Fry v Fry

[2014] NZHC 2256

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-001168 [2014] NZHC 2256

BETWEEN

JASON LAWRENCE FRY

Appellant

AND

CAROL MIZPAH FRY Respondent

Hearing:	26 August 2014
Appearances:	Nicola Penman-Chambers for the Appellant Brian Carter for the Respondent in a personal capacity Kevin Muir for the Respondent in a capacity as executor
Judgment:	17 September 2014

RESERVED JUDGMENT OF MOORE J

This judgment was delivered by  on 17 September 2014 at 2:00pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Date:

FRY v FRY [2014] NZHC 2256 [17 September 2014]

Introduction

[1]      The appellant, Jason Fry, is the son of Lawrence (“Laurie”) Fry from Laurie’s first marriage.  The respondent, Carol, is Laurie’s second wife.  Jason is now aged

41.   He has two sisters who have elected not to take part in these proceedings. Laurie’s first marriage ended in the mid-1980’s and was dissolved in 1985.   In December that year Laurie and Carol began living together.

[2]      The following year Carol purchased what would be the family home at 2-24

Gladstone Road, Parnell.  She did so in her own name using her own money.  There were no borrowings.  There was no contribution from Laurie.  The home was never registered as a joint family home.1

[3]      Laurie  and  Carol  established  a  company Unique  Fabrics  Limited,  which imports  high  end  furnishing  fabric.    The  start  up  capital  for  the  company  was provided by Carol when she sold her share portfolio.  Laurie and Carol took equal shares in the company and operated the company together, effectively as an incorporated partnership.  On 23 March 1989 Carol and Laurie married.

[4]      Jason started working for Unique Fabrics in his late teens in the early 1990’s. In 1995, whilst in his early 20s, he worked for the company in Melbourne before leaving to travel overseas.   He returned to New Zealand and recommenced employment with Unique Fabrics in May 2006.   He was appointed national sales manager in July 2006 and was in that role when his father died in April 2009 aged

64.   About three and a half years later Jason had a serious falling out with his stepmother, Carol, and he left Unique Fabrics.  At the time of his departure he was on a salary of $90,000.  Since that time he and his stepmother have been estranged.

[5]      Between March 1987 and November 2007 Laurie made a number of wills. On 12 November 2007 he made his last will.  As with previous wills he appointed Carol  as  his  executor  and  trustee.   Also,  consistent  with  previous  testamentary

iterations, he left the whole of his estate to her with the provision, amongst others,

1      The home augmented the size of the estate following concessions by Carol that 50% of the net value of the Gladstone Road properties should be included as per Fry v Fry HC Auckland CIV-

2011-404-1229, 26 May 2011.

that if Carol did not survive him the residue of the estate was to be divided into two equal parts; one part divided between Laurie’s children and the other half between beneficiaries nominated by Carol.  Carol made a mirror image will leaving the whole of her estate to Laurie but in the event of both of their deaths the estate was to be divided into two with Laurie’s half going to the three children and the other half to Carol’s nominated beneficiaries.

District Court decision

[6]      In April 2010 Jason commenced proceedings under the Family Protection Act (FPA) 1955 and the Law Reform (Testamentary Promises) Act 1949.   The latter claim has not been pursued on appeal.  The present appeal relates only to the FPA matters.

[7]      The hearing took place over three days in February 2004.  The Family Court Judge, after reciting the well established legal principles, found that there was a clear understanding between Laurie and Carol that in the event of Laurie’s death Carol would, in due course, provide for his three children.  He thus found there had not been  a  breach  of  moral  duty  by  Laurie  to  Jason.2      His  Honour  came  to  this conclusion for the following, additional, reasons:

(a)      The estate was small and thus Laurie would have known there was insufficient bounty to be able to provide for all his beneficiaries.  He was obliged to prioritise and decided that the needs of his wife should take precedence over his adult children who appeared to be self supporting and did not appear to have any special needs.

(b)At the time of his death he did  not know he was  going to  be a grandfather.

(c)       He provided for his three children in his last will.

2      Fry v Fry FC Auckland FAM-2010-004-000835, 15 April 2004.

(d)The mirror image wills made Laurie’s intentions clear.  He believed Carol would be financially secure so long as she had the business and that she would provide for his children.  The Judge accepted Carol’s evidence that she intended, in due course, to provide for Jason.

(e)      Jason was skilled and competent.  He and his wife live in their own home and he earns well above the average income.  His circumstances are consistent with others of his age.  He did not establish a need for maintenance and support.

(f)      While Jason was entitled to recognition, the last will, and its earlier iterations, acknowledged his position within the family.

(g)Carol is intelligent, capable and committed and has maintained her relationship with Jason’s two older sisters.   His Honour could understand why Laurie reposed the trust he did in Carol.

(h)If provision was to be made for Jason, consideration would have to be given to his two sisters with the result that the estate would be eroded to the point its value would be insufficient to properly discharge Laurie’s moral duty to Carol.   There was not enough money to go around.

(i)       This is not a case where Jason will be disinherited.

(j)The history of making consistent wills over many years demonstrated that Laurie made a conscious decision that Carol’s interests should have precedence over his children’s but on the understanding that in due course, when she no longer needed the money, they would be provided for.  This recognised the fact that the business had been built up by them together and but for Carol’s involvement the estate would not have had the value it did.  Furthermore Laurie would have been aware that the viability of the business could be jeopardised without Carol’s involvement.

Appeal

[8]      The appellant advanced four grounds of appeal as follows:

(a)      The Judge erred in law in finding that the deceased had met his moral duty by the trust he reposed in his wife in due course providing from her estate for the appellant.

(b)The learned Judge erred in fact in finding the deceased did provide for his three children in his last will.

(c)      The Judge erred in fact in finding the appellant earns well above the average income when he was  unemployed at the date of the trial (abandoned).

(d)The Judge erred in finding the appellant had not established a need for maintenance and support from the deceased.

[9]      Although three separate grounds of appeal are now advanced, in essence the complaint is that the Judge erred in finding Laurie had discharged his moral duty to Jason in trusting that Carol would provide for him in her will.

[10]     The application is brought under s 4(1) of the Family Protection Act 1955 which provides:

(1)       If any person (referred to in this Act as the “deceased”) dies, whether testate or intestate, and in terms of his or her will or as a result of his or her intestacy adequate provision is not available from his or her estate for the proper maintenance and support of the persons by whom or on whose behalf application may be made under this Act, the Court may, at its discretion on application so made, order that any provision the Court thinks fit be made out of the deceased's estate for all or any of those persons.

Is there a moral duty?

[11]     Family recognition alone can give rise to a duty to provide for an adult child.3

Whether there has been a breach of moral duty is normally assessed as at the time of

3      Williams v Aucutt [2000] 2 NZLR 479; [2000] NZCA 289 (CA).

the testator’s death.  There is no reason to depart from that approach in the present

case.4   Financial need may also give rise to a duty.

[12]     Ms Penman-Chambers, for Jason, submits that the moral duty in the present case arises both on the basis of need and paternal recognition.

[13]     However a needs-based or financial duty was not pressed in argument before me no doubt in recognition of the fact that Jason, both at the time of his father’s death and at present, is settled and well employed.  I am in broad agreement with the reasons given by the Judge that the appellant is not in “need”.   He owns his own home.5     He purchased this house in 2012.   He is now employed on a salary of

$85,000.  His liabilities appear to be limited to a mortgage and $20,000 of debt.  He

is able to provide for himself and his family.  His circumstances are not necessitous,6

and neither were they at the time of Laurie’s death.

[14]     However, despite the absence of need it is appropriate that some recognition is given to the relationship between the father and son.   As noted in Flathaug v Weaver, “The relationship of parent and child has primacy in our society”.7

[15]     It is clear that Laurie owed Jason a moral duty to provide for him. This is not disputed. The circumstances which give rise to the creation of a moral duty based on parental recognition include:

(a)       A close family relationship between Jason and his father.

(b)A close working bond between Jason and his father having worked together, on and off, for 10 years commencing, initially on a part-time basis, and ending in the role of national sales manager, a position he

held at the time of his father’s death.

4      Williams v Aucutt, above n 3, at 189; Re Allan (deceased) [1922] NZLR 218 at 221.

5      The family home was purchased by a family trust but nothing turns on that fact.

6      Re Bush (1983) 1 FRNZ 100 (HC); Williams v Aucutt above, n 3.

7      Flathaug v Weaver [2003] NZFLR 730, (2003) 22 FRNZ 1035 at [32].

[16]     Although the Judge was correct to describe the estate as small, it is not so small as to warrant no award being given in favour of the child.

Was the duty met?

[17]     Cooke P in Little v Angus sets out the principles relating to family protection cases:8

The inquiry is as to whether there has been a breach of moral duty judged by the standards of a wise and just testator or testatrix; and, if so, what is appropriate to remedy that breach. Only to that extent is the will to be disturbed.

[18]     In  determining  whether  a    parent  met  their  moral  duty  to  their  child, Richardson P in Williams v Aucutt sets out the appropriate test:9

… The test is whether adequate provision has been made for the proper maintenance and support of the claimant. Support is an additional and wider term than maintenance. In using the composite expression, and requiring

‘proper’ maintenance and support, the legislation recognises that a broader approach is required … Support is used in its wider dictionary sense of

‘sustaining, providing comfort’. A child's path through life is supported not

simply by financial provision to meet economic needs and contingencies but also by recognition of belonging to the family and of having been an important part of the overall life of the deceased. Just what provision will constitute proper support … is a matter of judgment in all the circumstances of the particular case. It may take the form of lifetime gifts or a bequest of family possessions precious to its members and often part of the family history. And where there is no economic need it may also be met by a legacy of a moderate amount. On the other hand where the estate comprises the accumulation of the family assets and is more than sufficient to meet other needs, provision so small as to leave a justifiable sense of exclusion from participation in the family estate might not amount to proper support for a family member.

[19]     This is the nub of the appeal.  Having found a moral duty arose, the Judge decided that Laurie discharged that duty through his trust in and reliance on Carol to maintain the commitment in her will to provide for Laurie’s children on her death. However, that commitment does not amount to an obligation, other than a moral one,

on Carol to make this provision.

8      Little v Angus [1981] 1 NZLR 126 at 127.

9      Williams v Aucutt, above n 3, at [52].

[20]     Although her will presently provides for Jason to receive on her death a one third interest of half her estate, Carol cannot be compelled to retain her will in its present form.  Nor can she be restrained at any time in the future from changing the provision to Jason in a way which would exclude him.

[21]     Indeed, following the filing of this application, Carol amended her will with the effect that in the event the Court was to make an award in Jason’s favour the provision relating to Jason receiving a one third interest of half of Carol’s residuary estate would be cancelled.

[22]     Although there is no extrinsic evidence on which to conclude that Carol is anything other than an “intelligent, capable and committed”10 person of integrity, the relationship between Jason and his stepmother has all but completely broken down since the incident in 2013 which lead him to leave his job at Unique Fabrics.  They are estranged.  Carol has not seen her new stepchild and, inevitably, the fact of these proceedings will only have served to further widen the gulf between them.

[23]     Furthermore,   Carol’s   act   of   changing  her  will   in  response  to   these proceedings is another factor which allows for little confidence Carol will provide for Jason after her death.

[24]     Additionally, she is now aged 61 and is actively involved in leading the management of the business.   It can reasonably be expected that she will have decades of life ahead of her.

[25]     In  my view the agreement with Carol is  palpably uncertain  and  entirely dependent on events and variables over which there can be little or no ability to control.  If Laurie had wished his spouse to have access to his estate over the course of her life but on her death provision would be made for his children, a life interest would have been the preferred testamentary structure.   Instead, no doubt in recognition of his love of and trust in his spouse he relied on her, as did she in

relation to him, to make provision for their nominated beneficiaries. However the

10     Fry v Fry , above n 2, at [65].

reality is that this agreement, through its inherent uncertainty, does not discharge the moral duty owed to Laurie’s children.

[26]     In my view there is a real possibility that Jason will receive nothing from his father’s estate.   The resultant uncertainty that possibility creates means the moral duty owed by Laurie to his son has not been met.

What is the appropriate quantum to remedy the breach?

[27]     In determining the appropriate amount to remedy any breach:11

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

[28]     In Public Trust v Relph Heath J determined that it was appropriate that a share of approximately 50% of the estate was divided between the three children.12

He did note:13

In determining quantum, I recognise the difficulty that a stranger to the family has in making provisions which inevitably go against intentions expressed in a Will. I agree wholeheartedly with Wild J's observations, in Warboys  v  Jones [2004]  NZFLR  360  (HC)  at  [33],  that  assessment  of adequate   provision   is   not   a   matter   of   “mathematical   or   scientific calculation”. There will always be a band of answers within which individual Judges make decisions on the facts of particular cases. It is difficult to say that one award is right and another is wrong. That is why appeals against amounts ordered are treated as appeals against the exercise of a discretion.

[29]     It is important to remind myself this is primarily a claim for recognition, as in

Williams v Aucutt:14

We are not concerned in this appeal with a claimant's need for proper maintenance.  It  is  conceded  that there is  none. The  claim is  for  proper

11     Williams v Aucutt, above n 3, at [70].

12     Public Trust v Relph [2009] 2 NZLR 819, [2008] NZHC 1944.

13 At [57].

14     Williams v Aucutt, above n 3, at 497.

support in the form of recognition both of membership of the family of the deceased and of contributions by way of assistance to and support of the deceased.

[30]     If the estate was to be distributed today Jason’s one-third interest would be in the order of $460,000.  In the course of argument Ms Penman-Chambers submitted an award of $400,000 would be appropriate.   In determining Jason is entitled to some provision I remind myself of the applicable principles and in particular the admonition against re-writing the testator’s will and the concomitant need not to disturb the testator’s intention beyond what is necessary to remedy the breach.

[31]    I also need to consider that whatever sum is awarded does not impose unreasonable hardship on Carol, nor on the business she is now running without Laurie.  Clearly Carol’s ongoing comfort and the business’s future viability was at the front of Laurie’s mind when he made his last will.   At the time of his death Laurie  was  drawing  a  salary of  $200,000  per  annum  and  Carol  $90,000.    The business was able to sustain annual drawings of that order to pay its leading officers.

[32]     I also do not ignore the position of Jason’s sisters who have elected not to take part in these proceedings.  One lives in Melbourne with her partner and their daughter.  The other has chronic health issues.  One is a solo parent living in rented accommodation.   Jason accepted she probably has greater needs than he.   Neither sister has had any involvement in the business.   It would seem the relationship between Carol and her step-daughters is starkly different to that with Jason.  Carol maintains close contact with both as well as their families and pays for various items including day-care costs, clothing and presents.   She said she loves both her step- daughters.

[33]     In the present circumstances I am of the view that a sum considerably less than one-third of the estate is appropriate for the following reasons:

(a)      Nearly half of the estate comprises the value of half the shares in Unique Fabrics.  A substantial part of the estate is Laurie’s notional interest  in  the family home at  2/24  Gladstone Road,  the property acquired by Carol in her name alone without contribution.   Laurie’s

primary intention was to provide for Carol and to ensure that after his death  she  would  be  able  to  continue  to  manage  and  operate  the business to ensure its continuing viability.  To order the payment of approximately $400,000 to Jason would significantly undermine Carol’s  security  in  the  home  as  well  as  the  business.     This consideration recognises that Unique Fabrics was jointly established by Laurie and Carol.  Consideration must also be given to the fact that the family home was purchased by Carol and funded by her exclusively. The same applies to the life insurance policy.

(b)In the absence of any pressing need on the part of Jason the duty can be met by the award of a modest legacy.  In DWA v EN the need to provide  security for  the  surviving  spouse  outweighed  the  need  to provide an immediate award of residue to the deceased’s children.15

(c)      Recognition needs to be given to the advantages of the certainty of an immediate cash payment made in advance of the time when Jason might  otherwise  expect  a payment.    Given  the circumstances  and Carol’s age this advance is likely to be several decades earlier than he might expect.

(d)Given the unpleasantness, tension and distrust which currently exists between Jason and his stepmother the advantages of a “clean break” are obvious.   The present award will allow the parties to go their separate ways without the on-going issue of testamentary dispositions hanging over the parties’ heads.

[34]     In all of the circumstances I consider that the sum of $175,000 recognises these various factors and properly discharges the moral duty of relationship which

Laurie owed to Jason.

15     DWA v EN FC Wellington FAM-2003-085-1600, 28 February 2005.

Result

[35]     The appeal is allowed.  The appellant is entitled to a lump sum payment of

$175,000. The appellant is also entitled to costs on the appeal on a category 2B basis with disbursements as fixed by the Registrar.

Moore J

Solicitors:

N Penman-Chambers, Auckland

B Carter, Auckland

K Muir, Auckland