Glass v Glass
[2022] NZHC 3233
•5 December 2022
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2021-409-000438
[2022] NZHC 3233
BETWEEN WILLIAM DENVER GLASS AND LYNDEN THOMAS GLASS
ApplicantsAND
WILLIAM DENVER GLASS
Respondent
AND
LISA JANE KNIGHT
Interested Party
Hearing: 25 October 2022 Appearances:
A G M Whalan for Applicants
R W Raymond KC and J M McGuigan for Respondent S A Woods and A M Watkins for Interested Party
Judgment:
5 December 2022
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 5 December 2022 at 3 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
GLASS v GLASS [2022] NZHC 3233 [5 December 2022]
Introduction
[1] Sally Elizabeth Glass, known to all as Libby (Libby), had a long and successful second marriage to Denver Glass (Denver). During their marriage they built up a sizeable asset base through Denver’s pork meat businesses, as well as through acquiring, renovating, and selling valuable Christchurch character properties.
[2] Sadly, Libby died in February 2020 after suffering from dementia. Her will left her modest estate to Denver and to charities, and made no provision for her children.
[3] Her daughter, Lisa Knight (Lisa), one of Libby’s three children from her first marriage, now seeks leave (albeit in the name of the executors of Libby’s estate) to bring a claim under s 25(1)(a) of the Property (Relationships) Act 1976 (the PRA), for division of relationship property as between Libby’s estate and Denver.
[4] That will not be straightforward as Libby and Denver placed almost all their assets in trust. Lisa says, however, there are grounds for orders to be made under ss 44 and 44C of the PRA in respect of property which was disposed to trusts. If such orders are made, she would then seek provision from Libby’s estate under s 4 of the Family Protection Act 1955 (FPA), and under s 3 of the Law Reform (Testamentary Promises) Act 1949 (TPA).1
The application under s 88 PRA
[5] Leave is sought to bring the PRA proceeding under s 88(2) of the PRA. Leave can only be granted where it is established that refusing leave would cause “serious injustice”. As Mr Raymond KC, counsel for Denver, points out, that is a high threshold. It requires Lisa to establish that:
(a)she has a reasonable prospect of a successful PRA claim which would enlarge Libby’s estate; and
1 Although at hearing the only claim said to be pursued was a claim under the FPA.
(b)she has a credible claim under the FPA or TPA for provision from Libby’s estate.
[6] That said, the Courts have also made it clear the threshold should not be set too high. As the Court of Appeal said in Public Trust v Whyman, serious injustice does not mean “intolerable injustice”.2 The Court in that case also noted that:3
…it is important to recognise that the “serious injustice” contemplated by s 88(2) will always (or perhaps almost always) be to a person other than the surviving spouse or partner, as a surviving spouse or partner can issue proceedings without leave. … Accordingly, it seems sensible to apply the serious injustice test in such a way as to facilitate the making of claims in such circumstances.
[7] Subsequent cases have emphasised the necessity to identify a “credible”4 or “reasonably arguable” claim against the estate. For example, in Kelly v Craigie, the Family Court stated:5
… the preponderance of authority has now established that where the applicant has a reasonably arguable family protection claim then it is likely to be a serious injustice to prevent such a claim being made by refusing to give leave.
Leave applications are likely to be declined where the underlying claims or applications under the [Family] Protection Act are not meritorious.
A consideration of the prima facie merits of the Family Protection Act claims is therefore required.
[8] The threshold was expressed in similar terms in Public Trust v Relph, where Heath J granted leave for the following reasons:6
(a)If relationship property proceedings were brought, Mr Relph’s estate can be “augmented by a successful claim”, meaning that the children’s right to claim under the 1955 Act is rendered economic …
(b)It is not necessary for the Court to be satisfied that a claim would succeed. Rather, the issue is whether a “serious injustice” would be caused if the claimants were shut out from making a substantive claim under the 1955 Act. There are meritorious claims by children of modest means.
2 Public Trust v Whyman [2005] 2 NZLR 696 (CA).
3 At [48].
4 Tod v Tod [2015] NZHC 528, [2015] 3 NZLR 399 at [50].
5 Kelly v Craigie [2020] NZFC 3126 at [52]–[54], [2020] 32 FRNZ 624.
6 Public Trust v Relph [2009] 2 NZLR 819 (HC) at [40].
(c)The inability of the estate to pay even modest legacies of $60,000 operates in favour of granting leave.
[9] At issue is whether I am satisfied that refusing leave to pursue these claims would cause Lisa serious injustice.
The family background
[10] Libby and Denver married in 1987. They had no children together. However, Libby had three children from her first marriage; Nicole, Lisa and Stephen, while Denver had four children from his first marriage; Steven, Logan, Sarah and Lynden.
[11] When Libby and Denver began their relationship, Denver owned a rural property in Buchanans Road, Yaldhurst, being the property Denver retained when he separated from his first wife. They lived there initially, with their respective youngest sons, until they sold it in 1995. Over the next two decades Libby and Denver acquired and lived in several notable residential properties, including Daresbury, Greystones, Banks Avenue and a homestead at Racecourse Hill, Darfield. Libby and Denver lived in the properties while they were doing them up, utilising Libby’s passion for interior design. They also owned holiday homes in Akaroa. Each time they purchased a new house a new trust was set up to own the property.
[12] Libby established a fashion boutique in Merivale known as Posh of Holmwood, while Denver continued to develop his pork business, known as Freshpork, along with associated farms and meat processing businesses. In 1999, he formed a company called Levin Coldstore 1999 Ltd (LCL), which owned a coldstore facility based in Levin for storing his meat products. Those shares were placed in Libby’s name and she received the income from those shares.
[13] Lisa says that Libby and Denver accumulated significant wealth, well in excess of $20,000,000 during their marriage. However, as Lisa acknowledges, much of this property was held or transferred into trusts. While that figure is not expressly confirmed, Denver acknowledges that Libby and he planned to see each child’s family unit receive assistance during their lifetime of $1,000,000, and he settled nearly
$17,000,000 in assets into the Tom & Dinah Glass Trust (TDG Trust) in 2016, while
Libby gifted the LCL shares to the TDG Trust at a value of $2,000,000.7 This suggests the figure of $20,000,000 is conservative.
The estate planning
[14] Denver explains that the Canterbury earthquakes, and the consequent impact they had on his and Libby’s financial circumstances, caused them to seek advice on, and implement, an estate plan. At the time, they owned two large historic properties, Daresbury in Fendalton, and 104 Banks Avenue in Dallington. Banks Avenue was red zoned following the earthquakes resulting in compulsory acquisition by the Crown, and Daresbury was irreparably damaged. The couple received significant insurance pay outs for these properties, and they decided to rationalise their affairs.
[15] Denver says that their estate plan assumed Libby would outlive him because she was five years younger. They also chose to continue the use of family trusts, saying this was “to ensure that Libby was insulated from family arguments about wealth, and to ensure our joint wishes would be achieved and respected”. Denver explains that he and Libby decided they would give $1,000,000 to each of their children’s family unit, that is, to their respective children and their grandchildren, during their lifetimes, instead of an inheritance. They intended the money would be used to acquire family homes, or to pay off borrowing on such homes, and that the property acquired would then form an inheritance for each of their children’s family unit. They were also concerned to ensure that the ex-partners of their children did not benefit from the gift if at all possible, which is why they preferred to gift this amount as capital to a trust.
[16] The balance left after assisting their children was to enable them to live in comfort and security and then, on their deaths, to benefit charities, including a charity they had a particular connection to, being the Nurse Maude Foundation (Nurse Maude). Libby had worked as a district nurse for the Nurse Maude organisation, and she maintained strong connections to that charity.
7 The shares were sold to the TDG Trust for $2,000,000, but the sale price was subsequently gifted to the Trust by Libby.
[17] Libby and Denver subsequently executed mutual wills, reflecting their estate plan, with the last such will being executed on 27 July 2018. Libby’s will left her chattels to Denver, to distribute such of them as he saw fit to her children in accordance with wishes she made known to Denver during her lifetime, but otherwise to be donated to Nurse Maude. In respect of the remainder of her property, that was to be given to Denver or, if he predeceased her, to the trustees of the TDG Trust as additional capital of that trust.
[18]In her will, Libby expressly noted that, other than personal chattels, she has:
… intentionally not made any financial provision for my children and grandchildren or Denver’s children and grandchildren due to the fact that family trusts that I have settled during my lifetime, or gifts to family trusts made in this my Will, have more than adequately provided for my family or I have personally provided for family members during my lifetime and therefore no further provision is required in this my will.
[19] Denver says he and Libby advised their respective children of their estate plan. That is confirmed by Lisa and Nicole.
The assistance given to Libby’s children
[20] Nicole supports her sister’s application for leave, and she confirms the proposal that each child was to receive at least $1,000,000 as an advance inheritance. Nicole shifted to Sydney, Australia in 2012. She had already received a gift of $100,000 in around 2005 from Libby and Denver. However, with the promise of $1,000,000 under the estate plan, she purchased a property in Balmain, Sydney. However, Denver then registered a mortgage over the property. When Nicole raised concerns about this, Libby told her it was to protect the asset from claims by future partners. However, Nicole’s view was that it was Denver’s way of keeping control over the asset.
[21] Unfortunately, Nicole and Denver subsequently fell out and, in 2018, Denver commenced proceedings for possession of the Balmain property and Nicole counterclaimed alleging the mortgage was a sham. That dispute was subsequently resolved at mediation on terms which remain confidential, and Nicole retained the Balmain property.
[22] The falling out between Denver and Nicole appears to have been triggered by events in late 2016 when Libby visited Nicole in Sydney and then suffered some form of breakdown.
[23] The parties’ accounts of what happened differ markedly. Denver suggests Libby was given medication by a doctor which she did not react well to and he flew over to retrieve her after becoming worried about her.
[24] Nicole’s version is that Libby did not want to return home to Denver, and was frightened of him as he was very controlling. She tried to help Libby by getting some assistance from a local lawyer. However, in the end, her mother chose to go back to Denver and her relationship with her mother never healed after that. Indeed, she is not even named as a daughter in the death notice which was published when Libby died.
[25] In any event, upon her return from Sydney, Libby’s mental health deteriorated. She started taking anti-anxiety medication and began seeing a psychiatrist. Lisa said Libby began to rely on her more and more, and was “frequently distraught and in tears”. She was diagnosed with dementia in June 2018, and her behaviour became increasingly erratic. Lisa, however, says she continued to visit Libby and provide her with as much comfort and support as she could in her final months.
[26] Stephen, Libby’s other child, does not support the application. He is described as having Asperger’s Syndrome. He lives on a sickness benefit in a property in Riccarton which was funded by Libby and Denver, but which is held on trust. He is a beneficiary of the TDG Trust and it provides him with an annuity. He says he is grateful for this and considers this was “generous” of Libby and Denver. He is critical of both his sisters and says he is “appalled” at Lisa’s claim.
[27] When Denver and Libby made the offer of assistance to Lisa, she owned a property in Bristol Street that had been acquired in part from capital gains on earlier property purchases, as well as from what she describes as a $100,000 gift from Libby and Denver in 2001 and a further $60,000 provided by Denver, the status of which was unclear. Lisa wanted to purchase a new property, and she says Libby and Denver
offered to purchase a property of her choice to the value of $1,000,000 which would be put into trust.
[28] In May 2012, the trustees of one of Libby and Denver’s family trusts, the Waterford Trust, purchased a property at 48 Kotare Street for $800,000. It was a large, five bedroom home within Christchurch Boys’ High and Girls’ High zones. Libby and Denver suggested it would be perfect for Lisa and her children and, while it was not the property she would have chosen for herself because it would be expensive to maintain, Lisa accepted the proposal that it be her family home. She agreed that it would be put into a trust, with Libby and Denver as two of the three trustees, although she understood the house would be hers when Libby and Denver died. When she sold the Bristol Street property in October 2012, the sum of $160,000 was repaid to the W D Glass Family Trust, despite Lisa’s understanding that it had been gifted to her, and she did not retain this amount as her own property.
[29] The Kotare Street property was subsequently transferred from the trustees of the Waterford Trust to the Libden Trust, a trust which was established in February 2013 to be the vehicle through which Libby and Denver provided assistance to Libby’s children. The Libden Trust also acquired Stephen’s property8 and arranged a loan of just over $1,000,000 to Nicole for her property purchase in Sydney.9 Lisa was permitted to occupy the Kotare Street property as long as she met the costs of rates, insurance, repairs and maintenance. Lisa said she complied with these obligations, although she struggled to afford the maintenance the property required. Thus, when the bathroom needed renovation she contributed $5,000 towards the cost and Denver and Libby the other $5,000.
[30] In 2017, Lisa and her then fiancé, Ryan, wanted to purchase a home together. They discussed with Libby and Denver whether Kotare Street could be sold to release Lisa’s capital, and they understood that was agreed to. However, when Lisa and Ryan agreed to purchase a property at Queens Avenue, Denver insisted that he be registered as an owner on the new property, failing which, he would not agree to the sale of
8 Though from August 2019, Stephen ceased to be a beneficiary and has been provided for under separate arrangements.
9 Nicole and her two sons are also no longer beneficiaries of the Trust, presumably as part of settlement arrangements.
Kotare Street. With Lisa unable to contribute to the purchase price the couple were forced to resell the Queens Avenue property at a loss which caused considerable friction in Lisa’s relationship with Ryan.
[31] In order to extricate herself from Denver’s financial control, Lisa negotiated a change to the ongoing ownership structure whereby she received a total payment of
$315,000, but would no longer be a beneficiary of the Libden Trust. She also had to agree to bring no claims against Libby’s estate. A deed was drawn up to record this arrangement in November 2017 (the 2017 Deed). In it, Lisa agreed as follows:
3.1 Lisa acknowledges and agrees that once she receives the $315,000 capital distribution … it will be in full and final settlement of her benefit from the Libden Trust and she will no longer be a beneficiary of the Libden Trust or any new trust to which the proceeds of sale of 48 Kotare Street are settled.
3.2 In consideration of the Law Reform (Testamentary Promises Act) 1949 Lisa covenants that she will not bring any claim for further benefit or inheritance against Denver & Libby (or the personal representatives of their respective estates), the Libden Trust or any other family trust settled by Denver or Libby either now or in future.
[32] Lisa now says that at the time, she “felt completely powerless to negotiate the terms of the agreement. I had no funds, a minimal income, five children to support, a dilapidated house to live in and a history of broken promises.
[33] However, after the 2017 Deed was signed, Lisa says negotiations continued with Denver to honour what she said was a promise that had been made during Libby’s lifetime that the Kotare Street property would be hers. She sets out a number of communications which took place in the first half of 2020, which suggested that Denver was willing to agree to a new ownership structure in order to realise the intention that the home would be Lisa’s and her family’s. That did not come to pass.
[34] While Lisa paid the rates, insurance and other expenses of the property for the first five years of occupation, she says she has not done so since May 2017 as a result of her dispute with Denver and the inability she has to exercise any form of control over the Kotare Street property.
Lisa’s circumstances
[35] Lisa is currently in her mid-fifties and has five children, who have now all left school, but some still live at home while they complete tertiary studies. Lisa currently works as a pharmacy assistant earning a wage of approximately $42,000 per annum. As at 20 July 2021, her only assets were:
(a)a second hand vehicle with an estimated value of $10,000;
(b)AMP Kiwisaver with approximately $4,000;
(c)BNZ savings account holding $15,000;
(d)a BNZ bank account which holds $250,000, being the balance of the
$315,000 that Denver paid her in 2017. The difference reflects what she had paid in legal fees to that point.
[36]At the same point in time, she had $18,000 in debts for unpaid legal fees and
$5,000 being a personal loan to the BNZ for dental work.
Is there a reasonable prospect of a successful PRA claim?
[37] When Libby died, her estate comprised cash assets of approximately $20,000 and personal chattels which included an extensive jewellery collection plus art and other heirlooms from her family, the Elsom family. Libby’s grandmother, Violet Elsom, was a recognised New Zealand portrait artist, her father, Stephen, was a master violinist, and her uncle, Johnathan Elsom, was a well-known actor, painter and sculptor. The current executors and trustee of the estate are Denver and his son, Lynden.10 They value the estate’s assets at $274,895.44 and the estate’s debts at
$34,018.95, resulting in a net value of approximately $240,000.
[38] Given the significant wealth which Libby and Denver accumulated during their lifetime, the estate is remarkedly modest in size. In Lisa’s view, this is because the couple’s assets were systematically transferred into trusts and other entities over which
10 The third executor and trustee, a solicitor, has stepped down from that role.
Denver had control. She is particularly concerned that some of the transfers occurred during Libby’s later years when she battled depression and eventually was diagnosed with dementia. Lisa doubts that Libby fully comprehended these transactions.
[39] Lisa considers there is good reason to believe there is existing relationship property that has not been brought into account by the executors of Libby’s estate. However, more importantly, she claims assets were transferred to trusts, either with the intention to remove them from the relationship property pool, or which, at least, had the effect of diminishing Libby’s relationship property entitlement. Lisa points out that when Libby and Denver first got together, the fresh pork business was in its early stages and Libby invested the proceeds of sale of her own property into the relationship. The sale generated around $90,000. She used $10,000 of this to purchase a vintage car to surprise Denver. The balance, on Nicole’s evidence, was given to Denver, although Denver says the proceeds were used to set up Libby’s business, Posh of Holmwood. If Nicole is correct, this suggests Libby would have a direct interest in Denver’s meat products business prior to it being transferred into trust.
[40] Furthermore, the dispositions meant Libby owned no share of any family home, despite the fact that both Libby and Denver each owned homes when they entered the relationship. All the equity they built up from the real estate they owned was transferred to, and then held in, various trusts.
[41] Lisa also points out that from 1999 to 2016, Libby was the sole shareholder of LCL. This gave her an independent income stream. While Denver says that Libby sold these shares to the TDG Trust in 2016, and then forgave the debt, in order to further their charitable aspirations, Lisa and Nicole have concerns about whether Libby comprehended the effect of what she was signing. Nicole also notes that when Libby visited her in late 2016 and expressed a desire to leave Denver, she said she would be alright because she owned the Levin Coldstore shares. Nicole says that when she checked the position on the Companies Register, Libby was shocked and upset to discover that the shares had been transferred to a trust earlier that year.
[42] Mr Raymond, for Denver, says, however, any application under the PRA will not be straightforward. It would require Lisa to establish that dispositions have been
made to trusts which defeat a relationship property entitlement. Mr Raymond argues that Denver’s pork business was well established before the couple met, and his shares in the business therefore remained his separate property. He also says there was no evidence that Libby ever worked in or otherwise assisted with the pork business. While Libby and Denver did not have a contracting out agreement, throughout their relationship they always acknowledged this was Denver’s separate property.
[43] Furthermore, the decision to place assets such as their family homes in trust was a mutual decision which, particularly after the Christchurch earthquakes, was deliberately pursued by them as part of their estate planning. He questions whether a “reverse” relationship property proceeding could gain traction in circumstances where both parties intended to make the dispositions and did so. Instead, he says Lisa is using the device of a PRA claim to achieve what she could not achieve under the FPA, which is to gain access to trust assets.
[44] Mr Raymond also challenges Lisa’s attempts to cast doubt on the legitimacy of Libby’s transfer of her shares in LCL to the TDG Trust. In his submission, that transfer of shares:
(a)was consistent with the terms of the couple’s estate plan which by then had been on foot for five years;
(b)was subject to her receiving all income from the shares for life, so the transfer made no difference to her personal position;
(c)occurred in mid 2016, which was before the mental health issues which emerged following her visit to Nicole in December 2016 and before she was diagnosed with dementia in June 2018; and
(d)in any event, made no difference to Lisa or Nicole as Libby’s 2011 will had already provided for Libby’s shares to be distributed to her trustees to pay the income to Denver during his lifetime, and on his death, to hold on trust to provide an income for Stephen during his lifetime.
Discussion
[45] While Lisa says there is a question mark over whether the executors and trustees have identified all Libby’s assets to reach the estate value of $240,000, her primary argument is that Libby’s estate can establish a claim for the transfer of property to a trust to be set aside, or for Denver to pay compensation to Libby’s estate under either ss 44 or 44C PRA. As counsel for Lisa pointed out, s 44C is the simplest route. Under that section, if the Court is satisfied that:
(a)since the marriage began, either or both spouses have disposed of relationship property to a trust; and
(b)the disposition has the effect of defeating the claim or rights of one of the spouses; and
(c)the disposition is not one to which s 44 applies;
the Court can make various orders for the purpose of compensating the spouse whose claim or rights under the Act have been defeated by the disposition.
[46]Those orders include:
(a)requiring one spouse to pay to the other spouse a sum of money, whether out of relationship property or separate property;
(b)requiring one spouse to transfer to the other spouse any property, whether the property is relationship property or separate property; or
(c)requiring the trustees of the trust to pay to one spouse the whole or part of the income of the trust, either for a specified period or until a specified amount has been paid.
[47] A noteworthy feature of the couple’s arrangements is that they never entered a relationship property agreement under s 21 PRA relating to the status, ownership and division of their property. For this reason, bald assertions that, for example, the fresh
pork business was Denver’s separate property throughout the marriage, are questionable. There is the possibility that Libby contributed the proceeds of the sale of her home to the business (although Denver denies this). More importantly, there is a tenable argument that Libby indirectly contributed to the significant increase in value in the business during their relationship through her support of her husband and looking after the household and their respective youngest sons. In either case, there would be a contribution to the increase in value of the pork business which could be recognised under s 9A PRA. Alternatively, the claim could be advanced under s 17 PRA for “sustenance” of separate property. It is also clear that at some point the couple transferred their family home into trust, which had the effect of defeating any claim Libby’s estate had to an interest in the family home.
[48] On its face, therefore, there is a reasonable argument that there have been dispositions of relationship property to various trusts which have, in practical terms, defeated the claims of Libby’s estate to relationship property. I therefore find there are reasonable prospects of a successful PRA claim which would enlarge Libby’s estate, although it is impossible to quantify the extent of such enlargement.
[49] The next, and more important issue, is whether the 2017 Deed Lisa entered into would prevent her from pursuing this and other claims against the estate.
The 2017 Deed
[50] Mr Raymond, for Denver, says this case can be distinguished from cases relied upon by Lisa, such as Whyman and Relph, because whether or not the estate can be enlarged through a PRA claim, the 2017 Deed bars Lisa from seeking further provision from Libby’s estate, whether through a TPA claim or an FPA claim.
[51] Mr Raymond rejects the submission for Lisa to the effect it is not possible to contract out of the FPA as a matter of public policy. In his submission, the authorities to that effect rely on outdated reasoning which:11
11 Gardiner v Boag [1923] NZLR 739 (SC); Parish v Parish [1924] NZLR 307 (SC); Re Julso [1975] 2 NZLR 536 (SC); and Public Trustee v Dillon [1940] NZLR 874.
(a)excludes the possibility of “positive” statutory terms being “overridden by consent”; and
(b)rejects any prospect of a Judge’s jurisdiction to determine an FPA claim from being “nullified” by the parties’ agreement.
[52] Mr Raymond argues that the idea that claimants with potential FPA rights cannot compromise their claim by settlement is out of step with modern practice. Parties routinely arrange their affairs so as to give effect to their FPA obligations during their lifetimes and then enter into contracts which provide their agreement constitutes a settlement of any rights, including under the FPA. By way of example, he points to the decision in Chambers v Chambers, which sets out the terms of a relationship property agreement of a sitting Supreme Court Justice and a barrister specialising in relationship property, where their agreement was acknowledged to be in settlement of their rights under the Property (Relationships) Act, the Family Proceedings Act 1980, the Family Protection Act, the Law Reform (Testamentary Promises) Act 1949 or under any other enactment or rule of common law or of equity or otherwise.12
[53] Similarly, the Law Commission has, in its recent review of succession law, criticised authorities which suggest parties cannot contract out of the FPA and recommended that parties should be able to settle their claims in testamentary disputes by agreement.13
[54] In the present case, Mr Raymond argues that the 2017 Deed is binding on Lisa and prevents not just a claim under the TPA, but a claim for any further form of provision from her mother’s estate.
[55] Mr Raymond points out that the 2017 Deed was negotiated over several months, with Lisa receiving independent legal advice, and was negotiated to achieve a balance between Lisa’s desire to be independent from the Libden Trust, while still reflecting her children’s ongoing interest in the Kotare Street property. In these
12 Chambers v Chambers [2016] NZHC 583 at [22(f)].
13 Law Commission Review of succession law: rights to a person’s property on death (NZLC R145, 2021).
circumstances, Mr Raymond submits there is no basis on which the 2017 Deed should be set aside.
[56] Ms Woods, for Lisa, submits that the 2017 Deed does not operate to bar either the PRA claim nor Lisa’s FPA claim. At best, it barred a TPA claim but did not, nor could it, prevent Lisa from bringing an FPA claim. She points out that there is longstanding and clear authority to the effect it is not possible to contract out of the FPA. Ms Woods acknowledges, though, that such an agreement may be relevant to assessing the extent of the moral duty if an FPA claim is brought.14
Discussion
[57] I accept, given the circumstances in which the deed was signed, which was that it was negotiated over several months with both parties being independently advised, that it would be difficult to argue the agreement is not valid and binding insofar as it dealt with Lisa’s entitlements under the Libden Trust and her entitlement to bring a TPA claim. However, I consider it is strongly arguable that it does not preclude an FPA claim.
[58] First, I consider there is clear room for argument about the scope of the 2017 Deed. The recitals to the deed record:
(a)the reason for the settlement of the Libden Trust, which was to benefit Libby’s children and grandchildren;
(b)that “Lisa now wishes to seek some independence from the Libden Trust and to be able to take her share … early and invest it independently for the purpose of acquiring a new family home with her new partner”;
(c)she was to receive $315,000, being two sevenths of the value of the trust asset (which at that time was valued at $1,100,000); and
14 Matthews v Phochai [2020] NZHC 3455 at [38].
(d)the parties wished to record their intentions as “their testamentary promises in this Deed under the Law Reform (Testamentary Promises) Act 1949”.
[59] In the body of the deed, cl 3.2 recorded that “[i]n consideration of the Law Reform (Testamentary Promises) Act 1949 Lisa’s covenants that she will not bring any claim for further benefit or inheritance against Denver & Libby ... the Libden Trust or any family trust settled by Denver or Libby either now or in the future”.
[60] In the circumstances, I consider it at least arguable that the deed was confined to claims under the TPA and did not preclude a claim under the FPA. Even then, though, it is unclear what testamentary promises were intended to be captured by the Deed. A testamentary promise is described in s 3 of the TPA as an “express or implied promise by the deceased to reward [the claimant for services or work] by making some testamentary provision for the claimant …”. The TPA does not cover a promise to refrain from making a claim, and it is difficult to understand the reference to that Act in the 2017 Deed unless it is to assert that Deed fulfilled the promise to give Lisa’s family unit an asset worth $1,000,000.
[61] In any event, notwithstanding the potential developments in the law of succession signalled by the Law Commission, I am satisfied that Ms Woods is correct in submitting that there is longstanding authority to say that it is not possible to contract out of claims arising under the FPA. That was reiterated, most recently, in the decision of Matthews v Phochai.15 There, on appeal, the High Court held it was correct to ignore a provision in a relationship property agreement which purported to settle all claims under any circumstances, including under the FPA.
[62] Accordingly, I am not satisfied that the 2017 Deed precludes the application for leave under s 88(2) nor a claim under the FPA.
15 Matthews v Phochai, above n 14, at [38].
Is the Family Protection Act claim reasonably arguable?
[63] Mr Raymond submits that, in any event, the FPA claim is not reasonably arguable. This is because Libby fulfilled her moral duty to Lisa and her children during Libby’s lifetime. Mr Raymond points to evidence from a chartered accountant, Mr Andrew Grace, who quantifies the benefits that Lisa and her family received at more than $2,000,000. Specifically, he says she and her family have received the following benefits:
(a)Lisa’s family trust was lent $195,00016 during the period 2001 to 2012. While $160,000 of this was repaid in 2012, he considers the benefit of the interest free loan plus the forgiven debt which Lisa received totalled
$251,000;
(b)The benefit of residing in Kotare Street rent free from 2012 is valued at
$290,000 after accounting for rates and insurance paid by Lisa.
(c)She has received a distribution of $315,000.
(d)The current market value of Kotare Street is estimated at approximately
$1,200,000 after repayment of $315,000 which Denver lent to the trust.
If Denver forgives the debt owed to the trust, then the total benefits Lisa and her family received are said to be $2,376,000.
[64] Mr Raymond argues that, in all the circumstances, as an adult child, she would be unlikely to receive further provision under the FPA. By way of example, in Chambers, the Court held that the claimant’s FPA entitlement would be approximately
$650,000, significantly less than his entitlement under the will which was capped at
$2,500,000.17 Similarly, in Carson v Lane, where the deceased left his four children nothing in the will, the Court restricted their awards to $1,250,000 from an estate of
$17,000,000 and where the remainder was left to charity.18
16 This differs from the figure Lisa says she received of $160,000.
17 Chambers v Chambers, above n 12, at [116].
18 Carson v Lane [2019] NZHC 3259, (2019) 32 FRNZ 359.
[65] In addition, Mr Raymond points to evidence that Lisa’s relationship with Libby was strained from at least 2018, saying this is relevant to whether an FPA claim would succeed. Lisa’s brother Stephen says that neither Lisa nor Nicole had a warm or caring relationship with Libby, and Lisa cut Libby off from November 2018 until Lisa agreed to see Libby on a weekly basis in the few months leading up to her death.
[66] However, Ms Woods, says the provision which has been made for Lisa is significantly less than indicated by Denver and Mr Grace. The money Lisa received prior to 2012, which Lisa says was $160,000, had to be repaid in its entirety before she moved into Kotare Street. Thus, despite paying mortgages on the series of properties and contributing her own funds to the upkeep and maintenance of the properties, Lisa moved into Kotare Street with no assets in her name at all. While Lisa accepts she has had the benefit of living in Kotare Street rent free since 2012, this must be weighed against the fact that, as a result of this arrangement, she does not now own any property and has missed out on the ability to benefit from capital gains as property prices have increased. Her ability to continue to occupy Kotare Street is also at the will of the trustees which creates no personal or financial security for her.
[67]In Ms Woods’ submission, the practical reality is that Lisa has only received
$315,000 together with whatever value is placed on the ability to live rent free at Kotare Street, albeit it is becoming increasingly dilapidated as Lisa does not have the income to support the property.
Discussion
[68]I accept that, in practical terms, Lisa’s position is that she has only received
$315,000 from Libby and Denver. It is not realistic to include the benefit of assets held on trust for Lisa’s children as she has no ability to use those assets in the interim and nor do they contribute in any way to her future financial security. The reality is that Lisa is now in her mid-fifties with no prospect of financial security or of owning her own home. She has no significant asset of her own aside from what is left of the
$315,000. While it is impossible to say what chances of success her FPA claim will have, given it is unknown at this stage what assets or income could be brought back into Libby’s estate through a successful PRA claim, the reality is Lisa has received
nothing under the will and only modest provision in her lifetime, which stands in stark comparison to the value of the assets Libby and Denver acrued during their marriage. I therefore consider she has a credible FPA claim.
[69] While this is a less straightforward claim than the other examples brought to my attention, there is a stark gap between the wealth Libby and Denver accumulated in their lifetime and what Lisa has received as direct provision from her mother during her lifetime. In the circumstances, I consider there would be a serious injustice to Lisa if she were unable to pursue a claim under s 25(1)(a) of the PRA for division of relationship property as between Libby’s estate and Denver. A successful claim to recognise some of the assets disposed of to trust as relationship property owned by Libby, would mean a claim under s 4 of the FPA for further provision from Libby’s estate would be tenable.
Result
[70] Accordingly, I grant leave under s 88(2) of the Property (Relationships) Act 1976 for the executors to bring a claim under s 25(1)(a) of the PRA.
Costs
[71] I have not heard from the parties in respect of costs. The executors, responsibly, facilitated the application for leave and took no active role in it. However, Denver Glass, in his personal capacity, opposed it. My preliminary view is that he should pay costs, on a 2B basis, to Lisa Knight. If costs cannot be resolved between the parties, I reserve leave to seek a determination of costs by the Court. Any such application must be brought within 20 working days of the date of this judgment.
Solicitors:
Rhodes & Co., Christchurch Wynn Williams, Christchurch
Copy To:
R W Raymond KC, Barrister, Christchurch J M McGuigan, Barrister, Christchurch
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