Brain v Harwood
[2014] NZHC 1092
•22 May 2014
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV 2013-470-000572 [2014] NZHC 1092
IN THE MATTER the Family Protection Act 1955 BETWEEN
ALAN WESLEY BRAIN Appellant
AND
CLIVE HARWOOD First Respondent
DAVID CLIVE HARWOOD and ALAN WESLEY BRAIN as Executors of the Will of VIOLET MARY BRAIN
Second Respondent
Hearing: 4 February 2014 Appearances:
H Roose for the Appellant
G Brittain for the First Respondent
No appearance for the Second RespondentsJudgment:
22 May 2014
JUDGMENT OF GILBERT J
This judgment is delivered by me on 22 May 2014 at 3pm pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
BRAIN v HARWOOD [2014] NZHC 1092 [22 May 2014]
Introduction
[1] Alan Brain, appeals against the decision of Judge A E Somerville in the Family Court at Tauranga upholding the claim made by his older brother, Clive Harwood, for further provision from their mother’s estate under the Family Protection Act 1955.1 Mr Brain also appealed against the Judge’s decision to make further provision for one of his children, Jason Brain, but he abandoned this part of his appeal at the hearing.
[2] Violet Brain died on 26 April 2011, leaving an estate worth nearly $3 million as follows:
Farm land $2,250,000 Cash in solicitor’s trust account $670,000 Shares $14,600 Bonus Bonds $25,760 Total $2,960,360
[3] In her will dated 16 December 2002, Mrs Brain made specific bequests of
$40,000 to each of her seven grandchildren, being Mr Harwood’s three children and Mr Brain’s four children. She left items of jewellery and two other personal items to her only granddaughter, Mr Harwood’s daughter. She made a further specific bequest of $180,000 to Mr Harwood and she left the residue of her estate, including the farm, to Mr Brain.
[4] Mrs Brain set out her reasons for making disparate provision for her two sons in her will as follows:
I state that I have made an unequal distribution between my two sons as Clive Harwood disowned his family name over 20 years ago after severe disagreement with my late husband, and since then my other son has contributed to the care, maintenance and operation of the farm in a very significant fashion and I believe that the provisions I have made for Clive Harwood and his children are a just and loving reflection of my obligations.
1 CH v DCH [2013] NZFC 7619.
The facts
[5] Mr Harwood was born in 1939. He contracted polio in 1948 which left him with weak legs and poor lung capacity. Despite these setbacks, he worked on the farm in the early part of his life with an expectation, as the older son, that he would one day inherit it. He worked every day after school milking the cows and attending to other farm chores. He also worked on the farm without payment during school holidays carrying out such tasks as slashing and clearing drains, cross cutting blown gum trees and harrowing.
[6] When Mr Harwood was 15 or 16, he received workers compensation for an injured hand. He used this money to buy a pedigree jersey heifer for the farm. Mr Harwood studied pasture and stock management at Massey University. He then returned to the farm where he again worked without pay. He later gained employment with the Department of Lands and Survey, driving bulldozers. During this period, he continued unpaid work on the farm at weekends. Mr Harwood married in 1962 and moved to Western Australia.
[7] In 1965, Mr Harwood returned to the farm at his parents’ request because his father, Oliver Brain, was in failing health and needed help on the farm. For the first three years, they lived in a caravan with their son David. They were still living in the caravan when their second child, Alison, was born. Although Mr Harwood worked as a contract 50/50 sharemilker, the arrangement was favourable to his parents because he was unpaid initially and he also funded a number of capital improvements on the land without recompense. These included a new cowshed, new haysheds and a farmhouse.
[8] The farm was seriously damaged in a major storm in 1968. The pastures were destroyed through saltwater flooding and it took several years for them to recover. Against the advice of farm advisers, Oliver Brain insisted that the herd be retained. This meant that Mr Harwood had to graze the animals on the roadside and sleep in a car until he was able to relocate them to other farms. He worked hard over the next three years remediating the farm, including repairing stock banks, floodgates and building new fences. Mr Harwood’s wife returned to Perth after the
flood, taking their youngest child with her. The older two children remained with Mr
Harwood.
[9] The relationship between Mr Harwood and his father deteriorated as a result of disagreements over various matters relating to the farming operation. They also differed in their religious beliefs. By 1971, a serious rift had developed between them which ultimately led to Mr Harwood being ordered off the farm and being served with a trespass notice.
[10] In 1972, Mr Harwood filed legal proceedings against his parents for losses he claimed to have suffered as a result of being evicted from the farm. He pursued this claim for approximately two years before walking away from it because of the effect it was having on his mother. This was a particularly difficult period in Mr Harwood’s life and his marriage did not survive it. It was at about this time that Mr Harwood shortened his name from Clive Harwood Brain to Clive Harwood. He wanted a fresh start.
[11] Mr Harwood remarried in 1974 and in the late 1970s he attempted to reconcile with his parents. This was partially successful although his relationship with his father was always strained. During this period, Mr Harwood was engaged in various oyster farming ventures.
[12] Mr Harwood was adjudicated bankrupt in about 1980 over a modest fuel debt which he claimed to have already paid. He believes that his brother was somehow involved in pursuing recovery of this debt which he refused to pay on principle. He separated from his second wife at about this time.
[13] Mr Harwood remarried in 1984. He and his wife lived in Russell and he saw little of his parents. He visited his mother once or twice a year and telephoned her on birthdays and other special occasions.
[14] Mr Harwood’s father died in 1991 but he had limited ongoing contact with
his mother, making only occasional visits. He attended her 90th birthday but not her
100th.
[15] Mr Harwood, who is now in his mid 70s, has limited financial means. His main source of income is National Superannuation. He and his wife sleep in temporary accommodation next to an oyster processing shed. They use the kitchen facilities in the processing shed. They jointly own this property with Mr Harwood’s son’s trust. Mr Harwood believes that his share of this property would be worth no more than $110,000. He has no other significant assets.
The decision under appeal
[16] The Judge referred to the Court of Appeal’s decision in Little v Angus which confirms that the question of whether there has been a breach of moral duty is to be judged by the standards of a wise and just testator.2 Applying this test, the Judge found that Mrs Brain breached her moral duty to make adequate provision in her will for Mr Harwood’s maintenance and support.
[17] The Judge considered that there were three principal reasons leading to Mrs Brain’s breach of duty. First, Mrs Brain failed to take adequate account of the fact that Mr Harwood made a significant contribution to the value of estate through his work on the farm in difficult circumstances and the improvements he made to it in the expectation that he would inherit it. Second, she wrongly took into account as disentitling conduct the fact that Mr Harwood changed his name following the rift with his father. Third, by making a specific bequest in a will prepared 10 years before her death, she failed to recognise that inflation would erode the value of the provision she intended to make for Mr Harwood. The Judge calculated that at the time the will was made, the bequest represented 13 per cent of the value of her estate and that at the time of Mrs Brain’s death, an equivalent provision would have amounted to just under $380,000.
[18] The Judge recognised that there is no presumption of equality between children. She referred to the Court of Appeal’s decision in Williams v Aucutt noting that the question of whether adequate provision has been made for the proper maintenance and support of a claimant extends beyond the economic needs of that claimant and that the Court should neither be unduly generous nor unduly niggardly
in remedying a breach of moral duty.3 The Judge considered that the estate was large enough to enable further provision to be made for Mr Harwood and the other claimant, Jason Brain.
[19] Taking all matters into consideration, the Judge awarded Mr Harwood
$700,000 from the estate, inclusive of the $180,000 bequest and costs.
Grounds of appeal
[20] In his notice of appeal, Mr Brain alleges that the Judge made various procedural and substantive errors in determining that Mrs Brain breached her moral duty. To the extent that there was a breach of moral duty, he alleges that the Judge erred in the exercise of her discretion by making an excessive award.
[21] Mr Roose refined these grounds of appeal at the hearing and submitted that the Judge erred in finding that:
(a) Mr Harwood was told that he could expect to inherit the farm;
(b) Mr Harwood’s expectation that he would inherit the farm was
reasonable;
(c) Mr Harwood was treated unfairly because this expectation was not met;
(d) Mrs Brain breached her moral duty; and
(e) an amount of $700,000 should be awarded to Mr Harwood.
Approach on appeal
[22] The Court cannot make an award under s 4 of the Family Protection Act unless it is satisfied that the testator or testatrix breached his or her moral duty. This threshold issue requires an assessment of fact and degree. As is usual with claims pursued under this Act, the Family Court made its determination based on the affidavit evidence. Cross examination was limited to one narrow issue. It follows
that this Court is as well placed as the Family Court was in determining whether or not there was a breach of moral duty. I consider that an appeal on this issue should be approached on the basis set out by the Supreme Court in Austin, Nichols, namely that although the appellant has the burden of showing that the Judge’s assessment was wrong, the Court is required to form its own view based on the evidence.4
[23] By contrast, the assessment of the appropriate award to remedy a breach of moral duty involves the exercise of a discretion, as is clear from the wording of s 4 of the Act. To succeed with an appeal against the level of an award, the appellant must show that the Judge acted on a wrong principle, took into account irrelevant considerations, overlooked relevant considerations, or was plainly wrong.
Did the Judge err in finding that Mrs Brain breached her moral duty to make adequate provision for Mr Harwood?
[24] In his submissions, Mr Roose worked through the judgment paragraph by paragraph taking issue with numerous points. These may be summarised as follows:
(a) Mr Oliver Brain did not promise Mr Harwood that he would inherit the farm;
(b) Mr Harwood’s contribution to the farm was overstated;
(c) Mr Brain also carried out unpaid work on the farm and therefore had an equal claim to inherit it;
(d)Mr Oliver Brain continued to work on the farm with the assistance of farm labourers, even after the sharemilking arrangement with Mr Harwood commenced;
(e) Mr Harwood benefitted from the sharemilking arrangement because Oliver Brain funded the purchase of the herd with the debt ultimately being written off in lieu of Mr Harwood’s inheritance; and
(f) Mr Harwood was responsible for the rift with his parents including by disregarding his father’s views in managing the farm; by bringing legal proceedings against his parents; and by changing his name.
(g)The Judge failed to take account of a letter which Mr Brain claims Mr Harwood sent to his parents in 1977 relinquishing his inheritance rights.
[25] Overall, Mr Brain considers that the Judge inappropriately accepted Mr Harwood’s account of events and did not have sufficient regard to his evidence where it conflicted in material respects. He also considers that his father was unfairly portrayed in the judgment as a harsh and uncompromising person. He does not accept that his mother breached any moral duty to Mr Harwood. I now deal with each of these issues.
Did the Judge err by finding that Mr Oliver Brain made a promise to Mr Harwood that he would inherit the farm?
[26] Mr Brain disputes that his father promised Mr Harwood that he would inherit the farm and notes that there is no documentary evidence to support this claim. The Judge accepted Mr Harwood’s evidence that at the time he worked on the farm he expected that he would one day inherit it, but she made no finding on whether any such promise was made to him. This is clear from the following passages in her
judgment:5
Although it is not necessary for me to make a finding on this issue I accept the submission from counsel for Clive Harwood that it would have been typical of farming families in the 1940s and 1950s, that children would be expected to work in their spare time on the farm and that it would be the expectation of the older son to take over the farm while continuing to work there for no pay.
…
Clive Harwood had an expectation he would take over the family farm as a schoolboy growing up and working on the family home [farm], having the status of the older son.
[27] In any event, it seems to me that whether or not his father promised
Mr Harwood in the 1960s or 1970s that he would inherit the farm has little
relevance. As it transpired, Mr Harwood left the farm in about 1971, some 40 years prior to his mother’s death. Any expectation that he would inherit the farm would have long since passed. The only relevance of this part of the evidence is that Mr Harwood contributed to the estate through his efforts on the farm.
Did the Judge overstate Mr Harwood’s contributions to the farm?
[28] Contributions to an estate will generally be relevant in this context. The Judge took this into account in her assessment of whether Mrs Brain breached her moral duty to make adequate provision for Mr Harwood’s maintenance and support:6
He invested his time labour and money into the farm in difficult circumstances.
He initially worked on the farm as a schoolboy while suffering from polio and later from leptospirosis.
He contributed to the purchase of a cow from workers compensation he received.
He was called home from Australia to the farm when his father was no longer able to do the work on the farm.
He contributed to the building of the herringbone cow shed and other maintenance over and beyond that expected of a sharemilker. He transported a house onto the property at his own expense. The home remains.
He worked to sustain the farm during the Wahine disaster and supported his father’s wish to continue farming during that time when his father was not agreeable to taking the advice of the farm advisers to sell stock.
Overall, Clive Harwood contributed to the value of the farm and sustained it through a difficult time when the father was not able to physically carry out the farm work and then contributed to the rebuild and maintenance of the farm following the natural disaster of the Wahine. He lived in difficult conditions in anticipation that he would eventually take over the farm. His wife at that time had the same expectation that her husband would take over the farm.
[29] Having reviewed the evidence, I consider that this is a fair summary of the contributions that Mr Harwood made to the farm. I do not accept Mr Brain’s complaint that the Judge overstated Mr Harwood’s contribution.
Did the Judge overlook contributions to the farm made by Mr Brain and others?
[30] Mr Brain further complains that the Judge had insufficient regard to his evidence that he also carried out significant unpaid work on the farm. He says that he also worked on the farm after school and during school holidays. He returned to the farm in August 1964 and carried out drag-line work until 1966. In later years he helped with stop banks and clearing drains, sometimes for weeks at a time. Mr Brain says that his father also continued to work on the farm with the assistance of farm labourers after the sharemilking arrangement with Mr Harwood commenced.
[31] I have no reason to doubt Mr Brain’s evidence. However, the Judge was not required to address this because there was no suggestion that the provision made for Mr Brain was inadequate, even taking into account the increased awards made to Mr Harwood and Jason Brain. The critical issue was whether there was a breach of moral duty to Mr Harwood having regard to all relevant considerations, including the contributions he made. Mr Brain’s evidence regarding his contributions and those made by others does not detract from the contributions that Mr Harwood made.
Did the Judge err in finding that Mr Harwood did not benefit from the sharemilking arrangement?
[32] Mr Brain’s next criticism is that the Judge did not recognise the benefits that Mr Harwood gained from the sharemilking arrangement. He says that his parents funded the purchase of the herd and transferred it to Mr Harwood at a favourable price. Mr Brain maintains that his father ultimately wrote the debt off in lieu of Mr Harwood’s inheritance, as he considered that this was a significant benefit that he had provided during his lifetime.
[33] I can see no error in the way the Judge dealt with this issue. She accepted that Mr Harwood’s parents purchased the herd and it was common ground that the herd was then transferred into Mr Harwood’s name. The Judge carefully reviewed the evidence, including the records kept by Oliver Brain, before concluding that Mr Harwood did not obtain any significant benefit from the arrangement:7
When Clive Harwood left the farm he had an overdraft of $5000 to the disaster relief account so that in addition to restoring the farm he ran up an additional debt of $5000. Oliver Brain had to extend his borrowing by
$1000 and retained all the benefits of the farm and the improvement and repairs that Clive Harwood had affected [sic]. But Clive Harwood went with
the $5000 debt and no benefits from the farm.
Did the Judge err in her assessment of the rift?
[34] The Judge accepted that the rift between Mr Harwood and his parents had its genesis in disagreements over farm management issues. For example, Mr Harwood proceeded with the new milking shed despite his father’s view that the existing shed was adequate and the cost of a new shed was not justified. In 1967, Mr Harwood entered into a grazing partnership with a third party to raise dry stock off the farm, which was a further source of aggravation. There was also a dispute about the amount Mr Harwood owed his parents for the herd. The non payment of this debt was clearly a matter of concern to Mr and Mrs Brain. These disagreements led to Mr Harwood being forced off the farm and prompted him to issue legal proceedings seeking compensation from his parents.
[35] The Judge took full account of these matters and recognised that the rift between Mr Harwood and his father was never resolved and continued to affect Mr Harwood’s relationship with his mother. The Judge viewed it as part of the background but did not consider that it amounted to disentitling conduct, even
combined with the change of name:8
All this history was part of Violet Brain’s relationship with her husband and her son. She had the divided loyalty of recognising her late husband’s ongoing problems with their son but also recognising that the dispute was not between her and her son.
Her main argument for giving one son $180,000 and the other son the balance of an estate worth $1,370,000 in 2002, less [$280,000] to her grandchildren was that Clive Harwood had changed his name.
The law is clear that the change of name is not disentitling conduct on the son’s part but it is a factor I take into consideration in the amount of the final award. The courts have set a very high threshold for disentitling conduct (McKay v McDonald HC Hamilton A62/98, 28 October 1998). There has been no deliberate malice towards his mother by Clive Harwood, there have been no criminal acts nor has he ignored or neglected the mother over a period of time.
8 At [118] – [120].
[36] Mr Roose responsibly concedes that the Court should not disturb the Judge’s finding that there was no disentitling conduct on Mr Harwood’s part. However, he submits that these matters should be taken into account in considering the quantum of any award. That is what the Judge did.
Did the Judge err in her treatment of the 1977 letter?
[37] As noted, one of the key reasons why Mrs Brain left the bulk of her estate to Mr Brain was that Mr Harwood changed his name after a major disagreement with her late husband. Mr Roose submits that Mr Harwood’s change of name needs to be considered together with a letter Mr Harwood allegedly wrote to his parents in early
1977 as follows:
I, Clive Harwood of Tauranga farmer, hereby relinquish all or any claims I may have for monies due to me as a result of a share-milking agreement between myself and Violet Mary and Oliver Lawson Brain.
I confirm that neither myself nor my children wish to inherit anything whatsoever from Violet Mary Brain and Oliver Lawson Brain nor other members of the family.
Neither myself nor my children wish to have any further contact with Violet
Mary Brain and Oliver Lawson Brain.
Signed Clive Harwood.
[38] Mr Harwood denies writing this letter. Mr Roose submits that it is implausible that Mr Harwood did not either write the letter or authorise it being sent. He says that either way, Mr Harwood would remember it. The Judge permitted cross-examination on this issue but in the end made no finding because she did not consider that the letter was relevant:9
I do not consider anything turns on the letter; there is a possibility that Clive Harwood did have something to do with the preparation of the original but cannot recall it 36 years later. Alternatively it had to do with something that Oliver Brain did and was nothing to do with Clive Harwood. These are the possibilities but the evidence does not assist me in resolving this matter. In any case this letter does not make any difference to the resolution of the claim as there was no reference to this document in the early will or in the current 2002 will of Violet Brain.
9 At [99].
[39] Mr Roose submits that although Mrs Brain did not refer to this letter in her will, it must have influenced her decision because Mr Brain found a copy of the letter in the house after she died. I do not accept that this follows. This letter was written over 25 years before Mrs Brain made her will. The fact that it was found in the house after her death does not mean that she was influenced by it when making her will. I agree with the Judge that Mrs Brain is unlikely to have taken this letter into account given that she did not refer to it in her will and she did make provision for Mr Harwood and his children contrary to the wish expressed in this letter.
[40] It appears that one of Mr Brain’s principal concerns about this part of the judgment is that it leaves open the possibility that Mr Oliver Brain forged the letter. He says that his father was an honest man and that his reputation was very important to him. While I can understand Mr Brain’s concern about this, I agree with the Judge that the letter is a side issue. It is not relevant to this appeal because Mrs Brain did not take it into account, nor would a wise and just testatrix do so.
Conclusion
[41] For the reasons I have given, I am not persuaded that the Judge made any error in her assessment that Mrs Brain breached the moral duty that she owed to Mr Harwood by not making adequate provision for his maintenance and support. It is clear from her will that she was strongly influenced by the disagreement between Mr Harwood and his father and the fact that he had changed his name. A wise and just testatrix would not have been so influenced, particularly given the background circumstances.
Did the Judge err in fixing the amount of the award?
[42] Mr Roose submits that the Judge erred in fixing the amount of the award in one or more of the following respects:
(a) Failing to take adequate account of the matters advanced by Mr Brain, referred to above.
(b) Taking into account an irrelevant factor, namely the effect of inflation.
(c) Placing too much weight on Mr Harwood’s contributions.
(d) The award was plainly wrong in that it was “far too high”.
[43] Mr Roose did not separately address the first and third of these grounds when making his submissions regarding the quantum of the award. There is no need to repeat what has already been said. It is sufficient to note that the Judge took all relevant background circumstances into account in determining not only whether there had been a breach of moral duty, but also the quantum of the award needed to remedy that breach.
[44] I accept Mr Roose’s submission that awards under the Family Protection Act do not follow as a matter of course merely because a testatrix has failed to index a specific bequest to inflation. The critical issue is whether the particular provision, irrespective of whether it has been indexed to inflation, is sufficient to discharge the testatrix’s moral duty to make adequate provision for the maintenance and support of the claimant, assessed at the time of death.
[45] The Judge concluded that Mrs Brain did not make adequate provision for Mr Harwood in all of the circumstances and therefore breached her moral duty. This was partly explained by the reasons outlined in Mrs Brain’s will. However, the Judge considered that the inadequate provision was also explained by Mrs Brain’s failure to take into account the effect of inflation. Mrs Brain was over 90 years old when she made her will and she may not have foreseen that she would live another
10 years and that the provision she intended to make for Mr Harwood would be materially eroded by inflation.
[46] The Judge made no error in this part of her reasoning. Her assessment of quantum was not based on inflation. She merely observed that it was likely that Mrs Brain herself intended to make greater provision for Mr Harwood despite the factors which she wrongly took into account as amounting to disentitling conduct.
[47] Mr Roose’s final submission is that the award is far too high and therefore
plainly wrong. He calculates that the provision made by Mrs Brain in her will was
equivalent to 13 per cent of the value of her estate at that time. Mr Roose further calculates that a global award of $365,000, including the existing bequest, would yield the same proportionate share of the estate’s assets at the date of death. Mr Roose submits that the Judge was not justified in awarding $700,000, noting that this represents 23 per cent of the value of the estate at the date of death.
[48] Mr Roose appears to have overlooked that the global award included costs. However, the major flaw in Mr Roose’s reasoning is that the Judge did not simply adjust the provision made by Mrs Brain to allow for inflation. It would have been incorrect for her to do so because the provision was inadequate in the first place, as the Judge found. The Judge properly concluded that the estate was sufficiently large to allow provision to be made for the proper maintenance and support of Mr Harwood as well as other beneficiaries. The Judge recognised that there is no presumption of equality but that the enquiry is not limited to the economic needs of Mr Harwood. Taking into account all of the relevant background, Mr Harwood’s age and poor health, and his limited income and capital, I consider that the amount awarded was reasonable and within the scope of the Judge’s discretion. I am not persuaded that the award was plainly wrong. There is no basis to interfere with it.
Result
[49] The appeal is dismissed.
[50] The parties have asked me to reserve costs. If the parties are unable to resolve this issue, a memorandum seeking costs is to be filed and served within
21 days of the date of this judgment. Any memorandum in reply is to be filed and
served within 14 days thereafter.
M A Gilbert J
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