5 I direct the Registrar to endorse this judgment with the delivery time of 3.00pm on the 24th day of May 2012.

RESERVED JUDGMENT OF GENDALL J

[1]      Trevor Maurice Lambie died on 14 August 2009.   He had two daughters (Nicola and Philippa) and one son (Peter).  His will essentially left the residue of his estate in almost equal shares to the three children, after the termination of their mother’s life interest.  The daughters seek further provision out of his estate, which

has an approximate value of $990,000.

ASHWORTH V LAMBIE HC CHCH CIV-2010-409-001986 [24 May 2012]

[2]      In the statement of claim, the plaintiffs initially sought orders that the Court impose a remedial constructive trust in their favour in respect of part of farm land originally owned by their father, but which had been transferred to their brother in about 1996.  That cause of action was not pursued, and the case proceeded on the basis of the alternative claim pursuant to the Family Protection Act 1955.

[3]      The first defendants are Peter, his wife and a professional trustee company in their capacity as trustees of Peter’s family trust.  As such they remain active parties in  the  Family  Protection  claim  because  the  trustees  are  beneficiaries  under  a provision in the will that reduces a debt owed by the trust to the estate (see [8(b)] below).

[4]      The second defendants are the executors and trustees of the deceased’s estate,

being his widow, a solicitor, and an accountant.

The deceased’s estate and will

[5]      The deceased and his wife had settled their assets as tenants in common in equal shares in 1992.  This was on the advice of their accountant that there was merit in ensuring farming assets were owned jointly by a husband and wife to facilitate the transfer of those assets between generations and to better preserve those assets from potential duties or rest home fees.  The combined net value of the assets, at the death of  the  deceased  was  $1,976,558.    Accordingly  the  deceased’s  estate  value  was

$988,279 made up largely by debts owing by Peter and his interests, a Term Deposit of about $150,000 and $19,000 being the deceased’s interest in the farming partnership with Peter.

[6]      The debts owing by Peter and his interests arose out of the gradual transfer of the family farm assets, since the mid 1980s.  Personal chattels of the deceased were left to his widow and until the “date of distribution” the trustees are to apply so much of the income available (and so much of the capital) to the widow and the three children in such shares as the trustees in their discretion should determine.   The parties accept that that provision is intended to operate as a life interest for the benefit only of the widow, despite the theoretical position being that income and

capital might be appropriated for the benefit of one or more of the children.  But the widow and professional trustees as executors do not intend that to happen.

[7]      The “date of distribution” is the date of death of the widow or such earlier date as the trustees in their discretion appoint.   It is not suggested that any earlier date of distribution is to be fixed.  Counsel have made it clear that the plaintiffs do not wish to challenge the widow’s life interest.

[8]      The residuary estate is to be held until the date of distribution and then distributed in the following way:

(a)      To Peter, a bequest of a sum which equals that which is owed by him personally or his company (or entities other than his family trust) to the deceased.  But this is conditional upon Peter repaying the estate the sum of $63,075 (being part of the amount presently owed by him).

(b)To the trustees of the Lambie Family Trust, a bequest of $225,000 being part of the debt owed by it to the deceased, and secured by mortgage.

The effect of those two provisions is that about $353,389 owing by

Peter and his family trust to the estate are forgiven.

(c)      The plaintiff Nicola is to receive the sum of $1,250 per year from 1

January 2007 to the date of distribution.

(d)      The two plaintiffs then equally share in the residue.

[9]      The effect of (d) is, assuming the capital remains preserved, each of the plaintiffs would receive approximately $300,000 each.  The bequests made to Peter and his trust have a value of $353,389.

Background

[10]     For many years four generations of the Lambie family have farmed property at Pendarves, east of Ashburton in South Canterbury.  The deceased grew up on the family farm and married his wife Adrienne in 1956.  He was farming in partnership with his father.  The deceased and his wife had three children:  Peter, born in 1957, Nicola born in 1959, and Philippa born in 1962.  When the deceased’s father died in

1965 that partnership ceased, but a debt of $52,000 remained owing to his father.

[11]     The children’s upbringing on the farm was happy and they enjoyed a normal family life.  They had the benefit of a good education and like most children spent time after school, in the weekends, and during holidays helping in small ways around the farm.

[12]     Peter left school in 1974 when aged 17.  He commenced working with his father full time on the farm.  He has worked on it over the ensuing 38 years.  As had been the case with earlier generations, his father hoped Peter would continue farming the family farm.  To that end, Peter was brought into the partnership in 1981. At that time Peter acquired a share of the stock and plant at favourable rates, with payment secured through a debt to his father.

[13]     Part of the farm land owned by the deceased had been acquired by him from his father with the purchase being secured by a mortgage back.  That gave rise to the debt of $52,000.  Upon the death of his grandfather one of his estate assets was that mortgage.  Peter obtained a piece of the farm land from his father by taking over his father’s debt to his grandfather’s estate of $52,000, together with a further debt to the deceased of $184,850, in the consideration for the 219 hectares then obtained.  Just as the deceased leased the land held by him to the farming partnership, so too did Peter lease that part of the farm to the enterprise.

[14]     As was not uncommon in New Zealand rural farming families, and just had been the case with earlier generations, the deceased and his wife hoped and expected that Peter would eventually take over the farm in its entirety, if that was financially possible.

[15]   Over the next two decades the farming assets and land were gradually transferred to Peter and his family trust.   Liability for the purchase price of each transfer was fixed as debts owing to the deceased. The farming partnership struggled in the mid 1980s and income was modest.  Some funds ($30,000) were provided by Peter’s  wife  from  her separate savings  to  clear  a trading  account.    Peter made significant improvements to the family home in about 1988, with the assistance of a rural bank loan.  When the deceased wished to retire from farming in about 1991 the partnership was wound up, with Peter taking over stock and plant with payment being secured by a debt to his father.

[16]     At about this time, the deceased and the widow were winding down their involvement in the farm.   In 1992 they entered into the agreement under the then s 21 of the Matrimonial Property Act 1976. As a consequence they held as tenants in common in equal shares one half of the farm assets including the land that, at that point, had not been acquired by Peter.  The widow has deposed it was the intention of her and the deceased to eventually transfer the entire farm to their son.

[17]     In about 1996 the deceased and the widow subdivided a block of land which they owned and sold some to a neighbour and part of it to Peter.  This enabled cash to be acquired which was used to buy a section for them to build a home to retire to in Ashburton.  They advanced $248,000 of those funds to a trust they had created, the Inverell Trust, which owns the property in Ashburton.  That debt was forgiven over the following years through an annual gifting programme, and it was paid off in late 2002.

[18]     The retired couple still held about 80 hectares of the farm land which was leased to the farming partnership.   It was sold in 2007 to Peter’s family trust, the “Lambie Family Trust” (of which the first defendants are trustees).  The price was

$1.35 million plus GST, based upon a valuation that had been obtained.  The Lambie Family Trust provided $100,000 cash to the deceased and his wife, and $168,750 for GST.  The balance of $1.250 million was advanced to the trustees, at a very small interest rate, the principal being repayable on demand.

[19]     The Inverell Trust owns the Ashburton property in which the widow resides. The  trust  was  created  to  own  and  retain  the  widow’s  home  so  as  to  provide retirement accommodation in her lifetime.   The trust deed provides that the two plaintiffs are the ultimate beneficiaries.  The discretionary beneficiaries are described as the plaintiffs, any of their husbands, and the widow or any child or remoter issue of any beneficiary.  Although that would include Peter or his interests, there is no suggestion the remaining trustees, being the widow and professional trustee, would exercise any discretion under that trust in favour of Peter.  The confident expectation is that on the death of their mother the plaintiffs will equally share in the capital of the trust.

[20]     The various debts owing by Peter and his interests to his parents, in summary, were $189,225, $171,000, $22,703 and the final $1.250 million arising out of the acquisition of the last portion of farm land.   The matrimonial property agreement which resulted in the deceased and his wife dividing their assets equally and holding them as tenants in common establishes the net value of each of their shares at about

$790,000 as at 31 March 2009.

[21]     It  is  apparent  that  both  the  deceased  and  the  widow,  with  legal  and accounting advice, endeavoured to fulfil their wish that Peter have the option of buying or acquiring the farm he did not hold after the deceased’s retirement in 1996. They made similar wills.  They were mindful of obligations to the daughters.  The widow in her affidavit says:

Trevor and I always wanted Peter to have the option of buying all the farm that was left after we had bought a property in Ashburton.  Trevor and I then thought that our daughters should get some money out of this and we would provide for this in our wills.

.... I was aware of the terms of Trevor’s last will.   We both made similar wills at the same time.   At that time I knew we both owned loans and investments which had come from farming assets which we had owned equally.  Both Trevor and I understood that in our wills, after our death we were putting in place arrangements which would give our three children an approximate equal share of our estates.  We also understood and anticipated that after my death our daughters would share equally in the value of the Ashburton home owned by the Inverell Trust.   I believe the value of this property  at  present  (1  August  2011)  would  be  between  $350,000  and

$400,000).

[22]     The reality is that the benefit of the provisions of the deceased’s will to each of the two plaintiffs, provided the capital fund remains the same would be to the extent of $300,000, and to Peter a little more.  Counsel for the executors advised that so long as there are no changes to the capital fund then Peter would receive 37.5 per cent and each of the plaintiffs 31.25 per cent of the deceased’s estate.1

[23]     In addition, by reason of the other measures the parents have put into place, the plaintiffs as ultimate beneficiaries in the Inverell Trust will, upon their mother ceasing to need the Ashburton home, receive further benefits assessed at the moment between $175,000 and $200,000 each.  That may increase if future property values increase.  Nicola will secure a further bequest, not likely to be large, of $1,250 per annum from 1 January 2007 to her mother’s death.

[24]     In about 2003, the deceased and his wife gave to each of the plaintiffs $5,000 and in 2006, they gave Philippa a gift of $50,000 to assist her to buy a home in Christchurch.   The separate provision for Nicola in the will of the annual sum of

$1,250 per year down to the date of distribution was designed to balance, in a small way, that gift.  That further benefit to Nicola is unlikely to exceed $20,000 and could be much less.

[25]     The deceased acquired a new car at cost of $30,000 about a year before he died and this was amongst the chattels the widow received pursuant to the will.  She transferred  it  to  the plaintiffs  to  share it  or the proceeds  equally based  upon  a valuation of $20,000.  That is, each received the equivalent of $10,000 through their mother’s act.

[26]     The grievance that the plaintiffs feel is that they believe their brother has been able to acquire all of the family farm from their father and they estimate the farm to be worth about $10 million.  They believe that but for the transfer of it to Peter, the value of the estate may have been in the region of $5 million.  As I have said, they initially pleaded that the block of land last acquired by Peter in 2007 was,

so they believed, to be held as part of their inheritance and they had been promised

1      If the plaintiffs eventually receive a further (say) $200,000 each from the Inverell Trust, the respective shares in the estate and Trust asset increase to 35.9 per cent each, with Peter’s reducing to 29.2 per cent.

this.  That was disputed by the widow and Peter, and the remedial constructive trust allegation or cause of action was abandoned.

[27]     The plaintiffs in their affidavit depose that although it is intended they will each receive a half share in Inverell Trust assets they say:

However  the  capital  may  conceivably  be  distributed  to  our  mother. Moreover there is no certainty as to how our mother will distribute her assets under her will.

In other words, Peter’s interests have already acquired a multimillion dollar asset in the farm whereas we have no certainty as to how much we will receive under our parents’ wills.  Certainly, our respective shares will not be worth anywhere near as much as the net gains which Peter’s interests have made.

Consequently it would be just to vary our father’s will by removing [the clause] which forgives debts owed by Peter, his wife, Susan and their trust and we also believe that should the Court reach the view that the above is insufficient  to  meet  our  father’s  moral  duty,  then  it  should  respectfully reopen the transaction with Peter involving the sale [of the last portion of the farm property] ....

We consider the purchase price of $1.35 million was inadequate and should have been $2.2 million, being the current market value.  That would mean the debt to the Lambie Family Trust was increased from $1.25 million to

$2.1 million.

Personal circumstances of the plaintiffs and Peter

[28]     The plaintiff Nicola Ashworth is in her early 50s and married with four children.   She and her husband have joint assets of $1.301 million, liabilities of

$373,000, leaving a net equity of $928,000.  The plaintiff Philippa Dixon is aged 50, separated and has two children.  She has assets of $489,100 and liabilities of $47,050 (it seems her home at 477 Ilam Road is not subject to a mortgage although she has loans of a little under $33,000).   Her net equity therefore is $442,050.   So her financial circumstances are more modest than her sister, but it is not argued that they should be treated differently.

[29]     Peter is now aged 53 living and working on the farm where he lives with his wife.  They have four daughters aged between 17 and 25, and one daughter lives on the farm.  Peter’s wife has a significant spinal disabling condition, being confined to a wheelchair.   From funds she received in 2010 as a disability insurance payment

($662,000), a little over $471,000 was spent improving irrigation facilities for the farm.   Further sums ($45,981) were spent on upgrading the kitchen and other alterations to the home.

[30]     Cash injected by Peter and his wife in the farming partnership, according to the accounts, is about $490,000.   The farm land owned by the partnership has a rating valuation of $6.43 million plus improvements of $1.55 million, a total of

$7.98 million.  The farm land owned by Peter’s family trust has a rating value of

$2.175  million  plus  improvements  of  $225,000,  a  total  of  $2.4  million.    The mortgage to the National Bank of $1.892 million and $1.250 million are secured by a mortgage to the deceased and the widow.  Peter has an additional liability to the bank from an overdraft facility.  The overall position is that Peter and his interests are in a very comfortable capital position, but most of this, being farm land and buildings, he must retain to use in the farming operation.  He is comfortably off, but the farm does not produce a large income (the Trust’s operating revenue of $68,000 for the year ended 30 June 2010 was almost entirely from lease payments by Peter’s partnership. And the partnership had an operating surplus of $16,376, after trust private expenses of $70,830 were deducted).

Approach to Family Protection Act claims

[31]     The approach that the Court must take in considering claims under s 4 of the Family Protection Act 1955 is well known and does not need extensive discussion. Under s 4,  the Court  has  a discretion  to  order  a  provision  be made  out  of the deceased’s estate for any person entitled to claim for whom:

... adequate provision is not available from [the deceased’s] estate for the proper maintenance and support of the persons by whom or on whose behalf application may be made ...

[32]     The concept of a breach of moral duty on the part of a testator has developed as a result of judicial interpretation for many years.   Cases such as Re Harrison,2

Re Young,3 Little v Angus4 and R v Leonard5 made it clear that financial need was not

2      Re Harrison [1962] NZLR 6 (SC).

3      Re Young [1965] NZLR 294 (CA).

4      Little v Angus [1981] 1 NZLR 126 (CA).

an essential requirement for an award, because moral obligations may exist to make provision for a child even if that person is comfortably situated financially.   The concepts of need and support had to be assessed in a broad sense, influenced by contemporary social attitudes.  Provisions for adult children are made, even if they are well-off and able-bodied, and married daughters were no longer regarded as sufficiently provided for by their husbands.   The parent-child relationship was regarded as so important that disinheritance was frowned upon.  The starting point was one of testamentary freedom and Courts often said they did not have power to re-write a will to meet their notion of fairness.  But over the years, at least up until

2000,  there  was  an  increasingly  liberal  attitude  towards  claimants  in  family protection claims, especially when brought by adult children.

[33]     That trend was halted by the Court of Appeal in its decision in Williams v Aucutt.6   The Court of Appeal said that the question was not whether the difference that the deceased drew between her two daughters was appropriate for a just and wise testatrix, but whether adequate provision had been made for the proper maintenance and support of the claimant, taking into account her means and obligations and all other relevant circumstances.  “Support” was a wider term than “maintenance”, meaning “sustaining, providing comfort”, and moral and ethical considerations were to be taken into account in determining the scope of the duty,

including recognition of belonging to the family and of having been an important part of the overall life of the deceased.   What provision would constitute proper support  to  recognise  that  latter  aspect  is  a  matter  of  judgement  in  all  the circumstances of a particular case. The Court went on to say:7

... It may take the form of lifetime gifts or a bequest of family possessions precious to its members and often part of the family history.   And where there is no economic need it may also be met by a legacy of a moderate amount.  On the other hand, where the estate comprises the accumulation of the family assets and is more than sufficient to meet other needs, provision so small as to leave a justifiable sense of exclusion from participation in the family estate might not amount to proper support for a family member.

5      R v Leonard [1985] 2 NZLR 88 (CA).

6      Williams v Aucutt [2000] 2 NZLR 479; (2000) 19 FRNZ 260 (CA).

[34]     Blanchard J, in a separate judgment, discussed some of the earlier authorities, and said:8

In the last few decades an expansive view appears to have been taken of the power of the Court to refashion the will of a deceased in order to fulfil what has been regarded as his or her moral duty.   This trend has not met with universal approval ... It is to be remembered that the Court is not authorised to rewrite a will merely because it may be perceived as being unfair to a family member, and it is not for a beneficiary to have to justify the share which has been given.  Rather, it is for a claimant to establish that he or she has not received adequate provision for proper maintenance and support.

We are not concerned in this appeal with a claimant's need for proper maintenance.   It is conceded that there is none.   The claim is for proper support in the form of recognition both of membership of the family of the deceased and of contributions by way of assistance to and support of the deceased. ... The question remains, however,  whether  a need  for  proper support is made out in the particular circumstances.  It is not to be assumed that merely because a claimant, no matter what his or her personal substance, has been a dutiful child of the deceased, it will necessarily be appropriate to order some provision or further provision. ....

It is not for the Court to be generous with the testator's property beyond ordering such provision as is sufficient to repair any breach of moral duty. Beyond that point the testator’s wishes should prevail even if the individual Judge  might,  sitting  in  the  testator’s  armchair,  have  seen  the  matter differently.  As I have said, the Court’s power does not extend to rewriting a will because of a perception that it is unfair.  Testators remain at liberty to do what they like with their assets and to treat their children differently or to benefit others once they have made such provisions as are necessary to discharge their moral duty to those entitled to bring claims under the Family Protection Act.

[35]     That approach has been adopted by the Court of Appeal in Auckland City Mission v Brown9 and Henry v Henry10 in relation to claims by adult children.  The expression “conservative” was explicitly addressed by the Court of Appeal in Henry. In delivering the judgment of the Court, O’Regan J (as he then was) said:11

In both Williams v Aucutt and Auckland City Mission v Brown the focus was on what was required to remedy the failure to make adequate provision in the will.   In both cases there was no real dispute in this Court that such a failure had occurred. It is likely that the Court’s remarks about conservatism were also focused on the extent to which the will should be disturbed when a failure to make adequate provision is established.  The law is clear on that: the award to the claimant should be no more than is necessary to remedy the failure.   This Court’s concern appeared to be that that approach was not

8      At [68]-[70].

9      Auckland City Mission v Brown [2002] 2 NZLR 650.

10     Henry v Henry [2007] NZCA 42, [2007] NZFLR 640.

being strictly followed. So, in that context, conservative means simply “no

more than the minimum necessary to make the adequate provision”.

And further:12

We do not accept that the application of the conservative approach would reduce what would normally be an appropriate award.   By definition, the result of applying the law as determined in earlier decisions of this Court would lead to the appropriate award.  That award may be lower than some awards  made  in  cases  which  were  subject  to  the  criticism  made  by Blanchard J in Williams v Aucutt.  ...  In cases of financial need, the amount necessary to remedy the failure to made adequate provision in the will will be able to be determined with greater precision, and with less room for broad value judgments, than in cases where the need is more of a moral kind.  The conservative approach requires that the Judge makes the assessment of what is required on a basis which focuses on what is necessary to make adequate provision, but to do no more than that.  Broader questions of desirability of greater awards or the Judge’s views of fairness should not come into play.

The plaintiffs’ contentions

[36]     The plaintiffs argue that because the value of the farm comprised the major portion of the “family assets”, and because that value has been received by Peter, they have not been properly recognised or “supported” by the provisions in the will. Essentially, they say that the general equal sharing between them and their brother in the  residue  is  unfair  to  them  because  it  does  not  recognise  the  benefit  that  he obtained through the acquisition by him of the farm in the deceased’s lifetime.

[37]     So, they contend that the deceased failed to recognise his moral duty to provide in his will more generously for them, in order to recognise that they had not received lifetime benefits to the same extent as Peter.  Mr Rennie recognised that the Court could only deal with the estate as it is.  But he contended that the bequests to Peter and his interests, effectively part forgiveness of debts, ought to be adjusted through reducing the amounts forgiven. That is, Peter and his interests must repay to the estate a larger amount than what is presently required, so that the plaintiffs’ share in the residue of the estate is consequently increased.   Mr Rennie did not contend that either plaintiff was in financial need – although Nicola’s financial circumstances are more modest than Philippa’s – but relies upon a proper application of the principles outlined in Williams v Aucutt requiring their position as loved family

members to be better recognised.  As dutiful daughters, and where the estate is more than sufficient to meet other needs, they say they are entitled to a more significant form of recognition as members of the family, and that the deceased, in making the provision that he did for them, failed to meet his moral duty to them.

The defendants’ contentions

[38]     Mr Nation, on behalf of both Peter and his family trust, submitted that the deceased did not fail to meet his moral duty to the daughters.  The estate is a little under $1 million and although significant is not unusually large in present times. But, it is sufficiently large for the deceased to meet his moral duty to all three children, and the plaintiffs are recognised as family members by sharing the estate on a basis, close to equal, with their brother.  Counsel argued that Peter and his trust as beneficiaries do not have to justify the award to them.  It is not a case of them having to show that the entitlements under the will were necessary to meet a moral duty owed to him.

[39]     Counsel argues that given all the circumstances, and the care with which the deceased endeavoured to structure his will and other financial provisions for the plaintiffs, the bequests and other expected benefits to accrue to them more than meet his moral duty to them.

[40]     Counsel argued that in family protection claims the issue is whether or not a testator has failed to meet his moral duty to a person entitled to claim, not whether the provision of a particular bequest to a beneficiary exceeded what was necessary to meet any moral duty to that person.   Counsel argued that without establishing a failure to recognise and meet the moral duty to a claimant, no basis exists for the Court to grant relief because to do so would lead to impermissible rewriting of the deceased’s will.

Discussion

[41]     The extent of the deceased’s moral duty is to be assessed at the time of his death.  Clearly in this case, a duty was owed to the widow and children.  The size of

the estate and the existence of other moral claims on it, described as “the testator’s bounty” in Re Leonard13 are of course relevant.  But the “testator’s bounty” may be different to “the family assets”.  The Court can only deal with the estate as it is and not what it might have been if the testator had not disposed of some of his assets during his lifetime, whether to beneficiaries under the will or claimants.  Naturally, the Court has to have regard to the size of the estate;   provision, if any, made for

claimants;    competing  claims  and  all  the  circumstances  in  deciding  the  initial question whether there was a breach of moral duty.  Neither counsel have been able to refer the Court to any authority to support the proposition that because a beneficiary receives benefits during his/her lifetime, then that can be reflected in there being an increase in the moral duty to others who claim under the legislation. It may well be that if the testator’s assets have been substantially diminished and/or depleted by inter vivos provisions to another, and as a result the estate is insufficient to meet the moral claims of others, awards to those claimants should be increased.

[42]     I have unearthed two High Court decisions where inter vivos gifts made to persons,  also  beneficiaries  under  a  will,  have  been  taken  into  account  when evaluating the extent of a deceased’s moral duty to a claimant.  But one example was where the gifts to the widow left a small estate, all of which was left to the widow with nothing to the claimant (and the parties had reached agreement and only sought

the Court’s approval to it).14

[43]     The  other  example  is  Re  Howse,15   where  a  small  legacy  to  a  claimant daughter – in necessitous circumstances – did not meet the testator’s moral duty where he had made significant inter vivos gifts to a housekeeper, who also was given a life interest in a modest estate.  Again, the breach of moral duty to the claimant arose because the estate was insufficient – if testamentary provisions remained unaffected – to remedy the breach of moral duty.

[44]     The present case is different.  Here the estate of the deceased is substantially made up of the debts due to the deceased by Peter and his interests, through their

gradual acquisition of the farm.  So it is not a question of the estate being depleted,

13     Re Leonard [1985] 2 NZLR 88 (CA) at 92 per Richardson J.

14     Re Fountain HC Auckland A101/87, 1 December 1989.

15     Re Howse HC Auckland A1093/84, 26 September 1990.

although the plaintiffs claim that the estate should be greater because the transfer of portions of the farm land was for benevolent consideration.  Yet where each of the deceased’s children is essentially treated equally, or close to that, and the effect of that is that each of two claimants can expect to receive $300,000, it is difficult to say that such “equality” does not fulfil the moral duty of the testator.

[45]     Here the deceased and his then wife clearly had legal and accounting advice, obtained valuations, and carefully constructed their financial affairs, and future provision for all the children.  Obviously the land transfers were clearly designed to benefit Peter, as had been the case earlier when the deceased acquired from his father the farm in similar fashion.

[46]     But the deceased knew the value of his estate and he knew that his widow would have, in her own right, assets to an equal value.   He knew that the estate largely comprised debts owing by his son and that in order to provide as best he could for his daughters, Peter and his interests would need to find quite significant capital sums.  He knew of his moral duty to provide some income and a home for his widow and that that was only likely to arise through the farming activity carried on by Peter.  He could have expected that the capital provision from his estate would not realistically occur until his widow died.  He knew and expected that at that time (as the widow deposes), her will would provide in similar fashion for the three children.  He knew that the plaintiffs would exclusively take a 50 per cent share each in the Inverell Trust, which owned the Ashburton property.  This reflected the value of funds yielded from the sale of some part of the farm.  He knew that in his lifetime there had been a capital provision to Philippa in the sum of $50,000 together with

$5,000 to both her and Nicola.

[47]     Just as the deceased was able to acquire the farm from his father, he and the widow clearly wished, and expected, Peter to acquire the farm from the deceased in a similar way.  The farm assets (land and buildings) were built up over generations. The farm was obviously improved over the 30 years when Peter worked on it, with the farming partnership being shared equally since 1991.  The farm may, it seems, have been lost if significant efforts had not been made by the deceased and Peter during the 1980s.  The deceased was aware that Peter had injected cash by taking

over the debt to his grandfather, making home improvements, meeting a large debt in very difficult times, and the expenditure on irrigation and other improvements.

[48]     I accept the argument of Mr Rennie that a testator cannot ignore his duty to family members entitled to claim by leaving it to others to make provision for them in the will, or that they might be amply provided for through the exercise of the discretion  of  trustees  in  respect  of  which  they  are  discretionary  beneficiaries. Re Wilson (deceased)16 is authority for the proposition that a testator’s moral duty is not discharged by leaving a claimant’s interests subject to a discretion.  That was an unusual case where the deceased directed his trustee to have the power in his uncontrolled discretion to pay capital to the widow in addition to the income that she

was given as of right and the estate was very small totalling $6,500. That is factually far from the present case and I do not see that proposition as applying here.

[49]     I accept Mr Nation’s contention that the risks of the plaintiffs not obtaining their benefits from the deceased’s estate, and their mother’s estate, and the Inverell Trust, are remote in the extreme.  The reality of what is likely to happen has to be taken into account. As was said by the Court of Appeal in Flathaug v Weaver:17

... Re Wilson is not authority for any wider proposition [that a testator could not discharge his moral duty to his widow by establishing a discretionary trust in her favour].  We see no reason why, in a proper case, an entitlement to benefit under a trust, even of a fully discretionary nature, should not be taken into account in assessing a testator’s duty to make provision.

The deceased knew of the 50 per cent entitlement of the plaintiffs to the eventual proceeds from the Inverell Trust and that, given that it was the widow’s retirement home  in Ashburton,  it  was  remote  in  the  extreme  that  it  would  be  distributed otherwise to other discretionary beneficiaries.  Just as he and his wife had equally divided the then family assets, he was aware, according to the affidavit of the widow, that their respective wills were the same.

[50]     In   my   view   the   plaintiffs   have,   perhaps   understandably,   looked   at comparative values which is a distraction from the correct legal question namely,

whether there was a breach of their father’s moral duty to them.  Naturally, inflation

16     Re Wilson (deceased) [1973] 2 NZLR 359 (CA) at 363.

17     Flathaug v Weaver [2003] NZFLR 730 (CA) at [36].

has significantly increased the value of the farm which Peter and his interests own. But the deceased was aware that over 30 years Peter and later his wife injected capital and efforts in continuing to farm and maintaining the property.

[51]     In assessing whether the deceased was a wise and just testator I think the Court is entitled to look at all the circumstances of him being a father who had inherited, by a process of acquisition and debts to his father, so as to feel entitled to adopt the same process for his son.  It may be, with there now being no issue of gift duties arising after 1 October 2011, an estate may be depleted completely (through no resulting debt) and new social and legal issues might arise, but this is not such a case.   If the estate is small and insufficient to meet the testator’s moral duty, and provide  for  proper  maintenance  and  support  of  the  claimants,  then  clearly  the position of the competing sibling may be relevant.  What also is relevant, and to be kept in mind, is the concept of testamentary freedom, provided moral duties are met.

[52]     What has happened in relation to the farm is that as the family “heritage”, it was passed down through generations and increased in value only through the work on it and injection of capital by the farmer.  In that way the deceased, Peter and his wife, have contributed significantly to its value and increase in that value.  It was not an unreasonable wish of the deceased who acquired the farm through borrowings from his father, to wish that this process occur with his only son.  Can it be said that a wise and just testator in the shoes of the deceased, in all those circumstances failed in his moral duty to provide proper maintenance in support for the daughters?

[53]     Although Mr Rennie relied upon the Court of Appeal’s decision in Williams v Aucutt, in fact that decision, whilst making it clear that there will be awards for those in comfortable circumstances where an estate is sufficiently large because of the need to recognise their position in the family, the actual impact of the Court of Appeal’s decision was to reduce the award of $250,000 made in the High Court to

$50,000 because that was the amount sufficient to remedy the breach.

[54]     Implicit in the position adopted by the plaintiffs is the contention that the deceased should not have disposed of the farm land to the son in the manner in which he did and, because of that they are entitled to a greater portion of the residual

estate than one-third each.  But that misses the point because, unless they can show a breach of moral duty to them as awards of $300,000 are insufficient to meet that duty, they have no valid claims.

[55]     I am not satisfied that the testamentary provisions made by the deceased should be interfered with, which can only occur if he breached his moral duty to make proper testamentary provision for his daughters.  I do not accept that he did. The Court cannot adjust the will simply because of its concept or perception of “fairness”.    If  the  provision  made  by  the  testator  in  his  will  for  claimants  is sufficient, bearing in mind the size of the estate, to properly provide for the adequate support and maintenance of the claimant, in the broadest sense is not open to the Court to vary the terms of the will to balance lifetime provisions said to benefit another member of the family against the testamentary provisions made for a complainant.

[56]     If the testator’s estate was insufficient to meet his moral duties to those claimants the position may be different.  But that is not the case here.  I keep in mind that the estate in truth comprises largely the debts which were the consideration for the transfer of farm land and assets over many years so the estate was not depleted or reduced.   The awards of about $300,000, realistically obtained upon the widow’s death, are significant to recognise the plaintiffs’ position in the family, to which can be added the near certainty of sharing equally on their mother’s death in the Inverell Trust.

[57]     For those reasons I am not persuaded by the plaintiffs that there has been any breach of moral duty by the deceased towards them.  Accordingly the claim against the first and second defendants is dismissed.

[58]     The costs of the executors and trustees of the estate will, as is usual, be met from the estate.  The costs of the first defendants as trustees of the Lambie Family Trust, its beneficiaries and of Peter John Lambie in his capacity as a beneficiary, are reserved.  If agreement is not reached counsel may submit memoranda.

J W Gendall

Solicitors:

Rhodes & Co, Christchurch for Plaintiffs
Wynn Williams Lawyers, Christchurch for First Defendants
Nicoll Cooney Silver Limited, Ashburton for Second Defendants