Blumenthal v Stewart
[2015] NZHC 3187
•15 December 2015
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-454-90 [2015] NZHC 3187
UNDER The Family Protection Act 1955 and the
Law Reform (Testamentary Promises) Act 1949
IN THE MATTER OF
the Estate of JOHN HAWTHORN MATHIESON late of Palmerston North (Deceased)
UNDER
Part 18, Rule 18.1 High Court Rules
IN THE MATTER OF
the J H MATHIESON TRUST
BETWEEN
COLIN PAUL BLUMENTHAL Plaintiff
AND
BRUCE ANTHONY STEWART First Defendant
NEUROLOGICAL FOUNDATION OF NEW ZEALAND
Second Defendant
Hearing: 13 - 15 July, 4 and 13 August 2015 Counsel:
H A Cull QC and P A Morten for Plaintiff
J M Morrison for First Defendant
S R Morris for Second DefendantJudgment:
15 December 2015
RESERVED JUDGMENT OF ELLIS J
I direct that the delivery time of this judgment is
10 am on the 15th day of December 2015
BLUMENTHAL v STEWART [2015] NZHC 3187 [15 December 2015]
[1] For some 22 years John Hawthorn Mathieson (John) lived in a de facto relationship with Shirley Dawn Blumenthal (Dawn). John had never been married and had no children of his own. Dawn had four children from her previous marriage, including the plaintiff, Paul Blumenthal (Paul). Paul was a young adult when his mother’s relationship with John began and he is now in his 50s. The relationship was ended by Dawn’s death, in 2004.
[2] John died on 1 February 2014. His will effectively left all his property, valued at around $468,000, to charity, the Neurological Foundation of New Zealand (the Foundation). The Foundation is also the only beneficiary of the J H Mathieson Trust (the Trust), which holds net assets valued at around $453,000.
[3] In these proceedings Paul brings claims against John’s estate under the Family Protection Act 1955 (the FPA) and the Law Reform (Testamentary Promises) Act 1949 (the TPA) and in equity against the Trust. I record that no similar claims have been brought by Paul’s siblings. It is not, however, in dispute that Paul’s relationship with John was closer and deeper than theirs.
[4] It is useful to begin by setting out the facts and evidence in a little more detail.
THE FACTUAL MATRIX
[5] Paul first became friends with John in 1978. John was a panel beater. Paul and Dawn were involved in running a family pest control business.
[6] John executed his last will in 1981. His de facto relationship with Dawn began the following year. His solicitor at that time (and until his death) was Bruce Stewart, the first defendant. Mr Stewart drafted the will and is its sole executor and trustee. Under the will, the beneficiaries are John’s father and his aunt, with a gift over to the Foundation. John’s aunt and father both died before he did.
[7] As I understand it, in the late 1980s John was no longer able to work as a panel beater and was unemployed for two years or so. In about 1990 he was given a job in the Blumenthal family’s pest control business. Paul says that later, when that
business was taken over by a company known as Ecolab, he ensured that John’s
employment with that company continued.
[8] In early 2002 John sought advice from Mr Stewart, in relation to asset protection matters. In that context Mr Stewart wrote to John, recording that:
(a) the value of his major assets totalled approximately $351,000; (b) the property he lived in with Dawn was owned by her; and
(c) because the principal beneficiaries under his will had died, his estate would go in full to the Foundation.
[9] Then, Mr Stewart noted:
Your arrangement with your partner [Dawn] is apparently that she will not leave anything to you and likewise you will not leave anything to her.
[10] Mr Stewart went on to recommend that John transfer his assets to a Trust in order to address the twin risks posed by:
(a) the possibility that Dawn might change her mind and make a claim under the Property (Relationships) Act 1976 (the PRA) in the event of John’s death; and
(b)the dissipation of those assets in the event that he might later be required to pay rest home fees.
[11] As a result, the Trust was established in 2002 and John’s assets transferred to it (as a loan), accordingly. The trustees were John and Mr Stewart. The named beneficiaries were and are John, the Foundation, “any other person in New Zealand” and “any charity in New Zealand” that John later nominated by deed. A gifting programme was put in place whereby the $351,000 debt owed by the Trust to John would be forgiven over time.
[12] As foreshadowed by Mr Stewart, when Dawn died in 2004, her will made no provision for John. Rather, she:
(a) left her shares, and any current account credit she might have, in Kiwi
Pest Control (1988) Ltd (Kiwi Pest) to Paul; and
(b) divided the residue of her estate equally between her two daughters. [13] The principal asset in Dawn’s estate was the property in which she and John
had been living. In 2004 it was valued at between $375,000 and $400,000. There
was a dispute between Dawn’s children over the will, which was eventually settled.1
In the context of that dispute John swore an affidavit in which he:
(a) confirmed that he made no claim on Dawn’s estate; and
(b) expressed his sadness and dismay at the dispute between Dawn’s
children, but took no sides on the merits.
[14] Because the house in which John and Dawn had been living formed part of Dawn’s estate, John wished to purchase a new home. It seems that at one point there was a proposal that he might receive a $50,000 contribution from Dawn’s estate for that purpose, but this was not pursued by him.
[15] Instead, in mid-2005, the Trust purchased a property on the corner of
Bunnythorpe Road and Setters Line in Manawatu (the Setters Line property) for
$545,000. The purchase price was funded from the Trust’s existing investments and a Westpac mortgage of $100,000. From that time onwards John lived in a self- contained flat which was part of the “shed” on the property and rented out the main house.
[16] Paul’s evidence was that, in return for John doing panel beating on Paul’s
vehicles, Paul removed a considerable amount of rubbish including a lot of scrap
1 As I understand it, the cause of the dispute was that Kiwi Pest no longer existed and its business
had, by the time of Dawn’s death, been taken over by another company, Ecolab.
metal from around the Setters Line property and tidied up the section. At John’s funeral Paul said that he had “a new best friend and a panel beater on tap”.
[17] Paul was given keys and had open access to the Setters Line property. At one point he also stored his furniture in the shed and his children stayed with John who supported them during Paul’s divorces.
[18] It seems that Paul’s second divorce was particularly difficult. He said that it caused him such financial hardship that he had to sell his own house to service the resulting relationship property debt. He said “John provided support of all kinds to me during that period”, including offers of money and the use of his own ute (neither of which Paul accepted). Paul did, however, relocate his pest control business to the Setters Line property and operated his business from there rent-free. He freely admitted that he stored his ute, work equipment and the chemicals he used in his business in the shed on the property for at least two years. The shed had 3-phase power and a high enough stud for Paul to install a hoist in it. Paul said that throughout this time John provided him with both moral and practical support in the running of the business.
[19] At some point Paul also moved some weaner steers into a paddock at the Setters Line property. He said the steers helped to keep the grass down and were a source of meat for both him and John.
[20] Paul said, and I accept, that the friendship between John and Paul grew stronger after Dawn’s death in 2004. He said that his mother had specifically asked him to look after John after she died. It is not seriously in dispute that they shared a close relationship. They were variously described by Paul’s witnesses as being “like friends”, “good mates”, “like brothers”, or as having a stepson-stepfather relationship. Paul himself described John as his “best friend” in the eulogy he delivered at his funeral and as a “good friend and mentor” in John’s death notice.
[21] On 18 November 2013 John snapped the tendons in both his ankles and was hospitalised and immobile. Paul’s evidence was that he visited him daily in hospital and brought him anything he needed. Although John was recovering his mobility
and had been released from hospital in January 2014 he died, quite unexpectedly, on
1 February.
PRELIMINARY MATTERS
[22] Before turning to consider Paul’s claims, there are two ancillary matters which need to be recorded.
Current status of Trust property
[23] Following John’s death, Mr Stewart resolved to sell the Setters Line property. Paul lodged a caveat against the title and Mr Stewart applied to the High Court to remove it under s 143 of the Land Transfer Act 1952. In a judgment dated 15 August
2014, this Court held in favour of Mr Stewart and ordered that the caveat be removed and dismissed Paul’s application for interim relief.2 Williams J made this order on the condition that Mr Stewart placed the proceeds of the sale of the Trust property into an appropriate interest bearing account pending disposition of these substantive proceedings.
[24] Mr Stewart sold the Setters Line property on 15 August 2014 for $520,000. The net assets of the Trust are, however, valued at just under $470,000 after taking into account the residue of the debt owed to John’s estate (John had not forgiven all of the loan by the time of his death). The net proceeds continue to be held in accordance with Williams J’s judgment.
The role played by the Defendants at the hearing
[25] The first defendant is the surviving trustee of the Trust. Although represented by Mr Morris during the hearing, counsel took no real active part in it. Mr Stewart himself did give evidence and in my view it was important that he did so; he was not only the trustee of the Trust but John’s lawyer for the entirety of the relevant period. As will be evident from the discussion which follows I accept the evidence he gave
and it was helpful to the Court.
2 Blumenthal v Stewart [2014] NZHC 1924, [2014] NZFLR 1002.
[26] It is also important to record that no criticism can be made of the role played in the hearing by the second defendant, the Neurological Foundation. Although charities have historically tended to abide in cases such as these3 as Ms Cull QC very properly pointed out that is now less routinely so. For example in Auckland City Mission v Brown the Court of Appeal said:4
[42] We can see no basis for criticising the stance taken by the charities in this case. In some circumstances it may be appropriate for the charities simply to abide the decision of the court and provide relevant information as to the testator's connection with and intentions in benefitting the charity. One such case is where competing claimants can be expected to test the respective claims. In other circumstances, as here, where there is no other beneficiary defending the will, and where the trustee was also the accountant for the Browns' business, it is, in our view, entirely proper to support the will, test the claims, and while perhaps formally submitting to the Order of the Court, respectfully suggest what, if any, further provision should be made for the claimants.
[27] Ms Cull objected to the proposed filing of late evidence about any special affiliation that John had with the Foundation and, as a consequence, I declined to receive that evidence. Nonetheless I consider that it would be reasonable to draw an inference that there was some sort of special connection simply from the fact that the Foundation was the sole beneficiary under both John’s will and the Trust. As it transpires, however, any such inference has no bearing on the outcome of this case. But, for the avoidance of doubt, the fact that the Foundation was the only beneficiary under both the will and the Trust made it entirely appropriate for it to take the active stance that it did.
THE CLAIMS AGAINST JOHN’S ESTATE
Family Protection Act 1955
Eligibility
[28] Entitlement to bring a claim under the FPA is governed by s 3, which relevantly provides:
3 Pulleng v Public Trustee [1922] NZLR 1022.
4 Auckland City Mission v Brown [2002] 2 NZLR 650 (CA); (2002) 22 FRNZ 232.
(1) An application for provision out of the estate of any deceased person may be made under this Act by or on behalf of all or any of the following persons:
(a) the spouse or civil union partner of the deceased:
(aa) a de facto partner who was living in a de facto relationship with the deceased at the date of his or her death:
(b) the children of the deceased:
(c) the grandchildren of the deceased living at his death:
(d) the stepchildren of the deceased who were being maintained wholly or partly or were legally entitled to be maintained wholly or partly by the deceased immediately before his death:
(e) the parents of the deceased.
…
Is Paul a stepchild for the purpose of the FPA?
[29] Paul’s claim is necessarily predicated on his status as John’s stepchild. As s 3(1)(d) makes clear, a stepchild is entitled to bring a claim if he or she was being maintained or was entitled to be maintained by the deceased immediately before his or her death. But in addition, s 2(1) of the FPA specifically defines “stepchild” as
… any person —
(a) who is not a child of the deceased, but is a child of—
(i) the deceased's spouse or civil union partner; or
(ii) a de facto partner who was living in a de facto relationship with the deceased at the date of his or her death and in whose favour the court can make an order under this Act; and
(b) who was living at the date on which the deceased—
(i) married that spouse; or
(ii) entered into the civil union with that civil union partner; or
(iii) became a party to that de facto relationship.
[30] Ms Morris submitted that although Dawn was in a de facto relationship with
John during her lifetime, and Paul is Dawn’s child, part (a) of this definition also
requires that Dawn be living in a de facto relationship with John at the date of John’s
death.
[31] At the hearing before me, Ms Cull submitted that the words “his or her death” were ambiguous, and could be interpreted as referring to the death of the de facto partner. If that were so, then Paul would fall within (a) because he is the child of John’s de facto partner who was living with John at the date of her own death.
[32] As a result of questions raised at the hearing about the policy underlying the definition, and the reason why Parliament might have chosen to differentiate between the prior children of de facto partners of a deceased person and the prior children of de jure partners, I granted Ms Cull leave to file further submissions on the issue, and the defendants leave to respond.
[33] In those submissions, Ms Cull maintained her position that it is possible to read the words “at the date of his or her death” as meaning at the date of either partner’s death. She said that so long as a de facto couple remain together until either partner dies, their children will be stepchildren for the purpose of the Act. Thus (she said) the words “in whose favour the Court can make an order under this Act” must therefore relate not to the eligibility of the de facto partner but to the eligibility of the stepchild who is bringing the claim. In other words, the ambit of the definition, in part, is determined by whether or not a (stepchild) claimant meets the other requirements of the Act.
[34] Ms Cull also helpfully traversed the statutory history of the provision which, she said, supported her contention that there was no legislative intention to distinguish between children of de facto and children of de jure relationships. I set out my own view of the pertinent aspects of that history below.
[35] Between 1970 and 1992 the definition of “stepchild” was confined to a child by a former marriage of the deceased’s husband or wife who was living at the date of the marriage of the deceased to the parent of the child. I accept Ms Cull’s submission that there was no focus in that definition on whether the original parent
of the stepchild remained living at the time of the deceased’s death. But the definition did not encompass the prior children of de facto partners.
[36] The present definition was enacted by way of the Relationships (Statutory References) Act 2005, whose purpose was described in the following way by the Justice and Electoral Select Committee in its report on the Bill:5
The main aim of the Relationships (Statutory References) Bill was to amend Acts and regulations that contain unjustified discrimination on the grounds of marital status or sexual orientation. The bill is the primary statutory vehicle for implementing the Consistency 2000 project (commenced in the
1990s) and its successor the Compliance 2001 project, both of which adopted the approach that under the Human Rights Act 1993 and its
subsequent amendments and the New Zealand Bill of Rights Act 1990, laws should be consistent with our human rights obligations. In addition to
implementing the Government’s policy objective, the bill gives legal effect
to civil unions. To achieve these goals, it amends a range of Acts and regulations.
[37] Ms Cull pointed out that as well as amending the FPA definition of “stepchild”, the Act also amended the Interpretation Act 1999 by defining not only “de facto partner” and “de facto relationship” but also “step-parent”, as follows:
29B Meaning of step-parent, etc
For the purposes of an enactment, the relationship of step-parent, stepson, stepdaughter, or any other relationship described by a word containing the prefix “step”, may be established by civil union or by de facto relationship as well as by marriage.
[38] But while this legislative history is of some academic interest, in the end I regard it as of little assistance here. That is because, as the commentary to the bill also makes clear, its anti-discriminatory focus was not an all-encompassing one. While, in general terms, the amendments effected by it recognised a de facto relationship as being akin to a marriage or civil union, the Bill also recognised that the law may on occasion be justified in treating de facto relationships differently
from de jure ones. As the Select Committee said:6
We also acknowledge that people who enter marriage or civil union are showing an unequivocal intention to change their status. Imposing
obligations on people who decide to live together but do not decide to enter marriage or civil union may not always be appropriate.
[39] For that reason the Committee expressly determined that the Bill should not deal with a number of specific areas of exception, which should be addressed in a more specific way on another occasion or on a case by case basis. One such area to which the Commentary specifically referred was “Laws to do with bestowing property on another party”. The Committee said:7
While we recommend that the provisions that currently assist spouses to leave property to each other should be extended to civil union and de facto partners, we have not recommended that automatic succession rights attach to de facto partners. We considered that automatic succession might not have been contemplated by people in de facto relationships, and that this matter would be better dealt with in a specific review of succession law.
[40] The Committee also said:8
We have a common concern that the term ‘‘de facto’’ is used in a range of laws with essentially conflicting purposes. As identified … above, some laws cast a wide net, for example to ensure that declarations of conflict of interest capture all parties likely to be influenced by the relationship. Others are narrow because they change rights or vest property in ways that usually require a conscious decision to take up those rights or obligations. Yet another class involve the State applying an eligibility test where the considerations are primarily of fair comparison with third parties.
[41] Accordingly, to the extent there is any ambiguity in the definition of stepchild, I do not consider that the legislative history assists in resolving it.
[42] In any event, I have formed the view that there is no such ambiguity, for the reasons that follow (in no particular order).
[43] First, it seems to me that there is a material distinction between a de facto relationship and a de jure one in this context. As the name suggests, a de facto relationship is defined by the facts of the matter, rather than the law, and it is the facts that determine whether that relationship has ended. If the deceased was separated but not divorced from his or her spouse prior to his or her death, the child of the previous spouse would still be eligible as a stepchild because the requisite
legal state of affairs between the parents existed. But if the parties to a de facto relationship have separated prior to the death of one of the parties, there is no de facto relationship and the child of the deceased’s former de facto partner would not be an eligible claimant. Death is simply another factual way in which a de facto relationship can end.
[44] Secondly, it will only be in some cases that a deceased person’s de facto partner will have died before him or her. In a case where the de facto partner is still alive, the words “his or her death” would, on the plaintiff’s interpretation, have no meaning. In fact, para (a)(i) would merely need to refer to “the child of a de facto partner of the deceased”. There would be no need to deal with prior children of de facto partners in a separate paragraph from the prior children of those who have married or been civilly united at all.
[45] Thirdly, there are other statutory clues that the words “a de facto partner who was living in a de facto relationship with the deceased at the date of his or her death” must refer to the death of the person whose estate is the subject of a claim. Exactly the same phrase is used in both:
(a) section 3(1)(aa), which provides that an application under s 3 may be made by “a de facto partner who was living in a de facto relationship with the deceased at the date of his or her death”; and
(b)section 4(3)(b) which provides that an application under s 3 must be served on “a de facto partner who was living in a de facto relationship with the deceased at the date of his or her death”.
[46] Neither of those provisions make sense or could apply where the de facto partner has predeceased the person whose estate is the subject of the claim.
[47] Fourthly, tangential support for this position just articulated can be derived
from the Supreme Court’s decision in Wood-Luxford v Wood.9 That case also
concerned the definition of “stepchild” under the FPA, in relation to a child who was
9 Wood-Luxford v Wood [2013] NZSC 153, [2014] 1 NZLR 451.
in utero at the date his mother married the deceased, who was not the unborn child’s father. Paragraph (b) of the “stepchild” definition requires that the child was living at the time his or her parent married the deceased. The Court acknowledged that it was not clear why Parliament excluded children who were not yet born from eligibility as stepchildren, but the majority concluded that:10
The statutory history of close legislative control of the conditions of eligibility points against judicial expansion of the categories of eligibility by construing “living” to include children conceived but not yet born at the date specified. …
[48] An expansive (and strained) interpretation of the definition of “stepchild” is
not to be preferred for the same reason.
[49] Lastly, I note that my view accords with that expressed by the learned authors of the Westlaw commentary who conclude:11
… the de facto partner must qualify as an eligible claimant for the de facto partner’s child to be a stepchild for the purposes of this Act. The child of a predeceased or separated de facto partner will therefore not come within the definition.
[50] Accordingly, I accept Ms Morris’ submission that Paul does not have
standing to bring a claim as a “stepchild” under the FPA.
Was Paul being maintained by John?
[51] Even if I am wrong in the view that Paul does not fall within the statutory definition of “stepchild”, there is a further impediment to his FPA claim here. Paul must also meet the “maintenance” requirement in s 3(1)(d). In other words he must establish either that he was being maintained wholly or partly, or that he was legally entitled to be maintained wholly or partly, by the deceased immediately before his
death. Only the first of these alternatives is potentially in play here.
10 At [28].
11 Nicola Peart (ed) Brookers Family Law — Family Property (online looseleaf ed, Westlaw) at
[FP.11.02].
[52] Precisely what a claimant must show in this respect was discussed at some length in Re Hilton, where this Court observed:12
Having regard to the Act’s concern with financial provision for close family members and the reference to legal entitlement to maintenance, the connotations of the word “maintained” in s 3 must be those which are conventionally relevant to a family situation. Although such a proposition seems obvious its declaration is desirable in view of the extensively argued but essentially tenuous submissions of the persons claiming status by virtue of alleged maintenance at the date of Dr Hilton's death. The term “maintenance” connotes the regular provision or contribution to another of, or money towards, that person's reasonable necessaries and conveniences of life. The word has been defined in and for the purposes of certain family law legislation such as the Destitute Persons Act 1910, the Domestic Proceedings Act 1968, and the Family Proceedings Act 1980, but it is not defined in the Family Protection Act 1955. In the Acts just mentioned the concept of life’s necessaries and conveniences is envisaged although of course the particular statutory meanings are to be taken as influenced by the particular legislative purposes of enforcing private obligations towards dependants. One cannot simply extrapolate the meanings in those statutes regardless of the purpose of the Family Protection Act and the ordinary connotations of the word in question. The purpose of the Family Protection Act, as far as s 3(1)(d) and s 3(1)(e)(i) are concerned, is to ensure that where at the time of death a deceased has a legal obligation or has assumed a moral obligation to the specified family members to provide for their upkeep, the deceased will or may, by virtue of such dependency, legal or actual, have a moral obligation to provide for that person out of the deceased's estate. Part of the speech of the then Attorney-General, reported in Hansard’s 1955 Parliamentary Debates, … is consistent with the purpose of synthesising testamentary and inter vivos provisions for maintenance. Unlike widows and children, who are entitled to claim by virtue of status, stepchildren … may not claim except by virtue of a combination of status and actual dependency. In its ordinary meaning in a dependency context the term “maintenance” has connotations of entitlement or provision on a regular even if not a periodic basis, and the term could not sensibly be applied to occasional gifts, provision of treats, or extension of hospitality to house or dinner guests.
[53] In rejecting the claim made by the stepchildren in that case the Court noted that all three had reached the age of independence and said that:13
This is itself a useful confirmation of the non-maintaining nature of his relationship with his stepchildren near the end of his life.
[54] The Court held that the occasional provision of accommodation, financial assistance, and hospitality did not amount to “maintenance”. Notably, it rejected the
12 Re Hilton (deceased) [1997] 2 NZLR 734, 15 FRNZ 340 at 345-346 (HC).
“strongest” claim for maintenance, which had been advanced by Dr Hilton’s eldest stepdaughter, Rachel, on the basis that:
(a) after the birth of her child she had lived at home with her mother and stepfather for three years;
(b)Dr Hilton had lent her $10,000 towards the purchase of a home for her and her husband; and
(c) Dr Hilton had also guaranteed an $8,000 bank loan to Rachel’s
husband for the purposes of his business.
[55] The Court cautioned that:14
… it is not for the Courts effectively to repeal the legislative condition by imputing extenuated, even fanciful, meanings to words whose meanings and connotations have been long understood.
[56] In the present case, the pleaded maintenance and support Paul says he received from John was:
(a) support following the breakdown of his marriages when he was in severe financial difficulties;
(b)permission to move his business and belongings on to the Setters Line property, because he was financially over-committed;
(c) financial support, by way of permitting him to occupy and use the
Setters Line property and to graze his cattle there rent-free; and
(d)caring for his children when they were young and over weekend and holiday periods.
[57] I consider that this pleading, and the corresponding evidence, falls well short
of establishing the high threshold of “maintenance” required under the Act as
illustrated by the case law. More specifically, Paul does not meet the threshold of having been “maintained” by John, because:
(a) Paul was legally an adult when John’s relationship with Dawn began and he was 54 when John died;
(b)there is no evidence of regular contributions on John’s part to the necessaries of Paul’s life; and
(c) the evidence suggests that rather than Paul being dependent upon John, the relationship was one of mutual assistance and benefit (this is a point I discuss in greater detail below).
[58] Once that point is reached, no question of moral duty arises. A moral duty can only be owed to a stepchild (who falls within the statutory definition) where there has been maintenance (or an entitlement to it). Any obligation arising from any services rendered by Paul to John therefore falls to be dealt with under the TPA. So it is to that aspect of the claim that I now turn.
Law Reform (Testamentary Promises) Act 1949
[59] Section 3 of the TPA relevantly provides that:
Estate of deceased person liable to remunerate persons for work done under promise of testamentary provision
(1) Where in the administration of the estate of any deceased person a claim is made against the estate founded upon the rendering of services to or the performance of work for the deceased in his lifetime, and the claimant proves an express or implied promise by the deceased to reward him for the services or work by making some testamentary provision for the claimant, whether or not the provision was to be of a specified amount or was to relate to specified real or personal property, then, subject to the provisions of this Act, the claim shall, to the extent to which the deceased has failed to make that testamentary provision or otherwise remunerate the claimant (whether or not a claim for such remuneration could have been enforced in the lifetime of the deceased), be enforceable against the personal representatives of the deceased in the same manner and to the same extent as if the promise of the deceased were a promise for payment by the deceased in his lifetime of such amount as may be reasonable, having regard to all the circumstances of the case, including in particular the circumstances in which the promise was
made and the services were rendered or the work was performed, the value of the services or work, the value of the testamentary provision promised, the amount of the estate, and the nature and amounts of the claims of other persons in respect of the estate, whether as creditors, beneficiaries, wife, husband, civil union partner, children, next-of-kin, or otherwise.
(2) This section shall apply—
(a) whether the services were rendered or the work was performed before or after the making of the promise:
(b) notwithstanding anything to the contrary in subpart 2 of Part 2 of the Property Law Act 2007, or any other enactment.
…
[60] A claimant under s 3 must therefore establish that:
(a) the deceased made an express or implied promise to make testamentary provision for him or her;
(b)he or she rendered services to, or performed work for, the deceased in the deceased's lifetime;
(c) there is a nexus between the services performed and the promise; and
(d)the deceased failed to make the promised provision or otherwise remunerate the claimant.
[61] The satisfaction of each element was contested by the second defendant here and so each will be considered in turn.
Promise
[62] By s 2 of the TPA a “promise” is defined as “any statement or representation
of fact or intention”. So, as the Court of Appeal said in Byrne v Bishop:15
[8] The term ‘promise’ under the Act covers declarations which might not fall within a dictionary definition of that word and certainly goes beyond any contractual context … . It includes a statement or representation of
15 Byrne v Bishop [2001] 3 NZLR 780, (2001) 20 FRNZ 609 (CA), citation omitted.
present fact (‘I have done X for you in my will’) or intention (‘I will do X for you in my will’) made either before, during or after the services or work occur (s 3(2)).
[63] Such a promise may be expressly made, or can be implicit. The promisor need not do much to make one. In Gibson v Gibson mere nodding of the head sufficed.16 Promises to someone other than the beneficiary can be sufficient. Corroboration of claims of promises made is preferable, but not essential. Context will also be relevant in determining whether a promise has been made.
[64] I quote the relevant pleading of the relevant testamentary promises in full:
25. The Deceased made express and implied promises to the Plaintiff that he would receive an inheritance.
26. In discussions with the Plaintiff, the deceased referred to his property interest at Setters Line, as “Paul’s inheritance” on frequent occasions.
27. In addition to the Deceased telling the plaintiff his property interests were going to be the plaintiff’s, he also referred to the property interests being held in trust for the plaintiff’s children.
28. Prior to his death, when the deceased was convalescing in a rest- home, and reference was made to a friendly rest home worker, the deceased said to the plaintiff: “You wouldn’t want someone else getting your inheritance would you?”
[65] Paul’s evidence was consistent with, but no more specific than, this pleading. There was little in the way of corroborating evidence for his claim. While such an absence is by no means fatal to the claim, it does make it more difficult for Paul to satisfy the Court on the balance of probabilities that a relevant promise was made.
[66] Paul’s burden is made heavier by the documentary evidence which, in my view, makes it tolerably clear that until (at least) the time of Dawn’s death, John had no intention of leaving any part of his estate to her or her family. John and Dawn plainly had an understanding to that effect and their respective wills, and his actions, are entirely consistent with that understanding. In light of that evidence, I simply do not accept that John made any testamentary promise to Paul prior to 2004.
[67] And although Paul’s daughter Nicola gave evidence that John voiced thoughts of leaving his estate to the Blumenthal family at about the time of Dawn’s death, that also seems to me to be unlikely in light of the matters just mentioned. It would certainly be difficult to conclude that any such ruminations reflected some firm or constant intention at that time, given the evidence that:
(a) Mr Stewart specifically asked him whether he wanted to update his will in 2005 when he settled the Trust; and
(b)John was at that time witnessing, with consternation and distaste, the in-fighting between Dawn’s children over her will; and
(c) John had expressly declined or did not pursue an offer of money from
Dawn’s estate.
[68] The question then becomes whether there is sufficient evidence to establish the making of a relevant promise after 2005. Paul’s evidence in that respect was that:
(a) John made various unspecific references to the Setters Line property as Paul’s “inheritance” including most recently while John was in hospital (in accordance with paragraph 28 of the pleading I have set out at [64] above); and
(b)after Paul had expressed dismay at the financial strain his second divorce was causing him, John said “Not to worry about it, it doesn’t matter, you will get it back when I’ve gone”.
[69] In terms of contrary evidence:
(a) Ms Ormsby, the “friendly rest home worker”,17 had no recollection of
John’s “inheritance” comment;
(b)Mr Stewart said that John had had a number of opportunities to update his will during the 10 years between Dawn’s death and his own, including:
(i)following his receipt of regular reminders from Mr Stewart asking whether he wanted to update his will to which he did not respond;18 and
(ii)at their annual meeting where John executed the documentation necessary to effect the yearly forgiveness of part of the debt owed to him by the Trust; and
(c) Paul’s own evidence that he was contemplating purchasing the Setters Line property from John in the time immediately before John’s death.
[70] Notwithstanding this evidence, however, I would be inclined, on balance, to accept that general references to “inheritance” were on occasion made by John to Paul in his later years, at least in the context of the Setters Line property.19 As I have said, I accept that their relationship was close and John would, no doubt, have known how useful the Setters Line property was to Paul. The fact that he took no formal steps to give effect to such statements is not determinative. There was other evidence that John was not expecting to die and that his principal financial focus during that time was more concerned with ensuring that he (John) was provided for
in retirement.
Work and services
[71] Having accepted that John did make some form of promise that the Setters Line property would be Paul’s “inheritance” the next question is whether Paul performed work or services for John that might justify the Court making good that
promise.
18 The last one of these was in 2013.
19 Because the Setters Line property is Trust property it could not itself be the subject of an order under the TPA. Nonetheless I consider that any services provided by Paul in relation to it are relevant to an assessment of his claim under the Act.
[72] Like the term “promise”, the concepts of “work” and “services” have been interpreted liberally. In Tucker v Guardian Trust Executors McCarthy J held that services need not consist of labour or physical acts but could include surrendering of rights and even intangible services such as companionship and emotional support.20
That broad approach has consistently been applied since. But it is always subject to the important requirement for “something extra”. The work or services performed must be of a nature or extent that is greater than those which might be thought to be an ordinary incident of a relationship of the kind existing between the claimant and the deceased.
[73] The work/services that are pleaded to have been provided by Paul to John were:
(a) support, in the form of employing him in Kiwi Pest from early 1990 and (following the closure of that business) in the form of organising other employment for him;
(b)maintenance of the Setters Line property (fixing fences, maintain the building, caring for the grounds and keeping the property pest free);
(c) firewood;
(d)support during the last two and a half months of John’s life (more or less daily visits, provision of food, a DVD player and rental DVDs, toiletries and other essentials purchased by Paul); and
(e) organisation of John’s funeral.
[74] I accept that Paul did, in a general way, perform the acts pleaded and set out above. I record, however, that in the course of the hearing it became apparent that the extent of Paul’s maintenance work on the Setters Line property was generally limited to the areas around the shed where John lived and which Paul used for his
own purposes. While it may be that he also on occasion helped with maintenance on
20 Tucker v Guardian Trust Executors [1961] NZLR 773 at 776.
the house, Leon Mudgway deposed that, when he became a tenant in September 2013, the house was “really untidy and overgrown” and “a mess, inside and out”. Mr Stewart also gave evidence that shortly after John’s death, the property was infested with weeds and that restoring the property cost the Trust around $2,000. But in fairness to Paul, Mr Stewart was not entirely clear whether the restoration
work had to be undertaken just in and around the house or more widely.21
[75] There are two principal difficulties that Paul faces in relation to this aspect of the TPA claim.
[76] First, even viewed generously and as a whole, the services said by Paul to have been provided by him to John appear to me to be no more than the natural incidents of the relationship between the two men which, as I have said, was of a close father/son kind. Ironically, the strong emphasis in Paul’s own evidence (and in the evidence of other witnesses called by him) on the closeness of the bond between Paul and John ultimately undermines Paul’s position in this respect.
[77] That evidence established that Paul was kind, caring and supportive of John, and did help him out both at the Setters Line property and in other ways. But I am simply unable to conclude that he did anything of significance beyond what might be expected of a good friend or close family. And because John’s death came relatively quickly and suddenly, there was simply neither the time nor the opportunity for Paul to provide him with a level of support or companionship that was sufficiently high or out of the ordinary so as to breach the “unusualness” threshold.
[78] Secondly, Paul’s own evidence also overwhelmingly suggests that the relationship between Paul and John was mutually beneficial and, if anything, was to Paul’s net benefit. More particularly, the evidence suggests that:
(a) the work done by Paul at the Setters Line property was balanced by the very considerable benefit Paul obtained through being permitted to
use it for his business and other purposes;
21 There was also evidence that it was not Paul but his daughter who purchased the DVD player, although that seems to me to be of no real consequence.
(b)Paul’s provision of meat from his cattle and the benefit to John of Paul’s cattle “keeping the weeds down” and from Paul’s fencing work on the property was balanced by Paul’s use of John’s grazing land at no cost and the mutual benefit Paul received in the way of meat and stock proof fencing;
(c) Paul’s pest control work for John was balanced by John’s panel
beating work for Paul; and
(d)the companionship and support between the two men was entirely mutual, subject only to the usual swings and roundabouts of their varying and respective needs and abilities over time.
[79] Lastly, John’s employment at Kiwi Pest and subsequently at Ecolab must be seen in the context of it being a family business owned and run not only by Paul but by his mother. I am therefore doubtful that John’s employment there was due solely to Paul’s endeavours. At the time John was first taken on he was, after all, living in a long term, loving, de facto relationship with Dawn. And on the assumption that John was suitably qualified and did the work well and willingly (and there is nothing to suggest that he did not) it is difficult not to regard the arrangement as anything other than one of reciprocal benefit.
[80] On balance, I am unable to conclude that the work and services performed by
Paul for John were of the relevant and actuating kind.
Nexus
[81] Even if I am wrong in that conclusion Paul would still need to establish a link between the services provided and the promises made. Such a nexus can either be express or, more commonly, inferred from the circumstances.
[82] The pleading in this respect was bland:
16. The Deceased, on several occasions in his lifetime, made express and implied promises to reward the Plaintiff for his services and work by making provision for the Plaintiff on his death.
[83] Again, Paul’s claim is defeated by his own evidence about the closeness of his relationship with John and his (wholly admirable) motivation for helping him. I need do no more than set out some of the relevant extracts below.
[84] In his affidavits, Paul said:
… I saw [John] as my step-father, with whom I had a close and meaningful relationship. I would do anything for him, as he had provided such support for me, whenever I had needed it.
After my mother died our relationship got stronger. I promised my mother I would look after him after she had gone. Both of his parents were dead and he had no brothers or sisters.
…
[85] And under questioning from counsel:
Why did you end up doing this work on the property?
He was my stepfather. I’m obligated to help him. It’s my responsibility.
…
Did you ever expect to get paid for any of the work or services you performed?
I had an expectation that I would inherit what he had. Is that the reason that you did things on the property?
Of course it’s not, he was a family member. He was my stepfather.
…
And so would you have done all of these things for Mr Mathieson whether or not you were going to receive an inheritance?
I had an expectation that I was going to receive an inheritance, he was my stepfather, I did it because he was my stepfather.
Even if you weren’t going to receive an inheritance?
It’s of no relevance. I had an expectation I would inherit, so.
[86] These exchanges highlight the essential conundrum of Paul’s claim. Although he and John had a close familial relationship, it is not one that is recognised by the FPA. And it is the close familial relationship and its ordinary incidents that conspire to defeat his claim under the TPA.
[87] It seems to me that the decisions of the Court of Appeal and the Privy Council in Welch make it quite clear that the TPA cannot simply be manipulated by the courts in order to remedy imperfections or gaps in the FPA.22 In that case, the High Court had made a substantial award notwithstanding a finding that the services that were performed by the deceased’s stepson were motivated principally by normal filial affection, rather than in response to a testamentary promise.
[88] Although the appeals challenged only the quantum of the award, the judgments make it plain that both appellate courts had grave reservations about the existence both of the actuating services and the relevant nexus with any promise made. Sir Robin Cooke (as he then was) speaking for the Judicial Committee began by observing:23
No claim by the appellant would lie under the Family Protection Act 1955, which is concerned with the moral duty of persons to make testamentary provision for their children and certain other defendants: stepchildren are entitled to claim thereunder only if they were maintained or legally entitled to be maintained by the deceased immediately before his death, which was of course not the case with the appellant.24
[89] Later, he said:25
During the period from 1954 to 1959 (when Mr Welch sold his business) the appellant helped Mr Welch in the business from time to time during holidays or in hours outside his own employment. In the earlier part of that period the appellant and his wife were at times living with Mr and Mrs Welch. The services were unpaid but the appellant and his family enjoyed reciprocal advantages. On the evidence some doubt must be entertained about whether Mr Welch's indications that he intended to leave to the appellant the shares, and later the house and furniture also, were meant to signify reward for those services rather than a normal expression of family love or affection. Williamson J accepted, however, that there was some element of promised reward for services to the business, and the point was not contested in the Court of Appeal.
The Judge spoke of the relationship between appellant and his wife and children and the deceased as a source of interest, comfort and joy to the latter. He said that the appellant had given the deceased companionship, mentioning for example that the appellant accompanied the deceased on trips to the hotel and other social gatherings, and that the appellant had also
22 Re Welch [1989] 2 NZLR 1 (CA); Re Welch [1990] 3 NZLR 1, (1990) 7 FRNZ 536 (PC) [PC Decision].
23 PC Decision at 3.
24 Welch was decided before children belonging to a de facto partner of the deceased were included in the FPA definition of stepchild.
25 At 7.
conferred on the deceased the enrichment of having a daughter-in-law and grandchildren.
It appears to their Lordships that some straining of the scope of the Act is required to bring within the concept of services the natural incidents and consequences of life within a close family group, such as existed in this case. The case is distinguishable from Hawkins v Public Trustee [1960] NZLR 305, where a grandson changed his name to that of the deceased, became in effect his adopted son, worked for him full-time as manager of his farms, and entered into a bargain with the deceased whereby he was to receive initially the whole but as revised a quarter share of the estate. In those circumstances Shorland J found that the actions of the claimant in gratifying the deceased by assuming his name and performing the role of near-adopted son were “service” within the meaning of the Act. That was a case of much more than a normal relationship between grandson and grandfather; whereas, in the present case, as the Court of Appeal put it:
“The evidence points to nothing more than a normal family relationship between a stepfather and stepson, who had the good fortune to get on well with each other. There was a reasonable balance of benefits and personal satisfaction on each side, and in earlier years Mr Welch helped his stepson with job opportunities and the gift of a section, as well as providing the general support of a father, and this carried on into the mutual companionship and family association of later times.”
[90] It seems to me that the facts of the present case are materially similar to those in Welch.
Sufficient remuneration?
[91] In light of my conclusions above it is not possible sensibly to consider the question of remuneration. It follows inexorably from those conclusions that the rewards reaped by Paul from his relationship from John adequately remunerate for the services he provided. I record, but do not need to detail, Mr Stewart’s attempts to place a value on some of the benefits Paul received.
Conclusion: TPA claim
[92] Although on balance I have found that John did make reference to Paul receiving an “inheritance” in the context of the Setters Line property I have also found that:
(a) the work and services performed by Paul for John did not go beyond the natural incidents of a relationship of the kind that the two men enjoyed;
(b)the benefits received by Paul from John in the course of their relationship at least equalled the benefits John received from Paul; and
(c) Paul performed the work and services as a consequence of his familial love and affection for John rather than in response to any promise of an inheritance.
[93] The TPA claim must fail accordingly.
CLAIMS AGAINST THE TRUST
[94] Paul claims either a constructive trust over the Trust’s property or for compensation for the Trust’s unjust enrichment at his expense.
Constructive trust
[95] It is not in dispute that the outcome of this aspect of Paul’s claim turns on whether he can establish the Lankow v Rose pre-requisites for imposing a constructive trust over trust property.26 He must show that:
(a) he has made either direct or indirect or contributions to the property in question;
(b) he has an expectation of an interest in the property; (c) such an expectation is reasonable; and
(d) the Trust should reasonably expect to yield him an interest in Trust
property.
26 Lankow v Rose [1995] 1 NZLR 277 (CA).
[96] The relevant Trust property here is the Setters Line property. The existence of each of the four Lankow pre-requisites is contested by the defendants.
Contribution
[97] As to Paul’s contribution to the Setters Line property, the defendants emphasised that the Court of Appeal in Lankow stated that “the contribution must manifestly exceed the benefits”. A constructive trust will only be imposed to restore the claimant and defendant to proprietary equilibrium.27
[98] For the reasons I have already given in relation to the TPA claim, the evidence here does not, in my view, establish the necessary imbalance. The relationship between Paul and John was essentially a reciprocal one, with benefit and detriment moving each way between them. My more specific findings of mutuality in relation to the Setters Line property are set out at [78] above.
Did Paul have a reasonable expectation of an interest in the Setters Line property?
[99] In case I am wrong in my conclusion that there was no relevant disequilibrium, I record that on the basis of the evidence I have already discussed that Paul did have an expectation of an interest in the Setters Line property and that it was reasonable. But as I have also discussed above, however reasonable that expectation might have been it did not arise because of his contribution to the property but because of his relationship with John and things that were said by him. Again, the absence of the requisite nexus would be fatal to the claim.
Could the Trust reasonably be expected to yield Paul an interest?
[100] In case I am later found to be wrong in any of the above respects, I consider as best I can the last Lankow element. The orthodox position is, of course, that it
will only be reasonable to expect a trust to yield an interest in trust property where
27 As Hardie Boys J said (at 282):
… by contributions to assets one is not referring to those contributions to a common household that are adequately compensated by the benefits the relationship itself confers. The contribution must manifestly exceed the benefits. ...
all trustees have known about, consented to or approved the relevant contributions such their conscience should be bound.
[101] Mr Stewart’s evidence was that he did not know about the maintenance and use of the Setters Line property by Paul. That was confirmed by Paul himself who said that he had conveyed to Mr Stewart his use of, and interest in, the property “at the time of notifying him of John’s death”.
[102] That evidence does not, however, give rise to a tenable claim that Mr Stewart abjured his Trustee responsibilities in the Murrell v Hamilton sense.28 Although the Setters Line property was Trust property, Mr Stewart knew from the outset that it was used to provide John with a home and income. While John was living there I can see no reason why Mr Stewart should have been concerning himself with the detail of the day to day use and maintenance of the property.
[103] The short point really is that the contributions made by Paul to the Trust property were simply not of the order to attract the attention of Mr Stewart or to bind his conscience. On my view of the evidence this element would also not be satisfied.
Conclusion: constructive trust
[104] None of the Lankow v Rose elements are made out here.29 There is no basis for constructing a trust over the assets held by the Trust.
Unjust Enrichment/Unconscionability
[105] It also inexorably follows from my analysis above that the evidence establishes neither unconscionability nor unjust enrichment. The benefits Paul bestowed on the Trust property were equalled by the benefits he received; the Trust was not unjustly enriched. And Paul’s own evidence establishes that he bestowed those benefits as a consequence of his love for and relationship with John; he did not
do so because he had some expectation of reward. Nor, given the strong reciprocity
28 Murrell v Hamilton, [2014] NZCA 377.
29 Lankow v Rose, above n 26.
involved, could there be any detrimental reliance. The claim against the Trust based on unjust enrichment or unconscionability cannot succeed.
SUMMARY
[106] Paul’s claims against the estate and the Trust must fail. More particularly:
(a) The claim under the FPA fails because Paul is not eligible to make a claim under the Act because:
(i) he does not fall within the statutory definition of “stepchild”;
and
(ii)he was not in any event being maintained by John either at the time of John’s death or previously.
(b)The claim under the TPA fails because although I am prepared to accept that on occasion (after 2005) John represented to Paul that the Setters Line property would be his “inheritance”:
(i)the work and services performed by Paul for John were no more than the kinds of acts that might be expected of a good friend or close family;
(ii)the work and services performed by Paul were, in any event, matched and possibly exceeded by the benefits he received from John and his use of the Setters Line property; and
(iii)there was no nexus between the work and services and any testamentary representation or promise. Rather, the work and services were a function of, and were actuated by, the close relationship between the two men.
(c) The constructive trust claim against the Trust fails because, based on my factual findings in relation to the claims against the estate none of the four Lankow v Rose elements are satisfied. More particularly:
(i)The contributions made by Paul to the Setters Line property was matched by the benefits he obtained from his use of the property.
(ii)While Paul may have had a reasonable expectation of an interest in the Setters Line property, that expectation arose because of his relationship with John and testamentary statements made, not as a result of his contributions to the property.
(iii)Mr Stewart neither knew about nor approved Paul’s contributions to Setters Line, not because he had abjured his trustee duties in that respect, but because they were not of an order that required his attention.
(d)The claim based on unconscionability or unjust enrichment fails for the same reasons; to the extent the value of Trust property was enriched by Paul’s actions it was equally diminished by the benefits that flowed back from it to Paul.
[107] As I have said, I do accept that Paul’s relationship with John was such that he might reasonably have expected some form of testamentary disposition in his favour. But while I have sympathy for the position Paul finds himself in, his personal claims against the estate appear to me to fall within the rock of the FPA and the hard place of the TPA. His claims against the Trust simply fail on the facts as I have found them to be.
[108] I see no reason why 2B costs should not follow the event in the usual way. If
counsel are unable to agree memoranda may be submitted.
Solicitors: McIntosh & Signal, Feilding, for Plaintiff.
Rainey Collins, Wellington, for First Defendant. TGT Legal, Auckland, for Second Defendant.
“Rebecca Ellis J”
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