Bennett v Bennett HC Christchurch CP99/00

[2001] NZHC 316

IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY CP99/00

BETWEEN ROBERT ALLAN BENNETT
Plaintiff

AND JEFFREY HAROLD BENNETT
First Defendant

AND PERPETUAL TRUST LIMITED
Second Defendant

CP100/00

UNDER The Family Protection Act 1955

BETWEEN DAVID ROGER BENNETT
Plaintiff

AND PERPETUAL TRUST LIMITED
Defendant

Hearing: 2, 3 and 4 April 2001

Counsel: R J Murfitt and D Welsh for R A Bennett
D H Hicks for J H Bennett
E D Wylie for D R Bennett
J G Matthews for Perpetual Trust Limited
P R Kellar for children of D R Bennett
K G Smith for children of R A Bennett
R E Neave for children of J H Bennett

Judgment: 10 April 2001

JUDGMENT OF PANCKHURST J

Introduction:

[1] In these two proceedings three major issues arise for determination. First, in CP 99/00 Mr Robert Bennett (Robbie) seeks compensation from his brother (Jeffrey) and from his father’s estate (administered by Perpetual) for what might conveniently be termed unjust enrichment, arising in the context of a farming partnership in which the father and sons were involved for about fourteen years.

[2] Second is an issue of interpretation of the will of the father (Harold) affecting the forgiveness of a mortgage from the sons to their late father, which mortgage also arose in relation to the farming partnership. Third is a family protection claim (CP100/00) by David, in which Robbie also sought further provision from the estate. David’s claim was settled in the course of the hearing. Accordingly, only Robbie’s claim remains for consideration. It was opposed by Jeffrey.

[3] The convenient course is to deal with the three aspects sequentially. The unjust enrichment claim and the will interpretation point each have the potential to impact upon the value of the estate. It is therefore logical to consider those aspects first and then the family protection claim. However, a first requirement is to distil the facts of the case.

The Bennett Family:

[4] The Bennett family has been in the Wakanui area of mid-Canterbury since the 1870s. The farm property at the centre of these proceedings, known as the “home block”, has been in the family since 1907. The farm is about 130 hectares in area, situated adjacent to the coast and the Ashburton River, and about 19 kilometres from the township of Ashburton.

[5] Harold Bennett was born in 1928. He acquired the property from his father and remained on it until his death on 6 June 1998, aged 70 years. His wife, Margaret, predeceased him. She died in March 1991. They had a family of three boys, David born in 1954, Robbie five years later in 1959, and Jeffrey five years later again in 1964. All three sons are married and have families. David has three children aged from twenty to eleven years, Robbie two aged ten and seven, and Jeffrey three children aged seven years or less.

[6] Harold Bennett was one of seven children. All of the four sons became farmers in the mid-Canterbury area. In 1956 their father (Alexander) died and left the home block to Harold and another son, Gordon. The two farmed in partnership until Gordon’s death at a relatively young age in the late 1960s. Harold then acquired full ownership of the home block by purchase of his siblings’ interests in the land left under their brother’s will. The property is farmed as a mixed cropping and stock unit.

David:

[7] David on leaving school worked on the family farm for a time before attending Lincoln College in 1973-4. He then returned to the property, but in 1976 commenced working with his maternal grandfather on his farm. Mr Cairns farmed nearby in mid-Canterbury. His family comprised two daughters, one of whom, Margaret, was David’s mother. In 1978, by which time Mr Cairns was in his eighties, a decision was taken that David should acquire his property. The two farmed in partnership for a couple of years until a company established by David and his wife purchased the property for $473,000. There was a mortgage back for the purchase price, with a concessional interest rate for the first few years. Mr Cairns died in 1983 and subsequently a deed of family arrangement was concluded whereby David paid a significant sum to his aunt in satisfaction of her interest in her father’s estate, leaving his mother holding a $300,000 mortgage over her son’s farm. Margaret died in 1991 and left her estate equally to her three sons. David refinanced in order to enable him to pay $100,000 to each of Robbie and Jeffrey.

[8] Hence over a period from 1978 David acquired his own farm with some considerable assistance from his mother’s side, but not without acceptance of large capital commitments. In the result he and his wife through the company structure now own a property of about 367 hectares and enjoy an equity or net asset position of about $1.6m. It is not necessary to analyse David’s situation in greater detail since, although initially he sought further provision from his father’s estate, that claim was settled in the course of the hearing. I shall mention the terms of settlement later. In the context of David’s family protection claim detailed accountancy evidence was presented in an endeavour to calculate the present-day value of the benefits he received particularly from his maternal grandfather. However, such evidence ceased to be relevant when David withdrew from the family protection proceeding.

Robbie:

[9] On leaving school Robbie likewise worked on his father’s property. In 1981, aged 22 years, he became the farm manager. Harold had a particular interest in English Leicester stud sheep and he devoted increasing attention to this activity, while Robbie assumed greater control of the general farm operation.

[10] In about late 1984 a farming partnership was formed known as “H.Bennett and Sons” (the partnership). It comprised Harold, Robbie and Jeffrey who was then aged twenty years. At that time he was towards the end of a three year course to obtain a Bachelor of Commerce degree in agriculture. In 1985 Robbie purchased a 107 hectare block from his cousin for $400,000. This was immediately across the road from the home block and the aim was to farm the two properties together.

[11] At about the same time Harold sold to Robbie and Jeffrey an area of about 127 hectares known as the “river block”. It all but borders the home block and Robbie’s land, but is of lesser quality particularly a section alongside the Ashburton River. Part of the river block (known as “the 100 acre block”) is separated from the land bordering the river by River Road. The relevance of this will become clear. The purchase price to the boys was $184,000, which was left in and part forgiven by Harold during his lifetime. In the result the partnership farmed all three properties, an area of about 365 hectares, as one farming unit. Robbie managed the farming operation with assistance from his father, but this decreased over the years particularly following the onset of Parkinson’s Disease. The financial affairs of the partnership to the date of Harold’s death on 6 June 1998 are at the heart of CP 99/00, the claim for unjust enrichment. I will return to this shortly.

[12] Like his brother David, Robbie had attained a position of some security by the time of his father’s death. His net worth is about $1m, largely represented by his land valued at $800,000. This net figure will increase by $65,000 if the balance of the river block mortgage is forgiven in terms of the relevant clause in the will.

Jeffrey:

[13] Jeffrey’s path did not exactly mirror that of his brothers. Upon leaving school he worked for his father for a time until he commenced at Lincoln College. During the academic holidays he worked on the farm but after obtaining his degree Jeffrey worked for the Rural Bank for four years in the late 1980s. He then returned home for about two and a half years until March 1991, that also being the time of his mother’s death. For the past ten years he has been in rural banking, his current position being as a rural business manager with a trading bank in Ashburton. Over this time Jeffrey’s involvement in the partnership farming operation has been minimal.

[14] His asset position by 1998 was also comfortable although not as solid as that of his older brothers. Jeffrey’s principal assets comprised a half share in the river block ($282,500), his equity in the partnership ($34,950) a house ($170,000) and investments of almost $60,000. His net worth of about $580,000 may also increase by $65,000 if the river block mortgage is deemed to be forgiven.

Harold’s Will:

[15] Harold’s will was dated 26 July 1991. It was made in the aftermath of his wife’s death. The three sons were appointed trustees. All policies of life assurance were left to the boys in equal shares (in fact these were transferred to them during Harold’s lifetime). Harold’s interest in the partnership was given to Robbie and Jeffrey equally. The home block was bequeathed to Jeffrey alone. The mortgage over the river block was given to Robbie and Jeffrey but upon condition that the land be split between them on an unequal basis. I shall return to this clause in due course since it is the subject-matter of the interpretation issue upon which Perpetual seeks directions. A loan of $30,000 made to David in 1981 (when he reduced his farm mortgage to his grandfather) was forgiven.

[16] Then followed a clause:

“I wish to state that the above provisions (re the insurance policies, the partnership, the home block and the river block mortgage) are intended to bring equality of treatment to my said three sons”

This statement of intent assumed importance in the family protection proceeding. Finally the residue of the estate was left to the boys in equal shares with a standard substitution provision.

[17] Probate of the will was granted to the three sons on 3 June 1999 but subsequently they retired in favour of Perpetual. The value of the assets at the date of death was approximately $1.2m. The significant items were:

Home block land	$682,500
Partnership interest	$169,569
River block mortgage	$130,000
Personal advances to sons	$103,000
Savings	$120,820

The residual value of the estate in part depends upon whether the gift of the river block mortgage to Robbie and Jeffrey has failed for non-satisfaction of the condition. Accordingly I will return to the issue of value in due course.

CP 99/00 - The Unjust Enrichment Claim:

[18] Robbie seeks judgment against the other partners in the partnership of H.Bennett and Sons for $477,030. The gist of the claim is that he carried the burden of managing the farming operation for the partnership, that he was paid an inadequate salary for his services, and that he did not receive rental for the land which he contributed (his 108 hectare block and his half share of the river block). With adjustments made to the partnership accounts for these, Robbie’s current account would move to a position of healthy surplus. The partnership accounts as at 6 June 1998 (Harold’s death) showed current account balances of $169,569 for Harold, $162,605 for Jeffrey, and $5,230 for Robbie. The total of these, $337,404, of course equated to the net equity of the partners in the partnership. In round terms the partnership owned livestock of $78,000, grain of $150,000 and plant of $240,000, against liabilities (borrowings and outstanding creditors) of about $140,000.

[19] Although referred to as a claim for unjust enrichment Robbie’s case was formulated with reference to the principles in Lankow v Rose [1995] 1 NZLR 277 (CA). It is not necessary to refer to the discussions in that case concerning the underlying equitable basis upon which relief may be granted. It is sufficient for present purposes to note that a plaintiff must establish contributions, direct or indirect, to the property in question, a reasonable expectation of an interest therein (here an increased interest), and that the defendant should reasonably in conscience recognise such interest. If these elements are established a constructive trust may be imposed to reflect the claimant’s interest.

[20] The evidence in support of the claim was effectively two-fold. Robbie described the farming operation of the partnership and in particular detailed the pivotal role which he played over a period of about fourteen years. There was no serious challenge to this evidence. Robbie worked long hours assisted by a farm manager and, to a limited and decreasing degree, by his father. He laboured under what might be termed a generational tension between father and son. Harold by nature was conservative and of the old school, whereas Robbie saw the need to make changes. He did so sometimes without the blessing of his father. In the result the financial results achieved by the partnership were described by an experienced mid-Canterbury farm accountant as “well above average”.

[21] The second aspect of the evidence was supplied by a forensic accountant of experience, Mr Irvine. He produced a detailed analysis of how the partnership accounts might be rewritten to take account of an increased salary for Robbie’s services and to include payment to each of the partners for their different contributions of land to the operation. Mr Irvine concluded that a base salary of $40,000 would have been appropriate for Robbie’s services to June 1999. Using the Consumer Price Index he calculated the equivalent figure for each year back to 1985, and made some adjustment for the period (two and a half years to March 1991) when Jeffrey assisted with management. This produced a salary range from about $20,000 in 1985 to $40,000 in 1999. By comparison Robbie in fact received no salary for the years 1985-87 and thereafter a figure which varied from a low of $9,500 (1989) to a high of $60,000 (1993). These actual salary figures were arrived at after the end of each financial year in light of the performance of the partnership and the financial needs of the partners at the particular time. In the final analysis Mr Irvine concluded that Robbie was paid $129,056 less than a true market salary for his services over the whole period.

[22] In relation to rentals Mr Irvine first noted the respective contributions of land to the partnership. Harold provided the home block an area of 130 hectares, Robbie a total of about 172 hectares (his farm of 108 hectares and half the river block) and Jeffrey about 64 hectares. From this base Mr Irvine calculated a rental figure for each property which reflected the advice of a local valuer experienced in rural land rentals. The resulting figures of $31,500 per annum for the home block, $33,750 per annum for Robbie’s land and $30,750 per annum for the river block were then applied back to 1985 by using the CPI. On this basis the cost to the partnership of land rental ranged from about $49,000 in 1985 to $95,000 in 1998. As with salary, the land rentals were then incorporated into the partnership accounts from year to year and the effect upon the current account positions of the partners calculated.

[23] Finally, Mr Irvine undertook the exercise of calculating interest earned or payable on the adjusted current account credits, or debits, of the partners. The interest rate used was the prevailing deposit rate in each of the relevant years as advised by the Reserve Bank. If the three adjustments postulated by Mr Irvine had been brought to account each year the partnership would have run at a substantial loss. The loss would have been at its lowest in 1985, about $30,000, and at its highest in 1989, about $107,000. These losses were then shared equally in Mr Irvine’s calculations.

[24] In the end result the adjusted figures were:

Partner	Current Accounts as per the Accounts	Salary Adjustment	Rental Adjustment	Interest Adjustment		Revised Profit Split	Adjusted Current Account Balances
Harold	$142,983	0	$369,775	$114,104	($532,995)		$93,867
Robert	$35,491	$129,056	$597,462	$313,452	($562,940)		$441,539
Jeffrey	$139,353	$17,584	$165,110	$90,492	($519,616)		$288,061

These adjusted balances, as compared to the actual figures in the partnership accounts, are at the heart of the unjust enrichment argument.

[25] Mr Hicks, for Jeffrey, challenged the very basis of the claim on the grounds that Robbie could have no expectation (let alone a reasonable one) of an increased interest in the partnership and that equally the other partners had no obligation to recognise Robbie’s claim. He submitted that the partnership accounts were binding upon all partners and any endeavour to go behind them was misconceived. He characterised the accounts as an expression of common intention of all three partners and criticised Mr Irvine’s evidence as an “exercise in unreality”. Counsel also drew attention to s 27 of the Partnership Act 1908 (whereby partners are required to enter into an agreement concerning remuneration for acting in the partnership business) and argued the partnership accounts also gave rise to an estoppel. Finally, he relied on the doctrine of laches to the extent that Robbie’s claim extended back to accounts which were settled in the mid 1980s.

[26] Mr Matthews, for Perpetual, adopted and supported these submissions. He also dealt with some practical issues which would arise in the administration of the estate were the claim to succeed.

[27] By a considerable margin I am satisfied that the claim must fail. I assume for present purposes that Robbie can demonstrate contributions to the partnership assets, which were not adequately reflected in his current account balance in the partnership accounts. (It will be necessary to return to that assumption in the context of the family protection claim, since the same contributions are relied upon in that different context). The claim founders, to my mind, for want of any reasonable expectation on Robbie’s part to an increased interest. Various aspects of the evidence demonstrate this.

[28] In advancing the case Mr Murfitt asserted that Robbie only agreed to the partnership accounts from year to year on the basis they were for tax purposes, that they did not define the legal ownership interests of the partners and that Robbie had the expectation that the imbalances in the accounts would be “set right in time to reflect (his) commitment and sacrifices for the benefit of the partnership”. However, his client’s evidence did not measure up to these assertions.

[29] In cross-examination Robbie effectively conceded he appreciated throughout that the accounts were determinative of the partners’ respective positions. He also gave evidence of concerns which he held over the years. But these related to land issues rather than the accounts themselves. Mr Capon, the partnership’s accountant, confirmed this aspect which he described as a sense of frustration on Robbie’s part at his father’s unwillingness to discuss what would happen to the land holdings of the partnership upon his death. This was naturally a matter of concern since Robbie was managing a farming operation of which the three separate blocks of land were an integral part. What might happen to the home block, which he saw as central to the operation, was naturally a source of worry. But this evidence concerning land provides no support for the proposition that the accounts served but a limited purpose and were not intended to define the property rights of the partners.

[30] In my view it was hardly surprising that Robbie’s evidence did not adequately support the claim. He was an entirely honest witness who left me in no doubt when pressed that he had an adequate appreciation of the partnership accounts at all relevant times. This was only to be expected. Mr Capon prepared them from information supplied by Robbie. They were circulated to the partners in draft. At that point the accounts showed the trading surplus, but before allowance for Robbie’s salary. For that purpose the partners attended at Mr Capon’s office and a decision was made. At the same time what Jeffrey would receive on account of his interest in the partnership was decided. Typically this was a sum of about $8,000 per annum, although it fluctuated according to the trading result. This sum was paid to him as either salary or interest on current account. Harold’s demands on the partnership were not significant particularly in his latter years. A principal concern for him was to minimise his taxation liability as a superannuitant (since an income tax surcharge applied for at least part of the time). The partners’ involvement in settling the accounts in this way was hardly a promising background to the contention that nevertheless the accounts were not binding as to their respective interests.

[31] Further, I consider that the exercise undertaken by Mr Irvine was unreal in the circumstances of this case. This was a family partnership, not one involving partners at arms length. Harold was the mover behind it. Plainly he sought to establish a structure suitable to farm the three properties as a unit and at the same time to bring Jeffrey into the fold. He provided the stock and plant which over time was acquired by the partnership at standard and depreciated values, not market values. Without his contribution there would have been no partnership. The very structure of the accounts reflected this family background.

[32] Moreover, the economic reality was that the partnership could not afford to pay land rental, in particular. Had it done so at market rates, and had Robbie been paid an increased salary as postulated, the partnership would have incurred losses of tens of thousands of dollars in every year. This could not have been sustained for more than a year or two. When regard is had to these realities it is quite evident why the accounts were structured as they were and, moreover, that the partners appreciated this.

[33] Mr Hadlee, another forensic accountant who was retained on Jeffrey’s behalf, expressed the view that he was “astonished” at the attempt to reconstruct the partnership accounts from inception to June 1998. I agree with this assessment. I find that the claim fails at the hurdle of reasonable expectation. No point would be served by a consideration of the further grounds of a defence which were raised.

Interpretation - Clause 2(iv) of the Will:

[34] This clause provides:

“(iv) AT THE DATE of this Will, I as mortgagee have a balance advance or principal sum of $184,000 secured under Memorandum of Mortgage No. C549344/2 under which my sons JEFFREY HAROLD BENNETT and ROBERT ALAN BENNETT are the mortgagors and I give devise and bequeath all my interest in the said Mortgage No. C549344/2 to my said two sons JEFFREY HAROLD BENNETT and ROBERT ALAN BENNETT as shall survive me and if more than one as tenants in common in equal shares provided however and this gift is entirely conditional upon the said JEFFREY HAROLD BENNETT and ROBERT ALAN BENNETT within two years of my death so dealing with their interests in the land which are subject to the said Mortgage that JEFFREY HAROLD BENNETT is the sole registered proprietor of the 100 acre (approximately) block AND the said ROBERT ALAN BENNETT is the sole registered proprietor of the 215 acre (approximately) river block AND if the aforesaid condition is not satisfied within one year of my death then my interest in the said Mortgage shall fall into the residue of my estate.”

It suffers from an internal conflict in that the condition allows two years for the sons to separate their interests whereas one year is referred to as the time after which the mortgage will fall into the residue in the event of non-fulfilment. Perpetual seeks a declaration as to the correct interpretation of the clause.

[35] There is, however, an added complication in that even giving the clause its most benevolent interpretation more than two years has passed since the date of death and Robbie and Jeffrey are still not the “sole registered proprietor” of the defined areas. It follows that unless the time requirement is unessential it is already much too late. Mr Matthews, for Perpetual, submitted that if the time requirement was struck down Perpetual would require the brothers to effect the land division within a defined reasonable time which would give efficacy to the clause.

[36] The only evidence which bears upon the interpretation point appears in the affidavit of Mr Ragg a solicitor of Ashburton. He prepared the will on Harold’s instructions. He was given to understand that the terms of the will were intended to achieve equality of treatment between the three sons after taking into account benefits which particularly David and Robbie had received during their father’s lifetime. As to the particular clause Mr Ragg deposed:

“I believe that there was an error in typing or drafting the deceased’s last will in that ‘two years’ should have appeared in place of ‘one year’ at the end of clause 2(ii).”

Significantly Mr Ragg does not refer to any file note or actual recollection of the instructions received from the testator. I infer that his belief is based upon an impression formed from reading the clause itself.

[37] Before I turn to the question of construction a number of points should be noted. The obvious intention of clause 2(iv) was to encourage an unequal division of the river block. It required that Jeffrey take an area of approximately 100 acres and Robbie an area of approximately 215 acres. Despite the lesser quality of the larger block Robbie nonetheless expressed the view in evidence that it was probably worth $320,000 as compared to $240,000 for the 100 acre block, a difference of $80,000.

[38] With reference to the land division only slow progress was made. At about the second anniversary of Harold’s death the brothers signed transfers drawn to achieve the required result but these could not be immediately registered. Rather on 6 June 2000 a letter was written to the estate’s solicitors which enclosed a notice dated 6 June 2000 saying that the land transfers had been executed “today”, that clause 2(iv) had been complied with, and calling upon the trustees to vest the mortgage in the two brothers as tenants in common in equal shares. Presumably it was intended to register the two land transfers with the transfer of the mortgage and therefore only the consent of Robbie and Jeffrey as mortgagees would be required. (Alternatively the transfers could have been registered with the mortgagee consent of all three brothers). Importantly however, for present purposes, although the transfers of the land were duly executed their registration remained dependent on mortgagee consent which was not in hand.

[39] In fact when David was requested to sign the transfer of the mortgage to his brothers in common he declined to do so on account of the time ambiguity in clause 2(iv) and since two years had already expired in any event. And so even today Robbie and Jeffrey are not the registered proprietors of the defined parts.

[40] Detailed submissions were made concealing interpretation of the clause. These included that the requirement to divide the land was a condition precedent not subsequent, that the time element may be severable or void for uncertainty, and that the ambiguity in the will had ceased to be of any relevance because registration of the land interests had not occurred within even two years.

[41] In the circumstances I can record my conclusions quite shortly. I accept that the condition is a condition precedent. That is vesting of the gift (the mortgage) in the donees is conditional upon fulfilment of the condition. Clause 2(iv) leaves no doubt as to this. By contrast a condition subsequent is one which after vesting of the gift puts an end to the gift (for example where a sum is payable from time to time subject to continuing widowhood). In this case however, the gift vested only when, and if, the land division was registered.

[42] As to the ambiguity I much prefer the construction that a time limit of two years was intended by the testator. Mr Ragg’s evidence provides some support for that view. Moreover, although the fulfilment of a condition precedent is to be strictly construed, there is scope to provide relief against the operation of a condition, the more so where a time element which is not of the essence (in that it does not affect other parties) is involved : Halsburys Laws of England (4th ed) volume 50 on wills, paragraphs 387-388. Here where there are conflicting references to time I consider there is ample scope to prefer the longer period.

[43] Regardless of the latter conclusion there is in my view no escape from the conclusion that the condition was not fulfilled within time (two years) and that accordingly the mortgage falls into residue. That result flows from the plain wording of clause 2(iv). A timely division of the land did not occur. In some instances substantial performance of a condition may suffice: Halsbury, paragraph 386. This is particularly so where complete fulfilment of the condition is thwarted through no fault of the donee. But where the terms of the condition are clear, it constitutes a condition precedent, and literal compliance is attainable then non-fulfilment may not be excused. That I consider was the position here. It was a case of too little too late. The land transfers were not signed until the eleventh hour, leaving insufficient time to obtain consent for their registration and hence the status of sole proprietorship was not attainable in time.

[44] Failure of the gift is perhaps not altogether surprising. Afterall, fulfilment of the condition required Jeffrey to accept an unequal division of the river block. On the other hand failure of the gift left his half share in common in the land intact albeit with a $130,000 mortgage liability to the estate. But as a residuary beneficiary he had a one-third interest in the debt in any event. Robbie was the one who stood to benefit most from fulfilment of the condition. That the gift of the mortgage failed is of direct relevance to his family protection claim.

CP 100/00 - The Family Protection Claim:

[45] The evidence led with reference to CP 99/00 is, by agreement, to be used in the present context as well. Robbie seeks further provision from the estate on the basis that by leaving the major asset in the estate to one son his father acted in breach of moral duty, the more so when clause 2(iv) of the will was not implemented by his taking a greater share in the river block.

[46] Counsel were appointed to represent the interests of grandchildren. In the event they filed a joint memorandum which expressed the view that active involvement in the proceeding was not necessary since the children were protected by the participation of their respective fathers. Direct claims by the grandchildren were not considered appropriate on account of the ability of David, Robbie and Jeffrey to provide for their children. I agreed with these assessments. Accordingly counsel were granted leave to withdraw and participated no further.

[47] I have already set out the operative terms of the will. Under it David received an equal share in Harold’s insurance policies being $65,594 (although the policies were transferred prior to death), forgiveness of a debt of $30,000, and a one-third interest in the residue. Upon my finding that the gift of the river block mortgage failed, Robbie received a share in the insurance policies, a half share in Harold’s interest in the partnership of $84,784, and a one-third interest in the residue. Jeffrey received a like interest in the insurance policies and partnership plus the home block (valued at $682,500 at the date of death and today at $736,000) and a one-third interest in the residue.

[48] As to the residue I calculate that with the river block mortgage included there is a sum of about $300,000 available before payment of administration expenses and costs. The settlement of David’s family protection claim was on the basis that his one-third share of the residue would pass to Jeffrey in return for payment of an undisclosed consideration, while neither Jeffrey nor Robbie would challenge the forgiveness of David’s $30,000 debt in the will.

[49] Leaving David’s settlement aside Mr Murfitt adopted as his starting-point for Robbie’s claim the proposition that in percentage terms Jeffrey benefitted under the will as to 83% of the assets, Robbie 18% and David 9% under the will. These figures will have changed somewhat on account of the river block mortgage falling into residue, but they remain indicative for present purposes.

[50] There was no division of opinion concerning matters of principle. The wellknown passage from Little v Angus [1981] 1 NZLR 126 (CA) at 127 bears repeating:

“The inquiry is as to whether there has been a breach of moral duty judged by the standards of a wise and just testator or testatrix; and, if so, what is appropriate to remedy that breach. Only to that extent is the will to be disturbed. The size of the estate and all other moral claims on the deceased’s bounty are highly relevant. Changing social attitudes must have their inference on the existence and extent of moral duties. Whether there has been a breach of moral duty is customarily tested as at the date of the testator’s death; but in deciding how a breach should be remedied regard is had to later events.”

Counsel then referred to the more recent case of Williams v Aucutt [2000] 2 NZLR 479 (CA).

[51] Arising from it a number of points were stressed. These included that the test was whether the testator had made adequate provision for the proper maintenance and support of the claimant (not whether any distinction drawn by the will was appropriate), that intervention must be limited to that extent necessary to repair the breach, that it is not for an advantaged party to justify the provision they have received, and perhaps of most present relevance that proper “support” mandates a wider approach than does proper maintenance. As to this Richardson P said at 492:

“‘Support’ is an additional and wider term than ‘maintenance’. In using the composite expression, and requiring ‘proper’ maintenance and support, the legislation recognises that a broader approach is required and the authorities referred to establish that moral and ethical considerations are to be taken into account in determining the scope of the duty. ‘Support’ is used in its wider dictionary sense of ‘sustaining, providing comfort’. A child’s path through life is supported not simply by financial provision to meet economic needs and contingencies but also by recognition of belonging to the family and of having been an important part of the overall life of the deceased. Just what provision will consistute proper support in this latter respect is a matter of judgment in all the circumstances of the particular case.”

[52] Mr Murfitt acknowledged that Robbie was not in necessitous circumstances, but argued that nonetheless there was a clear breach of moral duty to provide proper support. He stressed the notion of family property, particularly in relation to the home block which has been in the family for almost a century, and argued that proper support in Robbie’s case required that he receive some interest in, or on account of, that asset.

[53] The case was described as an unusual one on account of the clarity with which the testator had expressed his testamentary intent. To repeat clause 2(vi):

“I wish to state that the above provisions 2(ii) to (2(iv) are intended to bring equality of treatment to my said three sons.”

The clause references are to the insurance policies, the partnership asset, the home block, and the river block mortgage (not curiously enough the forgiveness of David’s $30,000 debt). It was common ground that the testator did not contemplate the will would bring equality of treatment per se, rather that it was intended to restore the balance having regard to inter-vivos benefits enjoyed by David and Robbie in particular.

[54] In these circumstances Mr Murfitt’s essential thesis was that Harold must have over-estimated the lifetime benefits received by Robbie, since otherwise he was bound to receive more under the will if equality of treatment was to be achieved. In addition counsel argued that if the river block was not divided in terms of clause 2(iv) inequality of treatment must follow, since Harold obviously included that mechanism to provide balance as he saw it between Robbie and Jeffrey.

[55] Detailed accounting evidence was adduced in an endeavour to identify and quantify the lifetime benefits received by all three brothers. Mr Orr, another forensic accountant, was retained by David to assess such benefits. He concluded that on an inflation-adjusted basis David received benefits (mainly from his maternal grandfather) to a value of about $500,000, Robbie about $480,000 and Jeffrey about $280,000. This evidence was in response to that of Mr Hadlee who undertook a similar exercise and reached not markedly dissimilar conclusions. While his final figures were somewhat different, the relativity was similar in that he calculated benefits to David of $529,000, to Robbie $516,000, and to Jeffrey $299,000 also on an inflation-adjusted basis.

[56] When David settled his claim and withdrew from the proceeding Messrs Orr and Hadlee conferred in an endeavour to reach a common view as to the benefits derived by Robbie and Jeffrey from their father. They concluded that “as between Jeffrey and Robert Bennett there has been a benefit in favour of Robert of either $216,000 or $205,000 depending on whether the Consumer Price Index or the Producer Price Index is used as a measure. This benefit arises from interest free loans made to Robert Bennett by the partnership and by Mr Harold Bennett”. It is to be noted that this figure represents the difference between the two. Both brothers received substantial, but equal, benefits during their father’s lifetime in the context of the partnership and arising from his transfer of the river block to them with the mortgage back. Since these aspects were self-cancelling the accountants focused on the additional benefits derived by Robbie.

[57] Counsel accepted that the accountancy evidence provided background information. Necessarily a broader approach was required in the assessment of the alleged breach of moral duty to provide proper support. The testator would not have structured his will on the basis of some nice accounting exercise designed to measure the benefits his sons had received over the years and on an inflation adjusted basis. Even given his stated intention to achieve equality of treatment, I do not consider a breach is established simply because Jeffrey received benefits under the will which outweigh the extra benefits derived by Robbie during his father’s lifetime. To adopt that method would involve substitution of an arithmetical approach where an exercise of broad judgment based on all the circumstances of the case is required.

Conclusions:

[58] I am satisfied that Robbie is entitled to further provision from the estate. Once the implications of clause 2(iv) of the will are understood it is apparent that the testator himself saw the need for the river block to be divided unequally in order to achieve equality between his younger sons. But in the event that clause achieved neither the unequal division of the land nor forgiveness of the mortgage debt which Harold intended. To my mind an award designed to at least cover these elements must eventuate.

[59] The more difficult question is whether assuming the gift of the mortgage occurred the testator still failed in his stated aim to bring about general equality of treatment via the will. Under it Jeffrey received the added benefit of the home block to a value of $682,500 at the date of death. As against that Robbie received extra benefits to a value of at most $216,000 during his father’s lifetime. The difference is over $460,000 using the inflation-adjusted methodology of the accountancy experts.

[60] On the other hand Mr Hicks argued that it would be wrong to assume the testator set out to achieve equality in terms of calculated benefits. He submitted it was more likely Harold had in mind equality in the sense that his three sons each owned a property which would enable them to be actively involved in farming. On this basis there was no justification to provide further provision to Robbie from the estate.

[61] Resolution of this aspect is not to my mind straight-forward. Ordinarily Robbie would encounter great difficulty in establishing a claim for greater provision, given the lifetime benefits and the insurance, partnership, and residue interests which he received. But in this instance the moral assessment of a testator was expressed with clarity, being equality of treatment for all three sons. In broad terms was that achieved when one has regard to all the relevant circumstances? I think not.

[62] The conclusion I have reached is that Robbie should be awarded further provision in the sum of $150,000. A legacy for that amount is appropriate. The figure of $150,000 in large measure reflects the testator’s own assessment in clause 2(iv) of what was required by way of adjustment, but is also rounded upward on account of my assessment of proper support for Robbie more generally.

[63] Costs are reserved. If agreement cannot be reached between the parties a memorandum may be filed on the claimant’s behalf, to which counsel for Jeffrey will have ten working days in which to reply.