Chambers v New Zealand Guardian Trust Company Limited
[2023] NZHC 2084
•7 August 2023
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE
CIV-2021-442-036
[2023] NZHC 2084
UNDER the equitable jurisdiction, Law Reform (Testamentary Promises) Act 1949 and Family Protection Act 1955 IN THE MATTER
of the estate of DENIS EDWIN CHAMBERS Deceased formerly of Richmond, Nelson
BETWEEN
CINDY MARY CHAMBERS
Plaintiff
AND
THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED
Defendant
LYNETTE ANN CHAMBERS
Interested Party
Hearing: 17-18 April 2023 Appearances:
J C Ironside and S W Sansom for Plaintiff A R Gilchrist for Defendant
G Pearson for Interested Party
Judgment:
7 August 2023
JUDGMENT OF McQUEEN J
CHAMBERS v THE NEW ZEALAND GUARDIAN TRUST COMPANY LIMITED [2023] NZHC 2084
[7 August 2023]
Table of Contents
Para Nos
Introduction [1]
Background [4]
History of the companies [6]
Denis’ wills and the estate [12]
Value of CJL, CJEL and Handy 4 Ltd shares [17]
The evidence [22]
Cindy’s evidence [24]
Lynette’s evidence [33]
Cindy’s reply evidence [46]
Alan Chambers’ evidence [48]
June Chambers’ evidence [52]
Bryce Chambers’ evidence [53]
Ross Jackett’s evidence [57]
Mark Pahl’s evidence [59]
Timothy Scott’s evidence [65]
Gilbert Robertson’s evidence [67]
Cindy’s claims [75]
Claim under Law Reform (Testamentary Promises) Act [80]
Cindy’s submissions [82]
Lynette’s submissions [87]
The Guardian Trust’s submissions [90]
Analysis [92]
Common intention constructive trust claim [117]
Cindy’s submissions [119]
Lynette’s submissions [124]
The Guardian Trust’s submissions [129]
Analysis [134]
Family Protection Act claim [151]
Implementation of relief [152]
Result [161]
Costs [162]
Introduction
[1] Mr Denis Chambers died on 17 September 2020. Ms Cindy Chambers, Denis’ daughter and only child, has issued proceedings against her father’s estate seeking to establish that she should be recognised as the rightful owner of Denis’ 40 per cent shareholding (the shares) in each of Chambers and Jackett Ltd (CJL) and Chambers and Jackett Equipment Ltd (CJEL) (or collectively, the companies). Cindy’s claim alleges the existence of a common intention constructive trust, such that the shares would pass to her by or at the time of Denis’ death. She brings alternative claims under the Law Reform (Testamentary Promises) Act 1949 (the TPA), and the Family Protection Act 1955.
[2] The defendant in this proceeding is the New Zealand Guardian Trust Company Ltd, the named executor of Denis’ will (the Guardian Trust). However, the Guardian Trust takes a neutral position on Cindy’s claim. Rather, the claim is in fact substantively opposed by the interested party in this proceeding, Mrs Lynette Chambers, Denis’ widow. Lynette relies on the terms of Denis’ will, which leaves the shares to her as a part of the residual estate.
[3] For the reasons set out below, I find that Cindy’s claim under the TPA succeeds, and in the alternative, so does her claim based on a common intention constructive trust. This judgment also addresses relief but only in principle. I have concluded that in fairness to all the parties, there should be a further opportunity to make submissions in relation to the implementation of relief.
Background
[4]I first set out the factual background insofar as it is undisputed.
[5] Cindy, as noted, was Denis’ only child. Cindy’s mother was married to Denis, a marriage which ended in or about 1990, when Cindy was ten years old. Lynette and Denis met in 1992 and married in 1996. Lynette has two children from a former marriage.
History of the companies
[6] In the 1930s, Denis’ father, Edwin (Ted) Chambers started a contracting business, ET Chambers. Subsequently, Denis’ brother Alan Chambers and Denis’ half- brother Eric Jackett also worked for the business. Alan was 16 months older and Eric 12 years older than Denis. The company name was changed to Chambers & Jackett and was incorporated under the Companies Act 1955 on 5 May 1970. Denis initially worked elsewhere as a diesel mechanic but joined the company in 1975. Ted died in December 1984. Denis was gifted some shares in the company from Ted while Ted was still alive, and some more after his death. Denis, Alan and Eric then owned 15,000 shares each. Eric retired in 1994 and Denis and Alan bought him out of the company under an agreed arrangement.
[7] The company was reregistered in 1997 as CJL with 45,000 shares. CJEL was incorporated on 13 November 2017. CJL specialises in earthworks, subdivisions, drainage, and post-driving. Its main revenue stream comes from contracting operations, but it also has small scale ad hoc livestock and fruit operations. CJEL operates under the umbrella of CJL, and owns the equipment used by CJL. The parties refer to CJL as the main business. CJEL’s revenue stream is entirely from CJL for the use of their plant and equipment, and therefore CJL has a corresponding expense to CJEL. In essence, the two companies form a single business, which is, and has always been, a family business. They are long-established and well-known companies in the Nelson and Tasman regions.
[8] The current directors of both companies are Alan Chambers, Bryce Chambers (Alan’s son and therefore Denis’ nephew), and Cindy. Denis was also a director during his lifetime.
[9] The companies register records that the shareholders of both CJL and CJEL are:
(a)Denis (40 per cent);
(b)Alan (40 per cent);
(c)Cindy and Motueka Trustee (No. 2) Ltd (10 per cent); and
(d)Bryce (10 per cent).
[10] Cindy and Bryce acquired their shares in two separate transactions, in 2015 and 2019. In 2015, 2250 shares were transferred to each of Cindy and Bryce for consideration of $150,000. In 2019, a further tranche of 2250 shares were transferred to each of Cindy and Bryce. The purchase of these shares was funded by a loan from Denis and Alan respectively, with the debts then forgiven. These transactions were formally recorded.
[11] It is common ground that Cindy has performed work between approximately 1999 and the present, as an employee of CJL. Cindy started off working in the field, driving the drainage chain trencher. She became Office Manager in 2011. Cindy is now the Chief Executive Officer of the companies. After leaving school Bryce worked for CJL as a machine operator. After a period overseas, he returned to Nelson, resuming work for CJL in 2009.
Denis’ wills and the estate
[12] Denis made two wills of interest to the proceeding. The earlier will was made in 1997. Of relevance is that in this will, Denis left his estate (other than personal chattels) to Lynette and Cindy in equal shares and there was no specific mention of the shares in the companies.
[13] The 1997 will was revoked when Denis made another will in 2007. Probate has been granted for this will. Materially, Denis’ estate consists of a half interest in what was his and Lynette’s family home at Cushendall Rise, Richmond (the Family Home), household chattels, and parcels of shares. The total value of the estate is significant. The will provides that the entire estate was to be left to Lynette, save Denis’ half interest in the Family Home, which was left to Cindy, subject to an occupational interest in favour of Lynette.
[14] Lynette’s occupational interest is to end at the time of her death, or remarriage, ‘or any earlier event which brings this right to an end’. She must pay all outgoings on
the Family Home and the chattels within. She may sell the Family Home, but the sale proceeds remain subject to the half interest in favour of Cindy.
[15] The shares in the companies are not specifically mentioned in the will, rather, they form part of the residual estate. The reasons why Denis made a new will in 2007 are discussed later in the judgment.
[16] The evidence from Mr Boyce on behalf of the Guardian Trust explains that some assets passed directly to Lynette through survivorship, to the value of approximately $2 million.
Value of CJL, CJEL and Handy 4 Ltd shares
[17] The parties have provided a valuation report for the purpose of this proceeding, prepared by Deloitte (the Deloitte Valuation Report) and dated 12 April 2022, presenting values as at 31 January 2022.
[18] The Deloitte Valuation Report was commissioned for the purpose of providing an ‘indicative fair market valuation of the shareholdings’ held by Denis’ estate in CJL and CJEL, as well as in Handy 4 Ltd (which owns a property portfolio). As already mentioned, Denis had a 40 per cent shareholding in each of CJL and CJEL, and a 10 per cent shareholding in Handy 4 Ltd. Lynette owns the remaining shares in Handy 4 Ltd. The Deloitte Valuation Report assesses the indicative fair market equity value of individual shares as:
(a)in CJL, as $113.18 per share;
(b)in CJEL, as $0.34 per share; and
(c)in Handy 4 Ltd as $21,812.45 per share.
[19]This results in the following valuation of Denis’ estate’s shareholdings: (a) in CJL, as $2,037,240;
(b)in CJEL, as $6,120; and
(c)in Handy 4 Ltd, as $218,124.50.
[20] Gilbert Robertson, the accountant for the companies, provided further advice in relation to the Deloitte Valuation Report. He agreed that it was not a fair reflection of the true value of the shares for CJL because proper consideration was not given to the land and equipment owned by the company. On Mr Robertson’s reassessment, the shares in CJL held by Denis’ estate were more properly valued at $3,394.000.
[21] With the consent of the parties, an updated valuation of the Family Home was provided during the hearing, which assesses the current value of the Family Home is
$2,000,000.
The evidence
[22] The present case is not one that depends on the assessment of voluminous documentary evidence, but rather the recollections of the parties as to important events in their family histories. Accordingly, their affidavit evidence is summarised in detail in this section. Cindy has provided two affidavits herself. Also filed in support of her claim are affidavits from members of her family, a current and a former employee of CJL and an affidavit from Mr Robertson, the companies’ accountant. Lynette has provided two affidavits in defence of the claims. The Guardian Trust has provided affidavit evidence in relation to the nature and size of the estate.
[23] Cindy and Lynette were the only two witnesses to be cross-examined at the hearing. I incorporate discussion of their cross-examination as necessary below.
Cindy’s evidence
[24] Cindy discusses in her evidence the family history and the origins of the companies. She began working for CJL in 1999 as a machine operator. She worked her way up through CJL, beginning to supervise and manage sites, and eventually taking on further responsibility from Denis. Cindy also began to help out in the office and was ‘fast-tracked’ into a management position. Denis took her along to meet
contractors, professionals, and clients, and regularly expressed the view that she would be the person to take over the companies from him, and that she and Bryce would one day ‘own the business’—rather than partners or wives coming into the business.
[25] Cindy discusses championing health and safety requirements within CJL throughout this time, to ensure the ongoing viability of the business She completed courses out of working hours for this purpose. Again, throughout this time, Cindy says she was performing management functions, but being paid only as a labourer, at a rate of $9.00 per hour, which was less than other labourers. She says that Bryce was similarly being paid at a lower rate than other workers. She says that they were each told that they would not be paid a fair or full wage until they owned the company— and that they would not own the company until the shares were given to them when their fathers were to retire or die. She says that this plan was repeatedly discussed over the years, and the discussions were always in regard to when they would receive the shares, rather than if they would receive them.
[26] Cindy says she took over the office manager’s responsibilities in 2011, as well as manging Human Resources. She says she was the office manager on an informal basis from August 2011 until June 2017, with financial accountability, including payroll, business management, contracts, and liaising with contractors and clients. Throughout this time Cindy says she was working overtime, as well as studying, and that by November 2014 her pay had increased to $25 per hour. When Cindy’s son was born prematurely in January 2016, she continued to work while in the hospital and breastfeeding. Following this, she was being paid for ten hours a week (as a result of receiving parental income support) but working far more than ten, and not being paid for that work. During this time, she says that Denis had no time for management meetings or decisions, given his workload of subdivision work. Cindy says that from June 2017 she has essentially been the general manager of CJL and CJEL. She has final authority for all company expenditure.
[27] Cindy also mentions her relationship with Mr Mark Pahl (who also gave evidence). Cindy explains that Denis did not initially approve of her relationship with Mr Pahl, although that changed over time. Cindy says that the only reason she can think of for Denis changing his will in 2007 was because of this relationship. She says
that under Denis’ 1997 will, she and Lynette were each left a half share in Denis’ estate but this was changed in the 2007 will so that Cindy would only receive Denis’ half share in the Family Home.
[28] Cindy discusses the transfer both to her and Bryce of 2,250 shares in CJL at a fair market price calculated by CJL’s accountant. Cindy’s shares were transferred to the Cindy Chambers Trust on 30 December 2015. She then notes that she and Bryce were each offered a further 2,250 shares as a gift in 2019, in both CJL and CJEL. This was because they were being debited interest on their overdrawn current accounts, meaning that their debt to CJL was increasing every year, and the dividends they were receiving from the shares transferred in 2015 were not covering those interest payments. Those shares were gifted on 1 June 2019.
[29] Cindy notes a meeting that occurred on 3 September 2020, with her, Denis, and Mr Robertson (the companies’ accountant), who was helping look at what might need to be done in the future for the management of the companies. She says that Denis did not appreciate the extent of his wealth or the value of the companies, and that he had said that he was discussing his will with his lawyer, Kim Penketh (who is, in fact, a conveyancing practitioner). Cindy says that during this meeting Denis was unsure about how to structure his affairs but that he was certain that Cindy should have all the shares, with Lynette gaining some income from CJL. She says they discussed giving Lynette a proportion of Denis’ shares to allow for her to receive dividends during her lifetime.
[30] Cindy notes also a further discussion, between her, Denis, and Lynette, while Denis was in hospital immediately prior to his death. She says:
… I asked Dad about his wishes for the company. His response was, “Cindy is going to have all the shares in the company”. Lyn said, “but I deserve them”. Dad responded along the lines of, “Calm down, you will have a lifetime right over some of the shares” and then he said to me something along the lines of, “I know you think Lyn has enough money from the rental properties. But she will need some more”. Lyn responded that she wanted more than that and I asked her what else she wanted. He response was along the lines of, “I want my last mortgage paid off by the amount of around $200,000.00 and I want a new Lexus and some income”. I responded that apart from more income, she essentially wanted $300,000.00 and she agreed that was what she wanted. She also asked about the life insurance on Dad’s life of $300,000.00… .
I indicated to Lyn that I could not agree on the money terms because Alan and Bryce also own the company. I also pointed out that CJL had put a lot of money into their house at Cushendall Rise. Lyn then responded along the lines that Handy 4 Limited is something which she and my Dad had grown jointly and she wanted that for herself, to which I responded that, “I don’t want any of it. I just want the family company and what the company has put into Cushendall Rise”. My Dad responded, “once Lyn dies my half share in Cushendall Rise goes to you”.
I stayed with my Dad and Lyn left the room. After this meeting, the wider family met, including my partner, Tim Scott, and Lyn who commented to everyone present that, “I’m not going to have any shares in the company”. One of her daughters said, “that’s good Mum, you’ve never had anything to do with the company, it should be Cindy’s”.
(emphasis in original)
[31] Cindy says Denis intended that she inherit all the shares in the companies, and he intended to change his will. She says that Denis’ desire to provide her with all of his shares was jointly because she was his daughter, and as a result of all the work and services she has provided CJL while she has worked there. Cindy believes she has added considerable value to the company over the last 20 years, and therefore to Denis’ shareholding.
[32] Under cross-examination, Cindy was asked about the common intention she asserts she shared with Denis. Cindy’s answer to Mr Pearson (counsel for Lynette) was that the first time there was a common intention that she should receive the shares “for nothing” was in 2019, although it seems to me that at this point she was merely restating the undisputed fact that the first time she had received shares at no cost was in 2019. Cindy also accepted that Denis never said to her that “he was holding the shares for you”. When asked about what would have occurred on Denis’ retirement, Cindy said he would not have given her shares straight away, rather over a period of time and there would have been more discussions. Cindy nevertheless maintained her position is that she would get shares on retirement or death. She says that on many occasions Denis said she would get shares for nothing, including as early as 2000. She also confirmed that there was no discussion of her paying for shares in the future.
Lynette’s evidence
[33] Lynette’s evidence presents a different picture. She says that Denis would find Cindy’s claim ‘shocking’. She says that Cindy and her family members have presented
a picture of Denis that is incorrect, and that their evidence is inconsistent with her experiences and understanding of the situation. Lynette says that she and Denis expected that if she lived longer than him, she would hold his shares during her life. However, given the relationship breakdown between her, Cindy, and the rest of the family, Lynette does not wish to retain the shares, but instead seeks confirmation of Denis’ will so that she may sell them at market value.
[34] Lynette’s view is that Denis has adequately provided for Cindy by leaving her his half share in the Family Home. She says:
When Denis was suffering from his final illness, he understood Cindy was guaranteed to get half out house (as per his Will). He also had in mind that he had already given her 10% of the total shares in the Chambers & Jackett businesses worth about $750,000 (current value, already transferred and the price gifted in 2015 – 2019). He also knew she would be the manager of a multi-million dollar business and that she had a mortgage-free home worth over $1,000,000. He was mindful that she inherited that home from her mother (which she acquired as relationship property from her marriage with Denis). The current values of the home Cindy got from her mother, the shares Denis gifted to her, and Denis’ half share in our Cushendall Rise home come to
$2,670,000 on Cindy’s calculations. At the time of his death, Denis believed he would leave Cindy as the recipient of gifts from her parents of that value.
In addition, Denis expected Cindy would have a strong income as the Chief Executive of the Chambers & Jackett business and the opportunity to grow her own wealth having substantial assets, debt-free, at a relatively young age.
[35] Lynette takes issue with Cindy’s claim as it would make Cindy the major beneficiary of the estate. She thinks this would be improper. She says that Cindy was not underpaid or exploited by Denis, and that the allegation that Denis failed to give her what he had promised is untrue.
[36] Lynette describes herself and Denis as intelligent and successful business people who built up their assets during their years together. Lynette says that she and Denis had open and frank conversations about their estates, resolving to each leave half-shares in the Family Home to their respective children, and that the rest of their estates would be left to each other. She says that Denis’ will was changed in 2007 reflecting that they had been married for ten years and that it was nothing to do with Cindy’s relationship at the time with a CJL employee, Mr Pahl. She views the transfer of shares to Bryce and Cindy as a way to give them an important stake in the
companies—and says that if Denis had told Cindy she would get 50 per cent of the company but gave her 10 per cent, the documents created at that time would show that.
[37] Lynette says that Cindy and Mr Robertson pressured Denis to change his will while he was terminally ill, and that Denis decided not to make any changes. She says that Denis was comfortable with the terms of his will at the time of his death. She says that the idea that the shares were only to be held by blood relatives is wholly inconsistent with conversations that she had with Denis. She says that the family have treated her badly since Denis died, essentially cutting her off, not keeping her informed as a minority shareholder as to financial and operational matters, and failing to meet financial obligations to Denis’ estate.
[38]In her affidavit Lynette seeks (although I note such relief is not pleaded) either:
(a)the rejection of Cindy’s claim, leaving Lynette to bring further proceedings to deal with the fact that she is a minority shareholder who has been shut out of the companies; or
(b)orders that:
(i)the value of Cindy’s half share in the Family Home is calculated, and the shares in the companies are independently valued;
(ii)Cindy receives shares in CJL equal to the value of the interest in the Family Home, and she takes the half share in the Family Home left to Cindy in the will; and
(iii)she receives the market value of the balance of the remaining shares in cash.
[39] Lynette acknowledges Cindy’s commitment to CJL over the time she has worked there. However, she says that Cindy’s emphasis on her responsibility for bringing in health and safety requirements in the companies is overstated, although on cross-examination, Lynette accepted that health and safety matters were not of any
interest to Denis. She also confirmed that he loathed going to meetings. She says that Cindy mischaracterises Denis’ business experience and approach as being ‘hands-off’, when that was not the case. She says that Cindy was not underpaid, but rather family members were paid modestly by the two companies, to avoid increased tax liabilities, and because family members regularly received new cars and various other benefits at CJL’s expense. Further, Lynette says that the value of the shares that Cindy has already received is higher than the value of the work that she alleges she was underpaid or not paid for.
[40] Lynette records in response to Cindy’s evidence about conversations immediately prior to Denis’ death that:
Cindy’s description of a three-way conversation in the hospital when Denis was dying … makes no sense to me. She claims that Denis said she would receive his Company shares and that I (in response to this) requested a mortgage repayment, a new car and some income. Denis and I did not say those things. She also claims that I asked about Denis’s life insurance. There was no discussion about life insurance at that time either. I find it deeply offensive to suggest that I was interested in money at this time; my only concern was for Denis.
The contents of Denis’s 2007 Will, and that he made no changes to his Will, despite the opportunity to do so in either the intervening years or in the months prior to his death, are, objective facts. They are entirely inconsistent with what Cindy claims Denis and I said.
[41] Lynette also draws attention to the fact that CJL’s constitution expressly provides for the transfer of shares to relatives and non-relatives, including spouses. She says that this is evidence that goes against the claim that Denis’ view was that shares should only be held by blood relatives. She does not accept that Denis ever held the view that only blood relatives should hold shares in the two companies.
[42] Lynette filed a second affidavit in which she confirmed that her opposition to Cindy’s claim under the Family Protection Act does not rely on any suggestion that Lynette has a moral claim for greater provision from Denis’ estate. Lynette explained that she has accumulated assets with a net value of several million dollars.
[43] When cross-examined, Lynette accepted that she was not involved in the day to day running of the companies, rather she was busy running her own business. She accepted that Denis never discussed retiring, only slowing down, giving an example
of a plan to travel together in Europe. Lynette also confirmed that she received certain assets through survivorship, on Denis death.
[44] When asked about her evidence that Cindy and Mr Robertson pressured Denis to change his will, Lynette acknowledged that she had discussed with Denis whether “he wanted to do anything [to change] his will now that he’d been diagnosed and he wasn’t keen at all to do anything because he didn’t want to even believe he was going to pass away but I said it was really important that we went along and just had a discussion”.
[45] Also in the course of cross-examination, Lynette agreed to provide a redacted version of her current will. This confirmed that (assuming Lynette receives the shares under challenge in this proceeding) Lynette has left one third of them to Cindy’s son.
Cindy’s reply evidence
[46] Cindy filed further evidence in reply to Lynette’s evidence. She confirms that her relationship with Lynette broke down shortly after Denis’ death, and that she disagrees with Lynette’s view of Denis’ intentions for his estate. She says that Denis wished her to receive his shares regardless of whether or not she was underpaid or not paid for the work that she did for CJL. She says that Denis kept his business out of his life with Lynette. She disputes what Lynette says is the value of the shares she received in 2015 and 2019, and what Lynette says she has received from the estate of her parents.
[47] Cindy denies that she pressured Denis to change his will. She says that discussions were had with Denis as it appeared that he did not understand the extent of his wealth, and that at the time of his death he had not had legal advice since 2007. She says that Denis’ denial of the state of his illness and the near prospect of his death inhibited him from seeking such advice or acting to further understand his wealth or will. She reiterates her view that Denis was not involved in the administration or management of the companies, and would not have been capable of running them on his own.
Alan Chambers’ evidence
[48] Alan Chambers is Denis’ brother, married to June Chambers. He is Bryce Chambers’ father, and uncle to Cindy. Alan says that when he and Denis received their shares in CJL they did not pay for them. He says that Denis frequently told Cindy that she was going to acquire his shares in the two companies. He says that he and Denis intended that their shares would be received respectively by their children, Bryce and Cindy, and that there was never any intention, discussion or suggestion that their wives would receive any shares in the business. Alan says that their view was that ownership of shares in the companies should be limited to blood relatives of the Chambers and/or Jackett families, and that after Denis was diagnosed with cancer, he reiterated his intention to give his shares to Cindy. Alan says it is his understanding of his shares that if he “popped off”, his wife June would be looked after, although she would not own the shares or have an interest in the business. He also says that he understood that the company would give Lynette an income.
[49] Alan discusses his role in running the two companies, illustrating that it was limited, given his preference for being on site, and operating heavy machinery. He says that being in the field was a preference also shared by Denis. He says that Cindy was much more involved in the management of the two companies, doing the requisite paperwork, organising meetings, recording keeping and accounting.
[50] Alan notes also the discussions had with Denis while he was in hospital immediately prior to his death. Alan says his understanding at that time was that Denis’ shares were going to Cindy, and that the companies would provide Lynette with an income. He says he and Denis were thinking along the lines that $40,000 to $50,000 a year was appropriate. Alan says he discussed giving Lynette an income with Lynette herself and she seemed relieved.
[51] Alan says that he feels Denis let Cindy down by not transferring the shares to her during his lifetime. He doesn’t think Denis realised that when he changed his will in 2007, the effect would be that Lynette would receive his shares.
June Chambers’ evidence
[52] June Chambers is married to Alan Chambers, and Bryce Chambers’ mother. She supports Cindy’s evidence, and says that it was indeed the view of Alan and Denis that only blood members of their family would ever own shares in the company, and that that was a view that was expressed by them throughout the 48 years she has been married to Alan, and a view she did not think was unfair. She says that in all the time she had known Denis, he never indicated that he wanted Lynette to have his shares at the time of his death. She also confirmed the existence of the dual life insurance scheme between Denis and Alan to enable them to buy back each other’s shares in the event of their deaths. June refers to Cindy’s relationship with Mr Pahl, and Denis and Lynette’s disapproval of that relationship. She says that this may have been a reason for Denis refusing to leave the shares to Cindy in his will made in 2007, which was a view also expressed by Alan in his evidence. She says that she has always believed that Cindy would receive Denis’ shares on his death or retirement. June confirms that Cindy had a great relationship with Denis.
Bryce Chambers’ evidence
[53] Bryce Chambers is a current director of both of the two companies, and the son of Alan and June Chambers. Cindy is Bryce’s cousin. He supports Cindy’s claim. Bryce began working for CJL when he left school at the age of 16. He then returned to CJL following a period in Europe between 2002 and 2007. Upon his return, he says he worked operating machinery, but he was paid less than the other machine operators, and far less than he would have received overseas. He says that when he and Cindy complained to their fathers about their pay, Denis and Alan would both say that they would receive due compensation in time, when they received the company shares on the death of Denis and Alan respectively. He says that throughout his time working at CJL both he and Cindy have been repeatedly promised the shares of their respective fathers upon their deaths. He says there was never any intention to involve either June or Lynette in the running of the business.
[54] Bryce says that it was clear that Denis was intending to ‘pass the baton’ to him and Cindy. He notes that Cindy was the person who led work on health and safety compliance, often having to remind Denis and Alan to be responsible and follow
guidelines. He says that “it is laughable to suggest that Denis would ask anyone in [CJL] to obtain licenses for health and safety obligations as Lyn has claimed in her affidavit”. His view is that neither Denis or Alan cared for following health and safety requirements, preferring instead to rely on their decades of experience in the field.
[55] Bryce is certain that Denis intended to pass his shares in the companies to Cindy, and that he had said as much. He says also that Denis did not discuss business matters with Lynette, and that he has no reason to think that Lynette was involved in any decision making regarding CJL.
[56] Bryce also discusses the work CJL did on the construction of the Family Home, by way of machinery and ‘man hours’. He says they did the foundations, drainage, garden landscaping, and water-blasting, and that Denis and Lynette used CJL fuel to run their vehicles, heat the Family Home, and power their boat. Bryce concludes by stating:
In my view, it is totally reasonable that Cindy expected Denis to leave his C&J shares to Cindy in his will. I have the same view that my father Alan will leave his C&J shares to me in his will and I know that from the time Denis died, my Dad has reviewed his affairs to make sure that he has structured his will and his personal affairs to ensure that this intention is properly carried out.
I do not know why Denis did not have a will which left his shares to Cindy, but I know absolutely that that is what his intention was. That is what Cindy and I have been working for since we both starting at C&J, 20 years ago in Cindy’s case and over 12 years ago in my case. From comments that Denis made during his life, I have no doubt that this is what Denis intended.
Ross Jackett’s evidence
[57] Ross Jackett is the son of Eric Jackett, Denis’ half-brother, and part namesake of CJL and CJEL. He says that he is upset that Denis did not leave Cindy his shares in his will and says that this is contrary to Denis’ intention. Attached to his affidavit is a statement which he says he wrote because he felt upset and because of discussions he had on 1 August 2020 with Denis and Lynette. The statement records his close relationship with Denis and states:
Denis mentioned that his intention was that [CJL] would go to Cindy Chambers as his only child. I questioned him on how he would provide for Lynette. He said they had another company that held rental properties etc, that Lynette would be majority shareholder of, and this was done to provide
income for Lynette and her side of the family. He stated that this company “Handy Four” had substantial assets that would support her once he was no longer here. He said to me that I should structure our companies in a similar way… .
Denis referenced the way his father Ted Chambers had left his will, his second wife was left a house to use until she died or remarried, the company shares in [CJL] were passed onto his blood children Denis and Alan Chambers… .
[58] Mr Jackett says that Denis leaving the shares to Cindy was a matter of preserving the family legacy.
Mark Pahl’s evidence
[59] Mark Pahl provided an affidavit. He was employed by CJL in the 1980s and 1990s as a truck driver, before being imprisoned for drug offending, and returning to work for CJL in 2002 as a Contracts Manager. He worked for CJL until 2017, at which time he was recalled to prison for breach of his parole conditions.
[60] Mr Pahl says that Denis was not an office person but was rather always out in the field. Mr Pahl worked in the office with Cindy and others. He says:
Initially, Cindy became an expert on the ditch witch and other machinery, including digger work and driving rollers. From the time I arrived at C&J in around 2002, Cindy increasingly began supervising drainage contracts, including supervising staff machine operators. From the time I started work in 2002, it was clear that Denis was bringing Cindy along slowly and showing her the way that he liked to manage the subdivision side of the business.
[61] Mr Pahl says that Denis thought of Cindy as “the boy that I never had that is going to take over the business”. He says that he understood that Cindy and Bryce would take over the business from their fathers, Denis and Alan. He says that neither Lynette nor June Chambers were ever involved in running the companies.
[62] Mr Pahl notes that he and Cindy championed health and safety compliance within the two companies, and that Cindy worked hard to make changes in the business and to bring Denis along with her, introducing a raft of health and safety polices. He then discusses that he and Cindy began a relationship between late 2005 and early 2006, notwithstanding their significant age differential. He says that this was a point of significant anguish and conflict between Cindy and Denis, and himself.
Mr Pahl says that Denis must have thought that he was unsuitable as a partner for his only daughter given the age differential and his criminal history.
[63]Mr Pahl states:
[Denis] never asked me to stop seeing Cindy or mentioned anything like that. He was however concerned about a lot of things. What he talked about came out in a flood. During our conversations at this time in 2006, he said he was changing his Will. He thought I was after his money but I do not know why he thought that. He was not thinking as straight as he should have been in my view. At the time I believe he had changed his Will or was about to change his Will.
It took a while after Cindy and I started living together before I was able to get back to a reasonable relationship with Denis. Once we had talked about it over a few weeks, we did start to communicate much better. We had always communicated really well for work, but over those first 3 weeks after he learnt about my relationship with Cindy, he had this outpouring of feelings and uncertainty. At the end of this period however, I felt like I had helped him deal with it.
I had been surprised how much my relationship with Cindy had affected him. I was surprised that he talked about getting advice from a counsellor and changing his Will. This is why I knew he was so distraught. He loves Cindy to death, so to change his Will showed how much my relationship with Cindy knocked him for a six. I felt really bad.
[64] Mr Pahl notes that his relationship with Cindy ended on or around 2013, but that they remain good friends. In her evidence, Cindy also speculates that it was her relationship with Mr Pahl that drove Denis to change his will. This is denied by Lynette in her evidence, who says instead that if Denis had intended to punish Cindy for that relationship, he would have cut her out of the will completely.
Timothy Scott’s evidence
[65] Timothy Scott provided an affidavit. Mr Scott was in a relationship with Cindy for approximately one year, which ended in 2021. They were therefore in a relationship at the time of Denis’ death. Mr Scott was also at that time, and until 13 May 2021, a full time employee at CJL.
[66] Mr Scott discusses being in the hospital immediately prior to Denis’ death, stating:
After maybe 30 minutes, Lynette walked into the waiting room and sat opposite me to my right beside a courtyard window where Roachelle [Lynette’s daughter] was sitting. As she walked in she started talking saying something along the lines of, “well, we have had a talk about things and Cindy will have the company shares”. Monique [Lynette’s daughter] who was sitting opposite me to the left with her husband, Aaron, got up and said, “look Mum, that’s good, you don’t need that stress anyway, that’s Cindy’s thing anyhow, she can have that”. At that point Roachelle then said, “look, let’s not worry about that right now anyhow, we can discuss that later”.
Subsequently, Alan Chambers went in to talk with Denis and other members one or two at a time. At some point I recall some discussions about whether Denis and Lyn should get any amendments of the Will done in the hospital as it was something that could have been done. It appeared to me that this suggestion was dismissed.
…
I understand Lynette is now denying that conversation occurred, about the Chambers and Jackett shares going to Cindy.
(Emphasis in original)
Gilbert Robertson’s evidence
[67] Gilbert Robertson, the companies’ accountant, also provided evidence. He has been the companies’ accountant since 2015. He provides evidence as to the financial management of the companies, and the transfer of a small number of shares to Bryce and Cindy in each of 2015 and 2019. Mr Robertson’s recollection of the meeting on 3 September 2020 between him, Denis and Cindy, was that:
It became clear to me that Denis did not understand the full extent of what he owned or the value of what he owned. I recorded on a whiteboard the wealth that Denis understood he and Lynette owned. It included their house, their boat, properties, shares, cash and the shareholder’s current account …
Denis was struggling with how to make it fair for all the family and how it should work on his death, but there was no doubt that Cindy was supposed to end up with all his shares in C&J. We specifically discussed the transfer of Denis’ full remaining 40% shareholding in C&L to Cindy. This included the transfer of the C & J Equipment shares.
…
Denis advised that Lynette wanted to retain an interest in the company. He said that she did not want to sit in the boardroom, but she wanted a return on an interest in the company, such as some income.
What was discussed was that all the shares should go to Cindy, but for Lynette’s life, she should have an interest in some shares. I note I have recorded 50% to Cindy and 50% to Lynette. I indicated to Denis that with an
interest of 50% of the shares, Lynette would receive an income of
$100,000.00, to which Denis said that amount was “absolutely ridiculous”. Where he rejected Lynette having an interest in 50% of his shares, I then advised him that if Lynette had a life interest in 25% of Denis’ shares or 10% of the company shares, she would receive annual income of approximately
$50,000. Denis was happier with that arrangement.
[68] Mr Robertson recorded these matters in a file note, prepared during the 3 September 2020 meeting. The file note supports his evidence. The file note indicates that Denis’ intention was to carry through that proposal into his will, and that he was discussing this with a Kim Penketh (who Mr Robertson assumed was Denis’ lawyer). Mr Robertson says he was unfamiliar with how a life interest attaches to shares so Denis suggested he meet with Ms Penketh to progress this. He says that he also understood that Denis would then talk with her to finalise his wishes along the lines of what was discussed on 3 September 2020. When Mr Robertson met with Ms Penketh on 15 September, he understood she was Denis’ lawyer. From her explanation, he also understood that Denis’ estate would own a specific number of shares like a trust and Lynette would receive income from those shares and then on her death, Cindy would receive the shares outright. Mr Robertson says he suggested to Ms Penketh that she should meet with Denis by himself, as he understood Denis was feeling some pressure to look after Lynette.
[69] Mr Robertson agrees with Cindy that she has not received full remuneration for the work she has done for CJL over the last 20 years. He has obtained data on Cindy’s renumeration and earnings over the period between 1 April 2002 and 31 March 2021. He has produced information comparing what Cindy was paid over that time period, compared to what others doing the same or similar work were paid. His calculation of what he says Cindy should have been paid also takes into account Cindy’s increasing responsibilities within the companies. Mr Robertson concludes:
55.In total, I summarise the amounts for which Cindy was underpaid or not paid at all, as follows:
(a)Gross payments for the period from 2022 until March 2021 was $838,476.38
(b)The total amount Cindy should have been paid if she was paid a fair wage was $1,230,913.01 and therefore for the hours she was paid a lesser rate than she should have or was under paid was approximately $392,436.63.
(c)For the hours Cindy worked and was never paid, these amount to 2,580 and she should have received for those unpaid hours approximately $99,287.20.
(d)The total amount which Cindy has been underpaid by, or not paid at all is $491,723.83.
[70] Mr Robertson also comments on Lynette’s evidence. He says that her impression of the transfer of shares to Bryce and Cindy in 2015 and 2019 is incorrect. He says that the intention of the share transfer in 2015 was to begin a succession plan for the business, bringing in Bryce and Cindy as managers and owners of the business over a period of time. This was completely separate from the 3 September 2020 discussion as to what was to occur on Denis’ death. He says that the 2019 transfer was designed to address their current accounts, which were blowing out significantly where the amount of dividends they were received was not reducing their current accounts. He says also that Lynette was not involved in any of these discussions nor in any CJL meetings that he was present for. He says that there was no connection between the transfer of the shares and Cindy’s claim of underpayment.
[71] Mr Robertson describes Denis as “old school”—he was very blasé about health and safety and did not enjoy paperwork. He says Cindy has worked very hard to bring the company up to compliance with health and safety and other regulatory practices. He says Denis and Alan preferred to be on machines rather than making strategic decisions and would procrastinate about making such decisions.
[72] Mr Robertson also says that he was unaware that Cindy regularly had new cars purchased for her, or other benefits at CJL’s expense, as Lynette has said. He also says there was never any discussion of paying Cindy and Bryce less than market rates to avoid paying too much tax.
[73] Mr Robertson denies the suggestion that he and Cindy pressured Denis to change his will, and says that in all his conversations with Denis, Denis never mentioned wanting anyone other than Bryce and Cindy to take over the companies. He says he does not think Denis fully appreciated the extent of his wealth. Mr Robertson was surprised to learn Lynette and Denis owned shares worth over
$2,000,000, noting the income from those shares has not been disclosed to him despite him completing Denis’ tax returns for the last five years.
[74] Mr Robertson confirmed that profits were always attributed to Denis, resulting in a significant current account, and he received significant dividends, shareholder salaries and drawings, which for the period 2003 to 2017 amounted to $175,000 per annum.
Cindy’s claims
[75] As noted earlier, Cindy has pleaded three causes of action. The first asserts a common intention constructive trust. The second is a claim under the TPA and the third is a claim under the Family Protection Act.
[76] In my view it is appropriate that I first address the claim under the TPA. In taking this approach, I acknowledge that Cindy’s claim was first and foremost advanced on the basis of a common intention constructive trust. Mr Pearson, counsel for Lynette, suggested that there is some difficulty in pleading a constructive trust claim in reliance on the same promise pleaded in support of a testamentary promise claim. He argues that the TPA provides a remedy for such circumstances and to contemplate unconscionability beyond the scope of the TPA simply becomes a device to avoid the TPA. He also says further that the authorities don’t reflect circumstances like the present as establishing a constructive trust, rather the claim should properly be seen as a TPA case, if there is evidence of a promise.
[77] While I do not accept Mr Pearson’s submission in its entirety, I do consider that given the factual circumstances, it is appropriate to firstly consider whether the claim is made out under the TPA. Parliament has provided a statutory cause of action, and it seems logical to assess this before considering whether equity requires a further response from the Court.1
[78] Before I consider each of Cindy’s claims, I make a general comment on my assessment of the evidence.
1 See also the discussion in Brookers Family Law – Family Property (looseleaf ed, Thomson Reuters) at [TA3.07(8)(d)].
[79] As previously mentioned, the parties required only Cindy and Lynette for cross-examination at the hearing. I found both Cindy and Lynette to be credible witnesses in the face of an upsetting family dispute. I have no doubt that Lynette was a loving wife to, and loved wife of, Denis. Nor do I doubt the close and loving relationship between Cindy and Denis. Nonetheless, to determine the claims made, I must make evidential findings on the balance of probabilities, based on the evidence that has been put before me.
Claim under Law Reform (Testamentary Promises) Act
[80]Section 3(1) of the TPA provides:
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.
[81] Section 2 of the TPA defines “promise” to include any statement or representation of fact or intention.
Cindy’s submissions
[82] Mr Ironside, counsel for Cindy, submits that she has a strong claim under the TPA. He says:
(a)Cindy rendered services or performed work for Denis in his lifetime;
(b)Denis made express or implied promises to reward Cindy for her work or services in his will by transferring her the shares in the companies;
(c)there is a nexus between the work or services and the promise; and
(d)Denis failed to provide for Cindy as such in his will, pursuant to the promise.
[83] I note that there was no dispute between counsel as to those requirements being the essential elements of a successful claim under the TPA.
[84] Mr Ironside submits that ‘services’ is a term that has been interpreted widely by the Courts, including that “the mere fact that what was rendered to the deceased was intangible and of a value incapable of precise monetary assessment, did not prevent it from being a service”.2 He says that the work that Cindy performed is capable of being included in the definition under the TPA. Mr Ironside accepts that the quantification of Cindy’s unpaid remuneration is somewhat crude—but says that Cindy assumed responsibility for significant aspects of the business, including obtaining the necessary compliance qualifications critical to the ongoing ability for CJL to complete contracting work. He says these factors constitute illustration of a conscientious attention to the ongoing viability of the business over a long period of time. He says these services were performed on the explicit understanding that Cindy was to take over from Denis in due course. He says that seen in this context, Cindy’s work and services for CJL amount to an extensive commitment over a period of 20 years to becoming Denis’ successor in the business. Cindy joined CJL because it is the family business and with her father’s encouragement. That Cindy would succeed to Denis’ ownership interest in the companies was undoubtedly a source of immense pride for Denis and important to him. Cindy is his only child so no one else was able to fulfil the role of filial successor.
[85] Mr Ironside accepts that Cindy has benefitted from her employment with CJL—including financial stability and opportunities to advance her career. However,
2 Tucker v Guardian Trust and Executors Company of New Zealand Ltd [1961] NZLR 773 (SC) at 776; citing Hawkins v Public Trustee [1960] NZLR 305.
he says that the commitment shown, and sacrifices endured by Cindy cannot be separated from the assurances given by Denis that Cindy would be his successor, and that any benefits to Cindy are negated if those assurances are not now honoured. He says that on a reading of the evidence there is little doubt that Denis’ words and conduct over an extended period amounted to a promise in respect of the shares.
[86] Mr Ironside submits that the overriding consideration is what is reasonable in the circumstances. He says no injustice is done to Lynette by Cindy receiving the shares, given Lynette’s own business interests and her lack of hands-on involvement with the companies. He submits that that when Denis became ill, he found it too challenging to put his affairs in order, and the Court’s assistance is therefore required to perfect the promise Denis made to Cindy. Mr Ironside submits that the appropriate relief is to transfer the shares to Cindy.3
Lynette’s submissions
[87] Mr Pearson submits that the first three elements of Cindy’s claim for a testamentary promise are not made out on the evidence. First, Cindy did not perform services for Denis—but rather was an employee of the family business. He says that on Cindy’s own calculations, she has already received shares to a greater value (approximately $500,000) than the amount she says she was underpaid (approximately
$475,000). He says this outcome is entirely consistent with Denis having the view that he had made adequate provision for Cindy.
[88] In relation to the requirement for an express or implied promise by the deceased to reward Cindy, Mr Pearson relies on Silbery v Silbery to submit that the testamentary arrangements in this case are inconsistent with the alleged promise. He says this case is illustrative of the difficulty in establishing a testamentary promise.4 Mr Pearson contends there was no promise that Cindy would receive the shares without payment. As to the requirement for a nexus between the services and a promise, he says that there is no basis for contending that Cindy provided services, beyond normal family roles, to her father. Mr Pearson says that Cindy’s argument that
3 Re Welch [1990] 3 NZLR 1; (1990) 7 FRNZ 536 (PC).
4 Silbery v Silbery HC Wellington CIV 2005-485-2499, 22 August 2007.
she enhanced the company shares is circular. That is, she claims to have enhanced the shares, but also claims to have a beneficial interest in those shares. He appears to suggest on this basis that there is no nexus between the services and any promise.
[89] As to the requirement that the deceased failed to make the promised testamentary provision or appropriately remunerate Cindy, Mr Pearson says this fails on Cindy’s own evidence. That is, she has been fully compensated for the value of the services she claims to have provided and she seeks to take at least an additional
$2 million in shares in preference to Lynette. He says this claim is therefore not reasonable.
The Guardian Trust’s submissions
[90] Mr Gilchrist, counsel for the Guardian Trust, submits that the Court must carefully determine whether there was an express or implied promise in the circumstances where some shares were earlier transferred and there was no provision for Cindy’s claim in Denis’ will. As to the nexus between the promise and the reward, Mr Gilchrist submits that motive for the services is irrelevant but what is required is that the promisor indicates that the plaintiff will be the ultimate beneficiary of the promise. The nexus must be objectively determined in circumstances where some of the shares were in fact formally transferred.
[91] Mr Gilchrist says that there is some provision for Cindy in Denis’ will and via the earlier share transfers. If Denis failed to make provision, the most difficult and contentious part of the claim is how that deficiency is to be remedied. Mr Gilchrist says the Court needs to assess the value of the services or work with the focus on the value of the services to the recipient. This can be conducted by considering the promisor’s own assessment of the value of services and here we know that the deceased “grappled with looking after Lynette, and what he should leave her in terms of shares”. Ultimately, Mr Gilchrist says the Court must assess what is fair and reasonable remuneration for what was promised. In circumstances where Cindy was paid for the work or services and has already received 20 per cent of Denis’ shares, Mr Pearson says there may not be justification for an award effectively in excess of
$2 million.
Analysis
[92] The elements of a claim under the TPA are not contentious as a matter of law. I turn to consider each element against the facts.
[93] First, I find on the evidence that Cindy provided work and services to Denis during his lifetime. Mr Pearson did not pursue a point made initially that as Cindy was an employee of CJL, she was not providing services to Denis. As noted by Mr Ironside, the concepts of ‘work’ and ‘services’ are to be given a broad and liberal construction, including both tangible and intangible services that are not easily valued in monetary terms.5 I consider that the fact Cindy was paid by CJL is not fatal to her claim pursuant to the TPA.
[94] I accept that the evidence given by Mr Robertson establishes that Cindy was either underpaid or not paid at all for some part of the work she undertook for the companies. Mr Robertson records this at a value of $491,723.83. I am satisfied that this work was undertaken for Denis. It benefitted him as a shareholder in the companies in that the companies did not have to pay for that work. While this also benefitted Alan, Bryce and Cindy, I note that a significant amount of the services in issue in this proceeding were provided by Cindy prior to the point at which she (and Bryce) first acquired shares in 2015. At that time, she had already worked for CJL for over a decade, while being underpaid. It has been suggested by counsel for the Guardian Trust and Lynette that the transfer of shares to Cindy in both 2015 and 2019 (in part at a favourable price and in part as a gift) compensates Cindy for this work. I do not agree. In my view, the arrangements relating to the transfer of shares are properly understood as separate matters. Notably, the 2015 transfer of shares resulted in Cindy possessing a significantly greater residual debt to CJL.
[95] I also consider that Cindy’s work and services went beyond what might reasonably be expected of an ordinary employee, and extended beyond what might reasonably be expected within the family relationship.6 This is exemplified by the work she undertook at the time her son was born. Her commitment at this time is
5 See Tucker v Guardian Trust and Executors Company of New Zealand Ltd, above n 2, at 776; citing Hawkins v Public Trustee, above n 2.
6 See Re Welch, above n 3.
supported by the uncontested evidence from Alan Chambers. A further example is her commitment to acquiring appropriate qualifications that assisted her to ensure the companies complied with regulatory requirements. The evidence suggests that these requirements were less likely to have been complied with had she not completed that work. I find that over the 20 years or so Cindy has been working for the companies, she has preserved and enhanced the ongoing success of the companies and therefore Denis’ interest in them. I accept Mr Ironside’s submission that Cindy gave conscientious attention to the ongoing viability of the business over a significant period of time. Put simply, Cindy did more than merely perform her employment duties.
[96] A less concrete but nonetheless important aspect of Cindy’s commitment to the companies is the fact that she is Denis’ daughter. Her involvement in the business was important to Denis because of his desire that this closely held family business continued to be held and operated by family members. In this regard I accept Cindy’s evidence that Denis talked about Cindy as being “the boy I never had that is going to take over the business”. This is supported by Mr Jackett’s evidence that Denis told him Cindy would take over Denis’ shares and Bryce would eventually take over Alan’s shares. I note Mr Jackett’s evidence that Lynette was also present during that conversation and that she said “and even Ted [Cindy’s son]” would one day be involved. I conclude that Denis placed a significant value on family members owning and operating the companies, as they have always done.
[97] I do not consider that the circumstances of this case are similar to that of Chapman v HP, in which a TPA claim was unsuccessful on the basis that “not being paid for work done in the family businesses was part of the family way of life”.7 The work concerned in that case involved both part-time and full-time work in several family businesses while the claimants were young, and over a significantly shorter period of time than in Cindy’s case. In the present case, Cindy has demonstrated a sustained and dedicated commitment over a period of two decades, in a manner that has upheld the value of the companies themselves and fulfilled Denis’ aspirations for the business.
7 Chapman v HP HC Wellington CIV-2007-485-1372, 2 July 2009 at [284].
[98] The second element Cindy must prove is that Denis had promised to reward her in his will for the work and services. Of importance in establishing this promise is the meeting between Denis, Cindy and Mr Robertson, the company accountant, on 3 September 2020. This occurred only two weeks prior to Denis’ death. Cindy says that at this meeting Denis was “indecisive about how he should arrange his instructions in regards [to] the shares in the company” although he was “certain that he wanted me to have the shares but he wanted Lyn[ette] to have some income from the company”. Cindy says that the meeting concluded with agreement that Mr Robertson would discuss how to achieve this with Kim Penketh (the conveyancing practitioner with whom Denis was dealing in relation to his will).
[99] The tenor of this discussion is supported by the evidence from Mr Robertson, which I outlined earlier. I consider that I can place considerable weight on the evidence given by Mr Robertson about this meeting and the steps he took shortly afterwards to speak with Ms Penketh. Mr Robertson is an independent witness. He has provided contemporaneous documentation to support his evidence. I record that the parties did not require him to be available for cross-examination at the hearing.
[100] Mr Robertson’s evidence is that, after speaking with Ms Penketh, Denis was “to finalise his wishes along the lines of what we had discussed, which was that Cindy was to have some shares immediately and the rest of the shares eventually, but in the meantime until Lynette’s death, Lynette would enjoy some income from shares the estate would retain”.
[101] However, Denis did not have this further conversation. Ms Penketh did not receive any response from Denis when she sought further information so a will could be prepared. Lynette’s evidence is that this shows Denis did not want to change his will. Her evidence is that Denis talked to her about changing his will and that “he considered whether he should make any changes and decided he would not make any changes”.
[102] Also important is evidence of other discussions Denis had in these last days of his life. Cindy and Lynette provide very different accounts of a conversation they shared with Denis in the last few hours of his life. In essence, Cindy says Denis said
she was to get all the shares and Lynette was to have a lifetime interest over some of them. Lynette says that this makes no sense to her. Her position is that Denis knew Cindy already had a ten per cent interest in the companies and “expected she might inherit more after my death”. Lynette says she and Denis remained comfortable with their wills from 2007 to Denis’ death.
[103] Lynette was not cross-examined about this conversation. Some questions were put to Cindy about it, but the answers elicited did not have the effect of altering Cindy’s evidence of the conversation. Cindy and Lynette each loved Denis dearly and knew he had very little time left. I expect that this day would have been highly emotional for each of them.
[104] I find that Cindy’s evidence of this conversation is supported by other evidence.
[105] First, there is evidence about what was said immediately following that conversation. Cindy’s evidence is that, in front of the wider family waiting in another room, Lynette said to everyone present “I’m not going to have any shares in the company” and one of Lynette’s daughters responded, “that’s good Mum, you’ve never had anything to do with the company, it should be Cindy’s”. The nature of this conversation is confirmed in the evidence of Cindy’s then partner, Mr Scott. Lynette’s evidence does not respond to this.
[106] Second, there is the evidence from Alan Chambers, Denis’ brother and fellow shareholder in the companies. Alan says that after Denis was diagnosed with cancer, they had a discussion in which Denis said he was giving all his shares to Cindy. Alan particularly recalls the conversation because he joked with Denis that Cindy would then have more shares than he did. Alan also says that when he was with Denis at the hospital on the day Denis died, he discussed matters with Denis. He recalls that this included Denis saying that if he wanted to get a lawyer in now, Denis could sign something, but that this never happened. Alan presumed he was referring to giving Cindy his shares. Alan and Denis also discussed the income Lynette should receive. Alan said they were both thinking that between $40,000–$50,000 would be an appropriate amount. Alan also gives evidence of a private discussion that followed,
between him and Lynette. Alan’s evidence is that Lynette raised the question of insurance money and was aware of the life insurance policies Denis and Alan held in favour of each other. Alan says he told Lynette that “we would carry on and give her an income, to which she said, ‘that’s so good’”. Alan says he then said “that was easy wasn’t it? Why were you so concerned?” and that after that Lynette seemed happier.
[107] It is the case that Denis had three months from the diagnosis of his medical condition to his death. He did have the opportunity to change his will or take other steps in relation to his shares in the companies. He did not do so. It seems to me likely that Denis was caught between his loyalty to both his daughter and his wife, and his desire to do right by them both. The evidence shows that Denis was not someone fond of paperwork. His ill health, poor prognosis, general disinclination for administration, and the difficulty of the subject matter means it is not perhaps surprising in these circumstances that he simply did not resolve these issues prior to his death. Such an outcome is unfortunately common.
[108] I am satisfied by the combination of Cindy’s evidence and Mr Robertson’s evidence that at the 3 September 2020 meeting Denis expressly promised to leave his shares in the companies to Cindy. I find that Denis intended for Cindy ultimately to own the shares in their entirety. I consider that this conclusion is supported by the other evidence I have discussed above.
[109] In addition, I accept the evidence from Cindy, Alan and Bryce that there was a course of conduct over a number of years prior to the 3 September 2020 meeting by which Denis said to Cindy on numerous occasions that she would receive the shares upon his death or retirement. Mr Jackett’s evidence similarly supports that this was Denis’ plan. I am satisfied that this evidence supports a further conclusion that such a promise had been made at earlier times and in any event supports my conclusion about the promise made at the 3 September 2020 meeting.
[110] The third element is establishing the necessary nexus between the work and services undertaken by Cindy and the promise made by Denis to give her the shares. I consider that such a nexus has been established. I consider that it is apparent from the evidence provided in this proceeding that the promise made by Denis to Cindy was
connected to the work and services that she has undertaken. It is clear that although he failed to accurately record this position in his will, Denis felt safe in the knowledge that Cindy, given her commitment to the companies, would continue to uphold and operate them following his death. While I accept that to some extent it is difficult to entirely separate Denis’ intentions for succession and his desire to reward Cindy for unpaid work, ultimately, both of these aspects support the finding of a nexus between Cindy’s work and services, and Denis’ promise. Absent the work and services provided by Cindy, Denis’ wishes as to succession were unlikely to have been fulfilled. Accordingly, I am satisfied that there is a sufficient nexus between the work and services, and the promise.
[111] The final element is that Denis failed to fulfil his promise to Cindy in his will, which is self-evidently established.
[112] Accordingly, I consider that Cindy’s claim under the TPA is made out and so I must consider what relief I should order.
[113] An order made pursuant to s 3(1) may be subject to terms and conditions as the Court thinks fit.8 That is a broad discretion, subject to the reservation that if the claimant was fully rewarded during the deceased’s lifetime, no award will be made.9 The Court must have regard to all the circumstances, including the value of the services or work from the deceased’s perspective,10 the value of what was promised,11 and what is reasonable in all the circumstances.12
[114] I consider that fair and reasonable provision in the present case, in return for the work and services that Cindy provided to Denis is that all of Denis’ shares in the two companies should be vested in Cindy.13 However, there is ample evidence (including from Cindy), which I accept, that Denis wished Lynette to receive some
8 Law Reform (Testamentary Promises) Act 1949, s 3(7)
9 See Klein v Klein [2013] NZFC 8915.
10 Powell v Public Trustee [2003] 1 NZLR 381 (CA).
11 Powell v Public Trustee, above n 10.
12 Samuels v Atkinson [2009] NZCA 556. I note also, however, that I do not consider this case factually similar to the present case, and cite it only for the purpose of recording the requirement of reasonableness.
13 Section 3(3) of the TPA gives the Court the power, where the promise relates to specific property which forms part of the deceased’s estate, to vest, direct, transfer or assign that property to a claimant instead of awarding a sum of money.
income from the companies, during her lifetime. Mr Ironside submits that this is from a legal perspective, “a distraction”, arguing that by September 2020, it was established that Cindy was to receive the shares.
[115] However, I consider that this must also be addressed. I consider that the appropriate relief is that Cindy receive Denis’ shares subject to Lynette receiving some income from the shares during her lifetime. I consider that the appropriate level of income for Lynette is established by reference to a 10 per cent share of the annual net profits earned by CJL.14 This reflects the discussions Denis had with Cindy and Mr Robertson, and with his brother Alan, where reference was made to a 25 per cent share of Denis’ 40 per cent shareholding. I return to the detail of how this outcome might be achieved later in the judgment.
[116] In case I am wrong in my conclusion that Cindy’s claim under the TPA is made out, I now turn to consider her cause of action based on a common intention constructive trust.
Common intention constructive trust claim
[117]In this cause of action Cindy pleads that:
(a)she carried out significant duties and responsibilities as an employee of the companies from 2000 to 2020;
(b)she did not receive fair and reasonable remuneration for those services, and those services improved the value of the companies’ business and shares;
(c)Denis encouraged Cindy to provide these services on the basis of assurances leading to a common intention held by Denis and Cindy that the shares would pass to Cindy on Denis’ retirement or death;
14 As a practical matter, CJL is the company which is used to carry out the business.
(d)the common intention was expressed by Denis to other persons on several occasions from 2010, including on 17 September 2020, the day he died;
(e)at the date of Denis’s death and on the basis of the common intention, Denis held the shares on trust for Cindy as his intended successor in the CJL business;
(f)Cindy reasonably expected to receive the shares and it is unconscionable for Guardian Trust to assert ownership of the legal and beneficial interest in the shares; and
(g)Cindy seeks the transfer of the shares in the companies to her.
[118] Lynette denies that such a constructive trust exists. As will become apparent in the following discussion, there is not much difference between the parties as to the relevant law, but very different views on whether the facts support the existence of such a constructive trust.
Cindy’s submissions
[119] Mr Ironside submits that the remedy available through the imposition of a common intention constructive trust is a flexible remedy that has application in a practical way.15 He relies on the statement of the Court of Appeal in Almond v Read that:16
The common factor in all of these scenarios would appear to be the unconscionability of the defendant in denying the plaintiff an equitable interest in the relevant property because of a previous understanding, whether subjectively agreed to by the parties or more commonly deemed by the law to have been appropriate in the circumstances. It is the element of consent or intention (or lack of either of these, as the case may be) that triggers the institutional constructive trust which arises to reverse the defendant’s unconscionability.
15 Commonwealth Reserves I, LC v Chodar [2001] 2 NZLR 374 (HC) at [37] and [39].
16 Almond v Read [2019] NZCA 26 at [172]–[173].
[120] Mr Ironside relies also on the decision of Glazebrook J in Chodar to emphasise that a constructive trust is a means to an end, a mechanism to enforce personal accountability with proprietary consequences.17 He argues that what exists in the present case is an institutional constructive trust, where Cindy is asking the Court to recognise in a declaratory manner that on Denis’ death, his shares in the companies were held on trust for her.
[121] Mr Ironside submits that critical to this case is the acknowledgment by Denis and Alan, to Cindy and Bryce, that they would become the future owners of the business. He says that it is clear on the evidence that the services and work performed by Cindy over a period of 20 years were on the explicit understanding that she would be rewarded as a future owner of the business, and that no one other than blood relatives would take that role. He says that this is consistent with the fact that past shareholders of the two companies had always been family members involved in the business, rather than passive shareholders.
[122] In the circumstances, Mr Ironside submits that it would be unconscionable for the Court not to recognise that a constructive trust has arisen, and therefore that the shareholdings do not form part of Denis’ residual estate, left to Lynette in his will. He says that Cindy and Bryce were treated differently from other employees on the understanding that they were to be the next generation of owners, and that their roles and treatment are only explicable on that basis. He submits that notwithstanding Denis’ will, the executor is prevented from passing the shareholdings to Lynette as the beneficiary of his residual estate—as at the time of Denis’ passing, the shares passed to Cindy. He submits that Cindy had an objectively reasonable expectation that the shares would pass to her.
[123] Mr Ironside emphasises that it should not be surprising that succession was dealt with in a largely informal way given the context of closely held family companies. There was trust between Denis, Alan, Bryce and Cindy. He says that this is not a case of an incomplete gift, as in Harvey v Beveridge.18 The family business
17 Chodar, above n 15, at [37].
18 See Harvey v Beveridge [2014] NZCA 72, (2014) 3 NZTR 24-003; and Harvey v Beveridge [2013] NZHC 1718, [2013] NZAR 1364.
context is crucially different, as seen from Bryce’s evidence that his father and uncle told him that he could go to work in Australia, but if he did, he would not get shares in the companies. Mr Ironside emphasises the course of conduct that establishes the common intention and reasonable expectation.
Lynette’s submissions
[124] Mr Pearson emphasises that probate is a vital jurisdiction of this Court, where stringent rules are applied to ensure that testamentary arrangements are secure against reconstruction by self-interested parties after a testator’s death. He notes that this this case, Cindy’s claim seeks to overturn Denis’ provision for Lynette, after their 28 years of marriage.
[125] Mr Pearson accepts that the legal principles relevant to a constructive trust claim are not disputed. He nonetheless submits there are significant difficulties with Cindy’s claim on the facts. First, he contends that there is a fundamental problem in that Cindy had not considered that she might need to buy out Denis’ shares if he was to retire—suggesting that otherwise, Denis would have had to rely on Lynette’s resources for financial support. Mr Pearson contends that even on the day Denis died, there was no resolution as to on what terms she was to acquire the shares. Thus, Mr Pearson argues there was no meeting of minds that Denis was to give Cindy the shares without payment.
[126] On these grounds, Mr Pearson contends that no common intention is established. He also notes that while Cindy’s case relies on evidence that shares in the companies were always to be held in “bloodlines”, the constitution of the companies specifically allows spouses to hold shares. Mr Pearson refers to much of Lynette’s evidence, on which she was not cross-examined, in support of her construction of the conversation which happened in the hospital immediately prior to Denis’ death, as well as other matters.
[127] Mr Pearson submits that no contemporaneous documentation supports Cindy’s claim that she worked for Denis at an undervalue in exchange for a promise to give her his shares on his retirement or death. He says that anecdotal evidence cannot override solemn testamentary arrangements. He submits that the Court must be
suspicious of the reconstruction of past events in a manner that is inconsistent with a deceased person’s intent as expressed in their will. He says that Cindy is seeking to circumvent Denis’ will, which has been granted probate, and relies on assertions of promises of which there is no written record.
[128] Mr Pearson also draws attention to the status of a constructive trustee, who cannot claim personally any increase in value of the property or any profits earned by it. He says that Denis’ position in respect of the shares during his lifetime is inconsistent with an intention by him to hold the shares on trust for Cindy. He says that Cindy’s position is that Denis did not hold the shares as a personal asset over the years, rather holding them on trust for her—and that this inconsistent with the way Denis acted throughout his lifetime.
The Guardian Trust’s submissions
[129] Mr Gilchrist, while taking a neutral stance, submits that the best evidence as to Denis’ intent is his own actions, and his intent as recorded in his two wills in 1997 and 2007. He submits that the Court should be cautious in interfering with Denis’ will, especially where Denis had the opportunity to amend it during the period where he knew he was suffering from a terminal disease. Mr Gilchrist notes the caution that must be applied in that the person who could have assisted most with this question,
Denis, is not able to give evidence in the case.19
[130] Mr Gilchrist says that the records of Mr Robertson show that the deceased struggled to decide how best to split his assets, but wished his shares to eventually pass to Cindy, subject to a life interest for Lynette, to provide her with some income. However, he says that an available inference is that Denis did not change the 2007 will because he was happy with it. Mr Gilchrist then submits that it is therefore possible to infer that Denis made a conscious and deliberate decision, not only in 2007 but also just before his death, not to leave his shares to Cindy. Denis had the opportunity to take advice, he took advice, and he nonetheless made no change to his 2007 will.
19 See Ace v Guardian Trust and Executors Co Ltd [1948] NZLR 103, affirmed by Hammond J in
Brown v Pourau [1995] 1 NZLR 352.
[131] Mr Gilchrist notes that the previous transfers of shares from Denis to Cindy have been fully documented and were undertaken in the context of professional advice. Mr Gilchrest says that there would have been no need for the transfer and/or gifting of the shares in 2015 and 2019 had the shares already been held on trust for Cindy. He submits that Bryce’s evidence does not establish that at this stage, Alan’s shares are in fact held on trust for him. He submits that in circumstances where the parties had accounting and legal advice and were aware of the need to document the transfers of shares in 2015 and 2019, the Court should be cautious in inferring intent by Denis to hold his shares on trust for Cindy. He submits that an intent to gift is not the same as an intent to hold property on trust.20
[132] Mr Gilchrist accepts that in the circumstances of this case, there could be a constructive trust. Having initially queried the availability of a common intention constructive trust outside the scenario of a de facto relationship, Mr Gilchrist clarified that he was not making the submission that there was any jurisdictional impediment to such a claim in the present case. Mr Gilchrist submitted that the three essential elements of a common intention constructive trust are a common intention, reliance and detriment, and unconscionability. Mr Gilchrist also relies on Harvey v Beveridge to question whether the present case too, is not a situation of an unperfected gift.21
[133] Mr Gilchrist’s concern remains as to whether on a factual basis, the evidence establishes a common intention between Denis and Cindy. He characterises the issue as to whether Cindy’s expectations were reasonable given the background facts and Denis’ conduct. Mr Gilchrist highlights that there is disputed evidence as to whether Denis’ intentions were made explicit, and if they were, they were oral, and inconsistent with the documentary actions that had been earlier taken.
Analysis
[134] I turn first to address what Cindy must establish, as a matter of law, to prove that a common intention constructive trust exists. There was not significant dispute
20 See Harvey v Beveridge, above n 18.
21 See Harvey v Beveridge, above n 18.
between the parties as to the relevant law. It is nonetheless convenient to set out here the position as I understand it.
[135] The leading authorities on constructive trusts in this context are Lankow v Rose and Wakenshaw v Wakenshaw.22 In Lankow v Rose, while that case concerned de facto relationships, Hardie Boys J said:23
The essential requirements I see to be twofold: that the plaintiff contributed in more than a minor way to the acquisition, preservation or enhancement of the defendant's assets, whether directly or indirectly; and that in all the circumstances the parties must be taken reasonably to have expected that the plaintiff would share in them as a result. Both statements need some amplification. In the first place, 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. Putting it in conventional estoppel terms, the plaintiffs contributions must have been to his or her detriment; or in Canadian terms they must have resulted by the end of the relationship in the enrichment of one to the juristically unjustified deprivation of the other. Further, the contributions need not be in money; they may be in services or in any other respect. But there must be a causal relationship between the contributions and the acquisition, preservation or enhancement of the defendant's assets for, as a claim to a constructive trust is a proprietary claim, a claim to an interest in property, the contributions must have been made to assets; not necessarily to particular assets, but certainly to the defendant's assets in general. The contributions may then be recognised by the imposition of a trust over a particular asset or particular assets, which may in turn be quantified or satisfied by a monetary award.
[136] In Wakenshaw, concerning a dispute between the deceased’s son and daughter- in-law, the Court of Appeal further stated:24
In particular, those cases have established that it is necessary for a person who makes such a claim to establish that more than a minor contribution was made to the acquisition, preservation or enhancement of the defendant’s assets, whether directly or indirectly; and that in all the circumstances both parties must be taken reasonably to have expected that the claimant would share in the assets as a result. While the contributions do not need to be monetary in nature, there must be a causal relationship between the contributions and the
22 Lankow v Rose [1995] 1 NZLR 277, (1994) 12 FRNZ 682 (CA); and Wakenshaw v Wakenshaw
[2017] NZCA 252, [2018] NZAR 532.
23 Lankow v Rose, above n 22, at 686.
24 Wakenshaw v Wakenshaw, above n 22, at [25].
acquisition, preservation or enhancement of the defendant’s assets; and the contributions that are made must manifestly exceed any benefits that the claimant derives from the arrangement.25
[137] The Court of Appeal has more recently considered constructive trusts in two recent decisions. In Almond v Read, the Court described constructive trusts as being divided between institutional constructive trusts and remedial constructive trusts, relying on the formulation of the distinction as formulated by Tipping J in Fortex Group Ltd (in rec and liq) v MacIntosh:26
An institutional constructive trust is one which arises by operation of the principles of equity and whose existence the Court simply recognises in a declaratory way. A remedial constructive trust is one which is imposed by the Court as a remedy in circumstances where, before the order of the Court, no trust of any kind existed.
The difference between the two types of constructive trust, institutional and remedial, is that an institutional constructive trust arises upon the happening of the events which bring it into being. Its existence is not dependent on any order of the Court. Such order simply recognises that it came into being at the earlier time and provides for its implementation in whatever way is appropriate. A remedial constructive trust depends for its very existence on the order of the Court; such order being creative rather than simply confirmatory.
[138] The Court identified that one common category of constructive trusts is where contribution has been made to the acquisition, improvement or maintenance of property or its value by a party other than a registered proprietor. The Court referred to the elements set out by Tipping J in Lankow v Rose that a claimant must prove in order to establish that equity should regard as unconscionable a defendant’s denial of a claimant’s interest.27
[139] The Court of Appeal was clear that where a contribution is made on the basis of a pre-existing common intention that the contribution will result in a proprietary interest, there will be no difficulty in establishing a reasonable expectation.28 Indeed,
25 Lankow v Rose, above n 22, at 282. This reasoning has been referred to on numerous occasions, including in Vervoot v Forrest [2016] NZCA 375, [2016] 3 NZLR 807 at [45]–[47]; Watson v Taylor [2002] NZFLR 59 (HC) at [41]–[46]; Glass v Hughey [2003] NZFLR 865 (HC) at [38]– [43]; Harvey v Beveridge, above n 18, at [9]–[13]; Marshall v Bourneville [2013] NZCA 271, [2013] 3 NZLR 766 at [27]; Hunt v Ogle [2003] NZFLR 1025 (HC) at [23]–[24]; and Stubbs v Holmes [1999] NZFLR 780 (HC) at 787. See also Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [13.2.4]
26 Almond v Read, above n 16, at [64]; citing Fortex Group Ltd (in rec and liq) v MacIntosh [1998] 3 NZLR 171, (1998) 6 NZBLC 102,535 (CA) at 171–172.
27 Lankow v Rose, above n 22, at 294.
28 Almond v Read, above n 16, at [69].
where there has been an express common intention applicable to the circumstances that have arisen, there is no need to fall back on reasonable expectations.29 The Court went on to refer to the observation of Glazebrook J in Chodar, that the purpose of a constructive trust is generally not to create an ongoing trust relationship but rather to force the disgorging of money or property by the constructive trustee; thus it is a “means to an end”.30
[140] The law relating to a common intention constructive trusts has been considered further in this Court and the Court of Appeal, in Mills v Laboyrie.31 In this Court, Edwards J set out in some detail the development of the law relating to constructive trusts in both New Zealand and England.32 On the facts of the case before her, Edwards J concluded that the common intention in the arrangement in question was unequivocal. Her Honour then addressed the questions of reliance on the arrangement, and what detriment was caused, or advantage obtained. The final aspect her Honour considered was whether the element of unconscionability was established. Having concluded that the claimants relied on the arrangement to their detriment, and that it would be unconscionable for the defendant to depart from the arrangement, Edwards J found that the requirements for an institutional constructive trust were made out in the factual circumstances before her.
[141] In the same proceedings, the Court of Appeal upheld the Edwards J’s factual findings on both contributions and common intention. The Court noted that as the question of reliance was not in dispute, “the prerequisites for recognition of a [common intention constructive trust] were established”.33
[142] The Court of Appeal nonetheless went on to discuss legal questions raised by the appellant as to the correct approach to causes of action based on a common intention constructive trust and the Pallant v Morgan equity. Of relevance for present purposes is that the Court clarified that, in its view, a common intention constructive trust is not precisely the same as, but is a close relation of, a reasonable expectation
29 Gormack v Scott [1995] NZFLR 289 (CA).
30 Chodar, above n 15, at 382.
31 Laboyrie v Mills [2020] NZHC 700; and Mills v Laboyrie [2022] 2 NZLR 258, [2021] NZCA 450.
32 Edwards J was also required to consider the Pallant v Morgan equity. See Pallant v Morgan [1953] 1 Ch 43, [1952] 2 All ER 951.
33 Mills v Laboyrie, above n 31, at [46].
constructive trust.34 The Court said that “either pathway provides the basis for the Court to recognise a constructive trust so as to prevent an unconscionable result”.35 The Court gave two reasons for this conclusion.36 First, that it is unnecessary to fall back on reasonable expectations if a common intention is apparent. Second, remedies may differ as between a constructive trust based on expectations and one based on a common intention, as the remedy for the latter may be disproportionate to the contribution.
[143] The Court of Appeal also briefly addressed whether a common intention constructive trust can be established without contribution, sharing the doubts expressed by the Court in Harvey v Beveridge as to evidence of contribution being a rationale for the distinction between reasonable expectations and common intention constructive trusts.37
[144] It is the case then, as ultimately accepted by all parties, that as a matter of law a claim founded on a common intention constructive trust is available in principle in the present case. In light of the above case law, I consider that to succeed in her claim in this regard, Cindy must establish that:
(a)there was a common intention between Cindy and Denis that, on Denis’ death, Cindy should hold the shares in the companies and/or Cindy and Denis had a reasonable expectation that on Denis’ death, Cindy should hold the shares in the companies;
(b)Cindy relied on this common intention or reasonable expectation;
(c)Cindy contributed in more than a minor way to the maintenance, preservation and improvement of the companies and therefore the shareholdings in the companies;
34 Mills v Laboyrie, above n 31, at [53].
35 At [54].
36 At [53].
37 At [55].
(d)Cindy suffered detriment in that she was under-remunerated for her contributions to the companies and the companies’ shareholders (including Denis) benefitted from those contributions; and
(e)overall, it would be unconscionable for Denis’ estate to retain the shares in the companies, and they should be transferred to Cindy.
[145] I now turn to consider the evidence relevant to this claim, some of which I have already discussed in the context of the TPA claim.
[146]I accept:
(a)Cindy’s evidence in relation to the work she carried out for the companies, from 1999 to the present, supported by the evidence given by Alan, Bryce, Mr Pahl and Mr Robertson;
(b)that Cindy has made both indirect and direct contributions that are more than minor to the preservation and enhancement of Denis’ shares, through her work and services for the two companies;
(c)that the formulation of a succession plan in this context, allowing Denis and Alan to have confidence that their respective families and legacies would be continued to be upheld, constitutes a significant contribution to the preservation and enhancement of Denis’ shares, going above and beyond what is expected of a typical employee, which answers the contention that she had already been adequately renumerated at the time of Denis’ death;
(d)that Cindy was under remunerated in comparison to the remuneration she would have received in an equivalent position not in her family company, as put in Mr Robertson’s evidence;
(e)that there was a common intention shared by Denis and Cindy that Cindy was ultimately to own all his shares in the companies, and that this was a reasonable expectation given Cindy’s significant
contribution to the companies over a period of more than 20 years, and commitment to the succession plan conceived of by Denis, Alan, Bryce, and herself, which accounted for the desire that the companies remain family owned and operated; and
(f)that Denis also wished to ensure that Lynette received a passive income from the companies.
[147] I am ultimately satisfied in the circumstances that there was a common intention shared by Denis and Cindy that Cindy was to own all his shares in the companies on his death. Accordingly, I have no doubt that it would now be unconscionable for Cindy to be denied the interest in the shares that were to pass to her upon her father’s death.
[148] I do not consider that Denis’ interaction with the companies during his lifetime is inconsistent with the recognition of a constructive trust arising at the time of his death. The holding of the shares by the executor pursuant to a constructive trust for Cindy’s benefit does not necessarily raise an issue of whether Denis himself held those shares on trust for Cindy during his lifetime. The common intention as illustrated in the evidence was that the shares would pass to Cindy at the time of Denis’ death. While there is evidence to suggest that the transfer of the shares may have occurred in a different manner had Denis retired for a period prior to his death, those are not the circumstances currently before the Court. That matters may have progressed differently in different circumstances is of no real import, as I am satisfied on the evidence that a there was a common intention that the shares would pass to Cindy upon Denis’ death, subject to some provision for Lynette during her lifetime.
[149] I conclude that in the last three months of Denis’ life, Denis, confronted by his mortality, was simply unable to take steps to provide the clarity that his family would have benefited from in relation to what he intended should happen to his shares. In my view, it must be the case that Denis intended for his only child to receive his shares on his death, after she has worked for this family held business for more than 20 years. While I acknowledge the legal significance of a will, the terms of Denis’ will cannot be the end of the matter in the circumstances as I have found them.
[150] Therefore, if my finding that Cindy’s claim under the TPA is successful is incorrect, I record that I would have found that a common intention constructive trust is made out in the circumstances. I would have found that the Guardian Trust holds Denis’ shares in the companies on trust for Cindy, and that therefore they do not form a part of Denis’ residual estate. I would also have found that the trust under which Cindy holds Denis’ shares is subject to Lynette receiving some income from the shares during her lifetime. As outlined in the context of the TPA claim, I consider that the appropriate level of income for Lynette is established by reference to a 10 per cent share of the annual net profits earned by CJL. This reflects the discussions Denis had with Cindy and Mr Robertson, and with his brother Alan, where reference was made to a 25 per cent share of Denis’ 40 per cent shareholding. I address the detail of how this outcome might be achieved below.
Family Protection Act claim
[151] Given my conclusions above, it is not necessary to express a final view on Cindy’s claim pursuant to the Family Protection Act. I nonetheless observe that a claim under the Family Protection Act does not sit well with the factual circumstances established. Had it been necessary to determine whether Denis had fulfilled his moral duty of provision to his only child, I consider it likely that he provided adequately for Cindy. While the provision of the half interest in the Family Home to Cindy is residual, when it accrues, it is a significant provision. Cindy also owns her own home worth approximately $1 million, subject to a small mortgage of about $50,000, and has her existing shares in the companies, which are worth approximately $500,000. My tentative view is that any further award to Cindy would not be justified based on need or recognition, as established in the caselaw.
Implementation of relief
[152] In relation to the TPA claim and the common intention constructive trust claim (in the alternative), I have concluded that Denis’ promise or the common intention means that Cindy should receive Denis’ shares. However, the promise or common intention must be understood as including the provision of an income for Lynette from CJL. I have found that the appropriate level of income for Lynette is established by reference to a 10 per cent share of the annual net profits of CJL, during her lifetime.
This reflects that the evidence establishes, in my view, that Denis wished that Lynette be provided with approximately $40,000–$50,000 per annum, for the remainder of her lifetime. Mr Robertson’s evidence was that he advised Denis that if Lynette had a life interest in 25 per cent of his shares (equivalent to 10 per cent of CJL’s total shares), she would receive an annual income of approximately $50,000, and that Denis was happy with that plan.
[153] The focus of the parties at the hearing was on an “all or nothing” outcome as to whether Cindy’s claims was made out or not. The parties did not address the possibility of the outcome I have determined is appropriate. In these circumstances, I consider that fairness to the parties requires that they have the opportunity to make submissions about how the relief I have ordered should best be implemented. In anticipation of those submissions, I have considered some possible approaches.
[154] One approach would be to vest all the shares in Cindy, subject to a life interest in 25 per cent of Denis’ 40 per cent shareholding in CJL in favour of Lynette. However, this may give rise to further conflict between the parties as to the governance of the companies. I am mindful that this dispute has soured relations between Lynette on the one hand, and Cindy and the extended Chambers family, on the other, and of the concerns expressed by Lynette in her evidence about being a minority shareholder in the companies.
[155] Another approach would be to vest Denis’ shares in Cindy, subject to a personal obligation on Cindy to provide income for Lynette with funds derived from Denis’ 40 per cent shareholding, for the remainder of Lynette’s lifetime, calculated as 10 per cent of the annual net profits earned by CJL.
[156] A variation on this would be to vest all Denis’ shares in Cindy, subject to an obligation on Cindy to provide a specified yearly payment of say $50,000 to Lynette, for the remainder of her lifetime. But the award of such a specific sum would have little regard to the ongoing operation, viability, and profitability of the companies. Were the companies to experience financial difficulty, an obligation to provide a specific monetary payment yearly could have an unfairly detrimental effect upon their solvency and the other shareholders.
[157] A final option would be for the estate to retain 25 per cent of Denis’ shares in order that Guardian Trust could administer the provision of an income stream to Lynette to the same level noted above.
[158] The parties may be able to agree how to give effect to my decision as to liability on Cindy’s claims and the relief awarded in principle. If that is the case, I ask counsel to advise the Court by memorandum.
[159] In the event that agreement is not possible, I propose the following timetable for the filing of submissions on the implementation of the relief I have awarded in principle:
(a)Cindy is to file and serve submissions by 5:00pm on Thursday 31 August 2023;
(b)Lynette and the Guardian Trust are to file submissions by 5:00pm on Thursday 21 September 2023; and
(c)any reply submissions from Cindy must be filed and served by 5:00pm on Thursday 28 September 2023.
[160] If the parties agree, I will make a decision on the papers. If the parties consider a hearing is required, counsel may liaise with the registry to schedule a hearing before me as soon as possible after 28 September 2023. The hearing will be of no more than two hours and may be held via AVL.
Result
[161] Cindy’s claim under the TPA is successful. Cindy is entitled to Denis’ shares in the companies. This entitlement is subject to Cindy providing an income to Lynette during Lynette’s lifetime. That income for Lynette is to be calculated by reference to a 10 per cent share of the annual net profits earned by CJL. The implementation of relief is to be determined following the receipt of further submissions from the parties.
Costs
[162] If the parties cannot agree on costs, I reserve leave for memoranda to be filed in the usual way once the implementation of relief is determined whether by agreement between the parties or by order of the Court.
McQueen J
Solicitors:
Richmond Law, Nelson for PlaintiffPerpetual Guardian, Wellington for Defendant
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