Harvey v Harvey
[2021] NZHC 2405
•14 September 2021
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2017-419-295
[2021] NZHC 2405
UNDER the Law Reform (Testamentary Promises) Act 1949 IN THE MATTER
of the estate of MARTIN LEONARD HARVEY
BETWEEN
BRETT LEONARD HARVEY
Plaintiff
AND
PAUL MARTIN HARVEY and CLARK
ROLAND HARVEY as executors of the estate of MARTIN LEONARD HARVEY
Defendants…/cont
Hearing: 26-30 July 2021 and 4 August 2021 Appearances:
DRI Gay for Brett Harvey
SWM Piggin for Delwyn Sinclair P J Stevenson for Margaret Harvey
K A Badcock and LAL Badcock for Bryce Harvey
Judgment:
14 September 2021
JUDGMENT OF GORDON J
This judgment was delivered by me on 14 September 2021 at 4 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:Allen Needham & Co Ltd, Morrinsville Le Pine & Co, Taupo
Badcock Law, Rotorua
Carson Fox Bradley, Auckland B Knowles, Auckland
Counsel:DRI Gay, Auckland SWM Piggin, Auckland P J Stevenson, Auckland
HARVEY v HARVEY [2021] NZHC 2405 [14 September 2021]
A MacMillan, Albany
CIV-2019-419-21
UNDER the Family Protection Act 1955
IN THEMATTER OF the estate of MARTIN LEONARD HARVEY
BETWEEN BRYCE CHARLES HARVEY
Plaintiff
AND PAUL MARTIN HARVEY and CLARK
ROLAND HARVEY as executors of the estate of MARTIN LEONARD HARVEY
Defendants
CIV-2019-419-68
IN THEMATTER OF the estate of MARTIN LEONARD HARVEY
BETWEEN DELWYN MARGARET SINCLAIR
First Plaintiff
ANDDELWYN MARGARET SINCLAIR and MARGARET CHRISTINE HARVEY as
trustees of the Maraetai Trust Second Plaintiffs
AND PAUL MARTIN HARVEY and CLARK
ROLAND HARVEY as executors of the estate of MARTIN LEONARD HARVEY
Defendants
CIV-2019-419-82
IN THEMATTER OF the estate of MARTIN LEONARD HARVEY
BETWEEN PAUL MARTIN HARVEY
Plaintiff (DISCONTINUED)
AND PAUL MARTIN HARVEY and CLARK
ROLAND HARVEY as executors of the estate of MARTIN LEONARD HARVEY
Defendants
…/cont
CIV-2020-419-158
UNDERthe Property (Relationships) Act 1976 and the Family Protection Act 1955
IN THE MATTER of the estate of MARTIN LEONARD HARVEY
BETWEEN MARGARET CHRISTINE HARVEY
Applicant
AND PAUL MARTIN HARVEY and CLARK
ROWLAND HARVEY as executors of the estate of MARTIN LEONARD HARVEY
Respondents
CONTENTS
Introduction [1]
The claims [4]
Background [14]
The nine wills – a general overview [23]
Will 9 [28]
Proposed resolution [32]
Order of consideration of claims [35]
Brett’s claims [38]
Breach of contract (Brett) [39]
Did Mr Harvey agree to forgive the debt in his will? [50]
Is the term that the debt be forgiven contradictory of and incompatible with
the terms of the written agreement? [70]
Section 24 of the Property Law Act 2007 [77]
Conclusion on breach of contract claim and relief [82]
Estoppel (Brett) [89]
Representation causing belief or expectation [92]
Did Brett reasonably rely on his belief or expectation? [94]
Detriment [96]
Unconscionability [106]
Conclusion on estoppel claim [107]
Relief [108]
Testamentary Promises Act (Brett) [112]
Conclusion [121]
Delwyn’s claims [122]
Breach of Contract (Delwyn) [131]
Did Mr Harvey agree to forgive the debt in his will? [134]
Is the term that the debt be forgiven contradictory of and incompatible with
the terms of the written agreement? [149]
Section 24 of the Property Law Act 2007 [155]
Conclusion on breach of contract claim [157]Relief [158]
Estoppel (Delwyn) [161]
Representation causing belief or expectation [165] Did Delwyn reasonably rely upon her belief or expectation? [168] Detriment [171]
Unconscionability [175]
Conclusion on estoppel claim [177]
Relief [178]
Bryce’s claim [182]
Estoppel (Bryce) [196]
Representation causing belief or expectation [197] Did Mr Harvey’s statement cause Bryce to have a certain belief or expectation and was there reasonable reliance by Bryce? [231]
Detriment [235]
Unconscionability [246]
Conclusion [251]
Mrs Harvey’s claim [252]
Background to relationship [256]
Contracting out agreement [258]
Legal principles [266]
Bryce’s opposition [274]Items of property that the Court does not need to consider [275] OHL (1000) Shares and OHL Shareholder’s current account [280] BC Harvey Industries Ltd (one share) [291] 150 Russell Road, Huntly (now sold) and 8 Ohinewai North Road, Ohinewai
[297]
29 Awanui Avenue, Te Kauwhata [302]
Half share in 37 Raleigh Street, Cambridge (now sold) [310]
Conclusion on relationship property claim [315]
Overall monetary result using Mr Kemp’s chart (before considering the
Family Protection Act claims) [316]
Estate’s legal fees [319]
Claims under Family Protection Act 1955 [323]
Mrs Harvey’s claim [323]
Brett’s claim [339]
Delwyn’s claim [342]
Bryce’s claim [344]
Result and orders [348]
Claims out of time [348]
Brett’s claims [349]
Delwyn’s claims [354]
Bryce’s claim [358]
Mrs Harvey’s claims [359]
Family Protection Act claims (Brett, Delwyn and Bryce) [365]
Costs [366]
Introduction
[1] Martin Harvey was a successful farmer and an astute businessman. He died tragically at the age of 72 years in a farming accident on a relative’s farm on 6 April 2016, two days after he made his last will on 4 April 2016 (Will 9).
[2]Mr Harvey is survived by his wife, Margaret, and his five adult children: Paul,
Brett, Clark, Delwyn and Bryce.1
[3] Paul and Clark are the executors of Mr Harvey’s estate. Probate of Will 9 was granted to the executors on 11 May 2016. The total value of the estate (before adjustments if any of the claims are successful) is $4,435,553.
The claims
[4] Brett, Delwyn, Bryce and Mrs Harvey are all plaintiffs in these proceedings. Brett’s case and Delwyn’s case are centred on debts which are presently classified as loans in the assets of Mr Harvey’s estate. Brett says that at the time his debt arose, there was an agreement between him and his father that his father would forgive the debt in his will. Delwyn’s case is the same in respect of her debt. Will 9 however, unlike Mr Harvey’s previous wills, does not contain a provision for forgiveness of debts. Brett and Delwyn bring claims in contract and alternatively in estoppel. Brett also makes a claim under the Law Reform (Testamentary Promises) Act 1949 (Testamentary Promises Act) as a further alternative.
[5] The main legal issue before the Court in Brett and Delwyn’s proceedings is whether they can satisfy the Court that the debts do not form part of the estate, notwithstanding that Mr Harvey did not forgive each of the two debts in Will 9.
[6] Brett and Delwyn are supported in their claims by their mother. Bryce defends the claims by Brett and Delwyn. The executors adopt a neutral position.
1I will refer to Martin and Margaret Harvey as Mr and Mrs Harvey respectively or by reference to their relationship with their children. Given the common surname, I will refer to all the sons by their first names. Although Delwyn uses her married name, for consistency I will also refer to her by her first name. No disrespect is intended by the use of first names.
[7] Bryce’s claim arises out of what he says was a promise by his father prior to Bryce signing certain documents in May 2002, that he would “even up” Bryce’s position in relation to his siblings because Bryce received less than his brothers as a consequence of a rearrangement in 1999–2002 of the family’s assets. Bryce says his father repeated that statement over the years. Bryce says he is entitled to a payment from the estate in an amount equal to what his shareholdings and current accounts in two family companies, which he gave up as part of the rearrangement, would be valued at today.
[8] Brett, Delwyn and Mrs Harvey all defend Bryce’s claim. The executors adopt a neutral position.
[9] Mrs Harvey brings a claim under the Property (Relationships) Act 1976 (PRA). Her claim is based on the presumption that all property owned by Mr Harvey at the date of death is relationship property and Mrs Harvey’s property owned at that time is also presumed to be relationship property. This presumption is subject to the terms of a contracting out agreement, which Mr and Mrs Harvey signed on 29 June 1999 (the contracting out agreement) and the property that is classified as the separate property of each of them in that agreement.
[10] Brett and Delwyn support their mother’s claim. Bryce defends it. The executors are again neutral.
[11] Separately, each of the four plaintiffs brings a claim under the Family Protection Act 1955. Mrs Harvey acknowledges that, depending on the outcome of her claim under the PRA, any award under the Family Protection Act may be modest to negligible but she notes her priority under the Family Protection Act ahead of the other claimants.
[12] Brett, Delwyn and Bryce all adopt the position that their claims under the Family Protection Act are contingent on the outcome of their primary claims. For Bryce, his claim under the Family Protection Act is also contingent on the outcome of the primary claims of his mother and two siblings. If those claims succeed to the
extent they reduce Bryce’s entitlement under Will 9, then he pursues his claim under the Family Protection Act.
[13] Paul also made a claim in contract and estoppel in relation to a debt which he said, like Brett’s debt and Delwyn’s debt, his father had said he would forgive and which was not forgiven in Will 9. Bryce initially applied to be joined to Paul’s claim but then withdrew that application. As a consequence, there was no opposition to Paul’s claim and Paul has filed a notice of discontinuance. There remains the issue of costs on Paul’s claim. In due course I will come to the distinction that Bryce makes between the debts said to be owed by Brett and Delwyn and Paul’s debt, which resulted in Bryce ultimately not opposing Paul’s claim.
Background
[14] Mr and Mrs Harvey were married for 48 years. During that time, they built up considerable assets between them. There is an issue as to whether a good number of those assets are relationship property or separate property. But for present purposes, it is sufficient to describe the assets generally as including farms, commercial buildings and a portfolio of residential properties. Mr Harvey did not set out to accumulate wealth simply for himself and his wife. He had plans that he put into effect during his lifetime to set up each of his children.
[15] Between 1999 and 2002, Mr and Mrs Harvey undertook a significant reorganisation of their assets. That reorganisation (the 1999 arrangements) included:
(a)a contracting out agreement under s 21 of the PRA pursuant to which certain property was identified as the separate property of Mr Harvey and other property as the separate property of Mrs Harvey;
(b)the transfer of shares in two family companies, ML Harvey & Sons Ltd (MLHS) and New Zealand Watermelon Distributors Ltd (NZWD); and
(c)the creation of the Harvey Family Trust.
[16] The general objective of the 1999 arrangements was to carry out the division of certain farm properties to Paul, Brett and Clark, the three oldest sons. From an early age each had put in long hours on the family’s farming ventures over various properties and their future was in farming. In summary, Paul, Brett and Clark each received a farm, stock and a portion of the bank and other debt associated with the farm which each received. The transactions also allowed Mr Harvey to divest himself of debt so he could move on to his next project. Bryce, who was not interested in farming, commenced work as a welder for a local company, Mooloo Stock Crates Ltd when he left school in 1988 at the age of 15 years. Delwyn was similarly not interested in farming and she left home at the age of 18 years to live and work in Auckland.
[17] There was a family meeting on 29 March 2001 attended by all the family members except Mr Harvey. Also in attendance was a solicitor, Toni Prowse, who was, at the time, a partner in the law firm McDermott & McIntosh.2 Ms Prowse had been involved in assisting Mr McDermott and Ms McDermott of her firm in the 1999 arrangements. Both Mr McDermott and Ms McDermott had acted for Mr Harvey over many years in a range of commercial, rural and private matters. Ms Prowse gave a presentation at the family meeting to all present.
[18] The family members unanimously agreed to put in place the 1999 arrangements. Those arrangements were recorded in a deed of 17 May 2002 (the May 2002 deed), which recorded the agreement of all family members to the transfer of assets and the forgiveness of debts. The results of the 1999 arrangements as recorded in various documents signed on 17 May 2002, including the May 2002 deed (and the earlier contracting out agreement), were that:
(a)Under the contracting out agreement, Mr Harvey’s separate property was the home farm at 384 Waikare Road which was in three separate titles (the home farm) and the shares in Harvey Holdings Ltd (HHL), which had been incorporated on 25 June 1999, four days before the contracting out agreement was signed;
2 McDermott & McIntosh later merged with Norris Ward McKinnon in Hamilton.
(b)Under the contracting out agreement, Mrs Harvey’s separate property was another farm in two separate titles also at 384 Waikare Road (Mrs Harvey’s farm) adjacent to the home farm and the shares she held in MLHS and NZWD. As a further part of the 1999 arrangements Mrs Harvey relinquished part of her separate property: a portion of her shares in NZWD (she retained her B shares); and all of her shares in MLHS;
(c)Brett received the shares in MLHS3 which owned farmland (the Owens Road farm)4 adjacent to the home farm. Brett/MLHS continued to farm both the home farm and Mrs Harvey’s farm under a grazing lease;
(d)NZWD transferred the farm at Kneebone Road, Orini, known as the Kneebone Road farm to Clark;
(e)NZWD transferred the property at 43 George Drive, Huntly (the Chowns Building) 5 to Mr Harvey’s newly established company HHL;
(f)As a consequence of the family members transferring their NZWD shares to Paul (except for Mrs Harvey’s B shares which she retained) the remaining asset of NZWD, a farm at 354 Waikare Road (the Moana Block) became Paul’s farm;
(g)The debts arising from the transfers of shares in MLHS and NZWD and assignments of current accounts were funded by the newly formed Harvey Family Trust (HFT). Mr and Mrs Harvey and the five children were all settlors and beneficiaries of the HFT and Mr and Mrs Harvey were the trustees. The HFT debt to each family member was progressively forgiven on a yearly basis.
3MLHS was renamed B & A Harvey Ltd from 1 November 2013. I will use the original name MLHS throughout this judgment.
4As well as the farm at Owens Road, MLHS owned a small amount of additional land, the detail of which is not relevant for present purposes.
5All parties referred to this property as the Chowns Building (using the name of the tenant, EG Chown & Sons Ltd) to identify the building.
[19] The principal issue in Bryce’s claim turns on what, if anything, his father said to him at the time the May 2002 deed was signed about what provision his father would make for him as a consequence of Bryce transferring his shares in the two family companies. The value of the current accounts together at that time was
$225,679. Bryce was then aged 28 years.
[20] In 2004, Mr Harvey sold the home farm (his separate property) to Brett’s company, MHLS, with a debt back (the debt). Brett says part of the arrangement was that his father would forgive the debt in his will or transfer it to Brett’s family trust in his will. It is this transaction that is the subject of Brett’s claim.
[21] Delwyn’s debt arose from Mr Harvey’s sale in 2009 of his shares in Del Properties Limited (Del Properties), which owned four residential properties in Northland. Delwyn’s case is similarly that at the time of this transaction, her father said that the debt resulting from the sale of shares would be forgiven in his will. It is this transaction that is the subject of Delwyn’s claim.
[22] A number of the claims are out of time. There is no opposition by any party to leave being granted where necessary for any party to pursue their claim out of time. I will make orders to that effect.
The nine wills – a general overview
[23] Between 2001and 2016, Mr Harvey executed nine wills.6 Mr Gay, counsel for Brett, submits that the Wills 1 to 8 show a steady progression and illustrate Mr Harvey’s constant attention towards forgiving any debts owed by his children, and the development and execution of an inheritance plan for each of his five children. Mr Gay submits the evidence shows that Mr Harvey consistently built up the value of his and Mrs Harvey’s assets and then transferred an asset (either in the form of that asset, or as shares in the company owning the asset) to one of his children. Invariably, the transaction would take the form of a sale at the asset’s
6Will 1 on 2 November 2001; Will 2 on 16 May 2002; Will 3 on 25 June 2004; Will 4 on 17 December 2004; Will 5 on 28 August 2008; Will 6 on 25 November 2009; Will 7 on 22 August 2011; Will 8 on 14 January 2014; and Will 9 on 4 April 2016.
market value, and a debt back for the sale price (or most of it) combined with, Mr Gay submits, Mr Harvey’s undertaking to forgive the debt in his will.
[24] It is apparent that in Wills 1 to 8 inclusive, the forgiveness of debts owed by Mr Harvey’s children is a constant. Mr Harvey’s Wills 1 to 7 were prepared by Clive Patterson of Patterson Law in Kaitaia.7 Mr Patterson had knowledge of Mr Harvey’s affairs.
[25] Will 8 was prepared by Barbara McDermott, who not only had extensive background knowledge of Mr Harvey’s assets and affairs, but the instructions for the preparation of Will 8 took place over an extended period between August 2013 and January 2014.
[26] By contrast, Will 9, executed two days before Mr Harvey’s death, was prepared by a solicitor, Alan Wilson who had acted for Mr and Mrs Harvey only once before in relation to the purchase of land for their proposed retirement home and in relation to the construction contract for the proposed retirement home. Mr Wilson did not have copies of Mr Harvey’s earlier wills nor did he obtain a list of assets from Mr Harvey or values for those assets. He did have title searches for the properties held in Mr Harvey’s name. Mr Wilson had two meetings with Mr Harvey. The first lasted around an hour. Mr Wilson thought the taking of instructions would have occupied about half of that time. The second was when Mr Harvey signed his will.
[27] A further matter relevant to the preparation, signing and execution of Will 9 is that although Mr Harvey was an able farmer and an astute businessman, he was unable to read or write. Mr Harvey relied on his wife to read out legal documents and other documents to him. Mr Wilson was unaware of this.
Will 9
[28]In summary, the terms of Mr Harvey’s Will 9 were;
7 Mr Harvey had property interests in the North.
(a)The property in the name of Mr Harvey at 29 Awanui Avenue, Te Kauwhata (the proposed retirement home) was to be held on trust for Mrs Harvey’s use within her lifetime;
(b)Certain items of personal property belonging to Mr Harvey were left to Mrs Harvey, including any car owned by Mr Harvey and household chattels;
(c)The property at 37B Raleigh Street, Cambridge owned jointly by Mr Harvey and his sister, Francis Winter, was left to Mrs Winter to have free use of for her lifetime;
(d)Shares in Ohinewai Holdings Ltd (OHL) in Mr Harvey’s name were left to Bryce;
(e)Any money or debt then owing by OHL to Mr Harvey was to be assigned to Bryce; and
(f)The residue of the estate was left to the five children in equal shares.8
[29] Brett’s debt and Delwyn’s debt each exceeds the amount they would receive as their one-fifth share of the residue. If Will 9 is administered as probated, the consequence will be rather than receiving a bequest under the will, both Brett and Delwyn will be required to make a payment to the estate for the balance.
[30] In relation to Mrs Harvey, as can be seen from the above, she receives little under the probated will.
[31] For Bryce, if this Court finds in favour of his two siblings and his mother on their claims, the residue and consequently Bryce’s one-fifth share will be less than under the probated will.
8Under Wills 1 to 6, the residue was left to Mrs Harvey. That changed, so that in Wills 7 to 9, the residue was left to the five children equally.
Proposed resolution
[32] On 9 March 2017, solicitors Norris Ward McKinnon, then acting for Mr Harvey’s estate, wrote in the following terms:
The Executors have instructed that Martin’s intention to forgive the debts owed to him by Harvey Holdings Ltd and Maraetai Trust [Delwyn’s debt] is to be carried out. In addition, the debt owed to Martin by B & A Harvey Ltd [Brett’s debt] is to be assigned to the Brett Harvey Family Trust for repayments to be assigned to Margaret.
We suggest that it would be appropriate for a Deed of Family Arrangement to be entered into by all of the residuary beneficiaries to record these agreements.
[33] All the beneficiaries, except Bryce, agreed to the proposal in the 9 March 2017 letter. Since then, (as noted above) Bryce has changed his position in relation to Paul’s claim.
[34] In the face of Bryce’s position, Brett, Delwyn, Paul and Mrs Harvey filed their proceedings.
Order of consideration of claims
[35] I will consider the claims in the following order. First, I will address the primary claims by Brett and Delwyn in contract and estoppel and Brett’s further claim under the Testamentary Promises Act and then Bryce’s claim in estoppel. My decision on those claims will, if they are successful, impact on the gross amount of the estate.
[36] I will then consider Mrs Harvey’s claim under the PRA. Where dual claims under the PRA and the Family Protection Act are made, and where no special circumstances require otherwise, the Court will first determine whether a claim lies under the PRA.9
[37] And third I will consider the claims by all plaintiffs under the Family Protection Act.
9Bill Patterson Law of Family Protection and Testamentary Promises (5th ed, LexisNexis, Wellington, 2021) at 269.
Brett’s claims
[38]There are four causes of action in Brett’s claim against his father’s estate:
(a)Contract;
(b)Estoppel;
(c)Under the Testamentary Promises Act; and
(d)Under the Family Protection Act.
Breach of contract (Brett)
[39] Brett’s claim as pleaded alleges a contract for the sale and purchase of the home farm, with a deed of acknowledgment of debt, and an oral statement by Mr Harvey, made simultaneously, that he would forgive the debt in his will.10
[40] Brett says his father proposed a “deal” to him in November 2004. The agreement reached between Mr Harvey and Brett on behalf of Brett’s company, MLHS, was that Mr Harvey would sell the home farm to Brett’s company. Brett says the agreement was in two parts. The first was a written agreement dated 23 November 2004 for the sale of the home farm to MLHS, the main terms of which included:
(a)The sale price was the current market value of $1,580,000 plus GST;
(b)The purchase price of $1,580,000 would be loaned by Mr Harvey as vendor to MLHS and would be guaranteed by Brett;
(c)The debt would be secured by a mortgage registered against the title to the land;
(d)Mr Harvey, as vendor, might at any time demand that MLHS repay the debt in whole or in part; and
10 Brett’s evidence is that his father said to him he would forgive the debt in his will or assign the debt to Brett’s family trust. When I use the term “forgive the debt”, it is intended to cover both alternatives.
(e)Pending demand being made, MLHS was to repay the debt by monthly payments of $1,000 until demand was made.
[41]The terms of the first part of the agreement are contained in two documents;
(a)The farm sale agreement, “Deed of Sale and Purchase and Acknowledgment of Debt dated 23 November 2004” (Deed of Sale); and
(b)The mortgage, which was registered against the three titles comprising the home farm, on 23 February 2005.
[42] Brett says the second part of the agreement was oral and related to the forgiveness of the debt. The agreement was that Mr Harvey, in his will, would either:
(a)Forgive the debt; or
(b)Assign the debt to the trustees of the Brett Harvey Family Trust (BHFT), upon confirmation that Brett or the BHFT or MLHS would continue to repay the debt at the rate of $1,000 per calendar month with those repayments being made as capital payments to Mrs Harvey for the remainder of her life.
[43] Brett says that this agreement encompassing both the written and oral parts, was effectively his inheritance from his father but provided to him in his father’s lifetime.
[44] Mr Gay refers to evidence of the oral part of the agreement which he says is contained in a letter from Brett’s lawyers, Allen Needham & Co to Martin’s lawyer, Clive Patterson, dated 23 November 2004. Brett’s evidence was that his father was present at Allen Needham & Co on 23 November 2004 when the agreement for the sale of the land was signed and when the letter was written. The letter includes the following:
“We understand that you will be receiving instructions from Martin Harvey to complete a new Will. We also understand, as stated in earlier correspondence,11 that Martin will be leaving the amount owing, pursuant to the Deed of Sale and Purchase and Acknowledgment of Debt dated the 23rd November 2004 (copy enclosed as abovementioned), to the Trustees of the Brett Harvey Family Trust created by Deed dated the 5th April 2002 to be held on the trusts referred to in the Deed.
In addition Martin wishes that his Will state that although the Trust will receive ownership of the Company debt on his death, Martin wants Brett to be obligated to continue to pay $1,000 every month to his mother for the rest of her life. They wish that the $1,000, not be taxable, and therefore it must be specified as capital”.
[45] Mr Gay notes that Mr Harvey partly performed the agreement in his subsequent wills (Wills 4 to 8). The first of those subsequent wills, Will 4, was executed the following month on 17 December 2004. Mr Harvey either forgave the debt conditionally upon Brett paying Mrs Harvey (as capital payments) no less than
$1,000 per month during her lifetime (Wills 4 to 6) or he forgave the debt absolutely (Wills 7 and 8).
[46] Brett has continued to make a monthly payment to his mother a sum of, in fact, $1,125. The debt currently stands at $1,353,875.
[47] Mr Gay submits that Mr Harvey’s failure to include a provision forgiving the debt in Will 9 is a breach of the contract entered into with Brett on 23 November 2004.
[48] In defending Brett’s claim, Mr Badcock, for Bryce, submits the debt remains outstanding and should be paid to the estate. He says:
(a)Mr Harvey did not enter into any contract to forgive the debt. He says the 23 November 2004 Deed of Sale makes it clear that the debt was repayable on demand at any time by Mr Harvey;
(b)The alleged oral term is contradictory of and incompatible with the express terms of the Deed of Sale (parol evidence rule);
11 The earlier correspondence was not included in the evidence.
(c)The alleged oral term is part of the one contract which is an agreement for the disposal of land. Section 24(1) of the Property Law Act (PLA) requires the contract to be in writing and signed by the party against whom the contract is sought to be enforced.
[49]I will address each of these issues in turn.
Did Mr Harvey agree to forgive the debt in his will?
[50] First, it was Mr Harvey’s intention for Brett to be gifted the home farm at least as at the dates of Wills 1 to 3 (2 November 2001; 16 May 2002; and 25 June 2004). That is apparent from cl 4 of each of those wills which states:
I GIVE my son BRETT LEONARD HARVEY the home farm owned by me at the date of my death which he is presently leasing from me.
[51] Brett’s evidence was that his father had approached him and put the terms of “the deal” to him. Brett says in one of his affidavits:
… in 2004 my father announced to me that he wanted me to buy the farm. He told me the terms that he had decided, which involved me purchasing the farm from him at its current value, and leaving the purchase price as a debt back to him (“the Debt”), which I would repay at the rate of $1000 per calendar month. He said that upon his death, he would transfer the debt to my family trust, but that I should continue to pay my mother the $1,000 per month for the rest of her life.
[52] This was confirmed in Brett’s viva voce evidence. Brett said that he, his father and Brett’s solicitor, Mr Needham, were all present together when Mr Needham had the 23 November 2004 letter (referred to in [44] above) typed. Brett said he paid the solicitor’s account and his father told Mr Needham what to do.
[53] In responding to questions about the forgiveness of debt, Brett referred to the Allen Needham & Co letter of 23 November 2004 and said:
It was done at the same time and that was the co – that was the main condition of me purchasing this, that he would forgive the debt if I kept paying him or Mum until they were both dead. … That was his deal.
[54]It was put to Brett that there was no oral agreement. He responded:
A There was an oral agreement – Q – you actually talked about it –
A – at the office, at the lawyer’s office. This is the discussion we had. That’s what he wanted. It was written down by Rod [Needham] sent off to his [Mr Harvey’s] lawyer and put in his [Mr Harvey’s] will.
[55] There was the further following evidence in cross-examination on the 23 November 2004 letter:
Q Now, the letter at page 22 is not signed by your father, is it?
ANo it’s not signed by me either. But it’s signed by my lawyer and it was done by my father, that’s his instructions right there and you will note in his will it’s exactly the same.
Q And the document’s not signed by your father’s lawyer either, is it? A No.
QAll this document is, is a letter from your father to your father’s lawyer setting out what he understands to be your father’s intentions in his will, isn’t it?
A That’s right.
[56] Despite Brett’s final answer “That’s right”, I accept Mr Gay’s submission that the other evidence referred to above, namely Mr Harvey telling Mr Needham “what to do”, means that the letter was more than the lawyer’s understanding. Rather, it was a record of what Mr Harvey had promised in relation to the forgiveness of the debt, and it was written in accordance with Mr Harvey’s instructions.
[57] In relation to Mr Harvey calling up the debt and requiring interest to be paid, there was the following evidence under cross-examination:
Q… And, the reality is, is that Dad, Martin never in the written contract ever forgave the debt because it was an on demand repayment wasn’t it?
A Well that’s what the words say but, you know, he’s – he, he would never call that debt in and he would never call the interest in and that’s what he promised so I didn’t really question it and I didn’t argue it. I knew he never would so. If I thought he would I don’t think I would’ve been doing this deal.
QWhat would you have done what Paul did have a clause inserted that said – that required Dad to forgive it?
ANo, I, I wouldn’t have done anything. I would’ve just said: “Keep your farm”.
[58] As to the interest clause, Brett’s evidence was that it was inserted so that the transaction would not be seen as gifting and accordingly it was to avoid issues with gift duty. He said:
There was quite a lengthy discussion about gifts and gift duty and Dad didn’t like paying tax and he wasn’t gonna lumber me with a humungous bloody tax bill through a gift, same as everyone else. So that’s why it was done. It is to go to my family trust so it skips me, it goes to my kids, no gift duties. Now there’s not that problem but at that stage that’s why it was done. So in actual fact the gift is to my kids.
[59] In response to a further challenge by Mr Badcock under cross-examination Brett said:
A… It’s a deal that hasn’t been honoured and that purchase – the whole Sale and Purchase Agreement relied on that promise as you would call it, but I would call it an actual deal.
[60] Brett also gave evidence that his father was committed to his promise to forgive the debt and that his father was well aware that the consequences of repayment would mean the sale of the farm. There was the following question and answer in cross-examination:
Q You see the truth here isn’t it that your father changed his mind as to what he was going to gift you in your [sic] Will or leave you in his Will and you’re simply not getting now what you thought you were going to get?
ANo, it’s not the case. Dad would never change his mind. We had a little discussion many years ago, me and Dad about this. I told him if he ever changed his mind this whole thing would go, everything. I would have to sell it and he said to me: “when I do a deal boy, I never change my mind and that’s that” and I know I didn’t have to ask him about it again. He would never change his mind.
[61] On that issue, the evidence of all other family members was that Mr Harvey’s word was his word and could be relied on.
[62] A somewhat similar situation arose in Harris v Harris.12 That case also involved the sale of a family farm by a husband and wife (the plaintiffs) to their son and his wife (the defendants) structured with a sale and debt back, and an assurance by the plaintiffs that only a proportion of the debt back would be repayable. As well as their claim in estoppel, the defendants had also contended that there was an overall contract by way of a family arrangement which included the term that the debt would be written off under the plaintiffs’ wills. They argued alternatively that there was a contract collateral to the acknowledgment of debt to the same effect, a breach of which would entitle the defendants to specific performance or damages.
[63] The issue for the Court was whether the arrangements were sufficient to amount to some promise or assurance which had legal effect, or whether they were merely statements of intention. The Court held that the most that could be taken out of the evidence was that there was a protracted series of discussions, some between the parties directly and some with their professional advisors which did not at any stage amount to a contract of family arrangement. It was further held that the evidence did not support the contention that there was a contract collateral to the acknowledgment. However, the defendants were granted relief on the basis of their estoppel claim.
[64] Harris can be distinguished on the facts in relation to the contract claim in that case. In this case, there was no evidence to contradict Brett’s evidence that his father was present at the law firm, Allen Needham & Co, when the terms of the agreement were discussed, including the term relating to forgiveness of debt. I accept Brett’s evidence that his father was present with him and Mr Needham as he has described. I accept Brett’s evidence that there was an oral agreement between him and his father, which was then recorded in the letter that Mr Needham had typed up. Contrasted with Harris, in the present case there was a single contemporaneous matrix of facts with the promise to forgive the debt bound up with the entering into the contract for the sale of the home farm.
12 Harris v Harris (1989) 6 FRNZ 1 (HC).
[65] There is other evidence that supports Brett’s evidence that his father agreed to forgive the debt. First, there is Will 4, executed just three weeks after the agreement on 17 December 2004. In that will, Mr Harvey had clearly turned his mind to the agreement that the debt would be forgiven. Clause 3 of Will 4 states:
3. I FORGIVE any child of mine or any Family Trust who or which is indebted to me at the time of my death from payment of such indebtedness PROVIDED THAT any forgiveness of the debt owing to me by my son BRETT LEONARD HARVEY or his trust will be conditional on him paying my wife no less than one thousand dollars ($1,000.00) per month during her lifetime, such payments to be treated as capital reductions.
[66] It can be seen that although the first part of the above clause is written in general terms and effectively repeats what is in Wills 1 to 3 regarding forgiveness of his children’s debts generally, the addition of the proviso that Brett continue to pay his mother $1,000 a month after Mr Harvey’s death, reflects part of the discussion that Brett says occurred in relation to the forgiveness of the debt. The forgiveness of debt continued through Wills 5 to 8.
[67] Further evidence of Mr Harvey’s considering that he had agreed the debt would be forgiven can be found in the manner in which Mr Harvey’s accountants treated his assets in Mr Harvey’s yearly financial statements. From 201113 to 2016, the financial statements do not include Brett’s debt.14
[68] It is necessary to set this arrangement in its proper context. That context is Mr Harvey’s intention to effect a transfer of assets to his children without the transactions attracting gift duty or other taxes. In Wills 1 to 3 Brett was gifted the home farm. However, by 2004 Mr Harvey intended a gift to the same effect, but as an inter vivos gift. To avoid gift duty the “gift” is structured as a transaction at market value with a payment on demand clause but with forgiveness of debt in his will.
[69] I am satisfied that, as part of the sale of the home farm, Mr Harvey agreed with Brett that the debt would be forgiven in his will. It was a term of the contract.
13 The earliest available accounts.
14 Nor Delwyn’s debt nor Paul’s debt.
Mr Harvey repeated that promise over the years to Brett and it was well known in the family.
Is the term that the debt be forgiven contradictory of and incompatible with the terms of the written agreement?
[70] Mr Badcock submits that Brett cannot call parol evidence that contradicts the written agreement. He says that the alleged oral term contradicts the written terms and is incompatible with the written terms.
[71] Commenting on the parol evidence rule, the authors of Burrows, Finn and Todd, state as follows:15
Determining the express terms of a contract is exclusively within the jurisdiction of the court. In exercising this function, judges have traditionally been bound by what is known as the parol evidence rule. This rule excludes extrinsic evidence that would “add to, vary or contradict” a written document. The parties are instead confined within the four corners of the document in which they have chosen to enshrine their agreement. This rule, of great antiquity though it is, has been much attenuated over the years.
… perhaps most significantly, the exclusion of oral evidence is inappropriate where the written document was never intended to be the whole contract – where, in other words, the parties intended their contract to be partly in writing and partly by word of mouth. This situation is so common as to greatly weaken the supposed prohibition on adducing evidence to add to a written contract.
… In each case, the Court must decide whether the parties have, or have not, reduced their agreement to the precise terms of an all-embracing written formula. If they have not, the writing is but part of the contract and must be set side by side with the complementary oral terms.
[72] Mr Badcock relies on the decision of the Supreme Court in Bathurst Resources Ltd v L & M Coal Holdings Ltd,16 where the Court said:17
The parol evidence rule provides that when parties have reduced a contract to writing, extrinsic evidence is inadmissible to add to, vary or contradict the writing.
15Finn, Todd and Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at 178.
16 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85.
17 At [56].
[73] However, Mr Badcock’s submission overlooks the content of the footnote to the passage just cited in which the Supreme Court said:18
There are also certain preconditions for the rule to apply. For example, the written agreement must be intended to be the whole agreement …
[74] In this case, having regard to the evidence referred to in the above section of this judgment, the written document was not intended by Brett and Mr Harvey to be the whole contract.
[75] I also do not accept Mr Badcock’s submission that the oral term contradicts the written terms and is incompatible with those written terms. Although Mr Harvey’s reciprocal promise to forgive the debt in his will would bring to an end (upon Mr Harvey’s death, when the will becomes operative) Brett’s obligation to repay the debt, the oral term does not purport to contradict any written term of the contract. Prior to Mr Harvey’s death, the debt remained payable upon demand. Upon Mr Harvey’s death, Brett’s obligation to repay the debt is replaced by an obligation to pay $1,000 per month to his mother for her life. In other words, Mr Harvey’s promise to forgive the debt is matched by a promise on Brett’s part that he will make the monthly payments to his mother. The parties accepted mutual obligations.
[76] In substance there is no difference between Brett’s contract and Paul’s contract with his father which Bryce belatedly decided not to challenge. Paul’s contract for the sale of a farm to him also had a repayment of debt on demand clause and a forgiveness of debt clause. The only difference is that the forgiveness of debt clause was a term of the written contract in Paul’s case.
Section 24 of the Property Law Act 2007
[77] Mr Badcock submits the oral term (if proven) is so closely tied up with the debt created in the written agreement that it must relate to the disposition of an interest in land, given that land is the subject matter of the written agreement. As a consequence, he submits, the contract is not enforceable because of s 24 of the PLA.
18 At fn 49
[78]That section provides:
(1)A contract for the disposition of land is not enforceable by action unless -
(a)The contract is in writing or its terms are recorded in writing; and
(b)The contract or written record is signed by the party against whom the contract is sought to be enforced.
[79] I do not accept Mr Badcock’s submission. The contract or promise by Mr Harvey to forgive the debt is not a contract for the sale of land, although it was an integral part of the transaction as a whole, which Mr Harvey proposed to Brett and which was concluded. The subject matter of the written sale agreement is the land and the subject matter of the oral part of the agreement to forgive the debt which, as a chose in action, is personal property not realty. The contract for the disposition of land was fully expressed and set out in the Deed of Sale. I accept Mr Gay’s submission that the purpose of the PLA is achieved by having the terms of the sale of land defined with clarity, but that does not exclude other terms of contract dealing with related issues such as the forgiveness of debt.
[80] Mr Badcock further submits that when the subject matter of the contract is partly within the section and partly outside of it, but there is only one indivisible consideration for the whole contract, the contract is within the section.19 He submits there is only one indivisible consideration, that is the debt.
[81]I do not accept that submission either. Brett separately promised to make the
$1,000 monthly payments to his mother after his father’s death. That is a separate promise from Brett’s promise to buy the land.
Conclusion on breach of contract claim and relief
[82] Brett succeeds on the balance of probabilities in his claim for breach of contract. In respect of the balance of the debt, being a sum of $1,353,875, he seeks the following relief:
19 DW McMorland Sale of Land (3rd ed, Cathcart Trust, Auckland, 2011) at [4.02].
(a)An order that the executors specifically perform the contract by executing an assignment of the debt in the sum of $1,353,875 in favour of the trustees of the BHFT, upon condition that Brett agrees to continue to make the payments of $1,000 each month to Mrs Harvey for the rest of her life;
(b)A declaration that Brett is entitled, upon his undertaking to continue making the repayments of $1,000 each month to Mrs Harvey for the rest of her life, to the assignment in favour of the BHFT of so much of the debt as remained outstanding at the date of Mr Harvey’s death; and
(c)Alternatively, equitable damages of the above sum.
[83] The relief sought is equitable and is entirely at the discretion of the Court. The purpose of a decree of specific performance is to ensure that justice is done:20
Specific performance is traditionally regarded in English law as an exceptional remedy, as opposed to the common law damages to which a plaintiff is entitled as of right. … [B]y the 19th Century it was orthodox doctrine that the power to decree specific performance was part of the discretionary jurisdiction of the Court of Chancery to do justice in cases in which the remedies available at common law were inadequate.
[84] Applying the factors bearing upon the exercise of the discretion to award specific performance or an injunction I find the following. There was no unfairness to Mr Harvey in the agreement of 23 November 2004 and in fact it was initiated by Mr Harvey. Mr Harvey had provided for Brett to receive the home farm as an outright gift in his three wills that pre-dated the 23 November 2004 agreement.
[85] I accept there would be considerable hardship to Brett and MHLS if the debt were now to be required to be repaid and there would be no hardship to the executors if the debt were forgiven or assigned in accordance with the terms set out in the Allen Needham & Co letter to Mr Patterson of 23 November 2004. The repayment of the debt now would mean not only that MLHS would have to pay the full market
20Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1997] 3 All ER 297, [1998] AC 1 at 301, per Lord Hoffman.
price for what I accept Mr Harvey intended as Brett’s inheritance and free of debt, there would also be no consideration or compensation for the value of the improvements that Brett and MLHS made to the home farm prior to the sale in November 2004 and which formed part of the “market value”.
[86] Although the repayment of the debt is not a contract for the sale and purchase of land, it is closely tied up with MLHS’ purchase of the home farm. It is an integral part of the transaction because of the debt required to be repaid by MLHS or Brett. There is evidence from Brett which I accept that some land would have to be sold to generate sufficient capital to repay the debt. As a consequence, the home farm, that I accept Mr Harvey intended MLHS and Brett to receive in 2004, or at least part of it would likely be lost because at least part of the land would need to be sold to repay the debt.
[87] The performance of the decree would not require supervision by the Court and the remedy would be available to both parties. Brett has acknowledged his obligation to continue paying his mother $1,000 per month for her life (and indeed has been paying her $1,125 per month). And finally, there has been no delay in seeking relief.
[88] I will make the orders in [82](a) and [82](b). With the making of those orders, it is not necessary to make the order sought in [82](c), which is sought as an alternative.
Estoppel (Brett)
[89] Brett’s estoppel claim is made in the alternative to his claim in contract. Although Brett has succeeded in his contract claim, I will nevertheless consider his estoppel claim.
[90]The four criteria required to be satisfied for an estoppel claim are that:21
21 Hansard v Hansard [2015] 2 NZLR 158 (CA) at [5] citing Wilson Parking New Zealand v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567 at [44], applying Burbery Mortgage Finance & Savings Ltd (in rec) v Hindsbank Holdings Ltd [1989] 1 NZLR 356 (CA) at 361 and Goldstar Insurance Co Ltd v Gaunt [1998] 3 NZLR 80 (CA) at 86..
(a)The party against whom the estoppel is alleged has acted in a manner that has caused the claimant to have a certain belief or expectation;
(b)The claimant has reasonably relied upon that belief or expectation;
(c)The claimant will suffer detriment if the belief or expectation is departed from; and
(d)It would be unconscionable for the party against whom the estoppel is alleged to depart from the belief or expectation.
[91] Mr Badcock submits that even if Brett can establish representation, reliance and unconscionability, he has suffered no detriment and that is fatal to his claim.
Representation causing belief or expectation
[92] The evidence which I have already accepted establishes that there was a clear and unequivocal statement by Mr Harvey that he would forgive the debt in his will. This statement was the underlying reason for Brett entering into the Deed of Sale on 23 November 2004 in the form it was drafted, to buy the home farm.
[93] In all the circumstances, Mr Harvey clearly created in Brett and MLHS the expectation that Mr Harvey would forgive the debt. The terms of the representation that gave rise to that belief or expectation are clearly set out in the Allen Needham & Co letter of 23 November 2004 to Mr Harvey’s solicitor. There was no demur from either Mr Harvey or his solicitor in response to the letter, and Mr Harvey executed Will 4 accordingly.
Did Brett reasonably rely on his belief or expectation?
[94] I accept that Brett relied on his father’s statement and that reliance was reasonable. It was a family transaction involving succession for a family farm to pass to the next generation. Brett was asked in cross-examination whether he relied on any representation by his father before he entered into the 23 November 2004 agreement:
Q … the only time that any representation by your father that he would forgive the debt that could induce you to enter into this agreement or convince you to enter into this agreement could have only been before you entered into the agreement, couldn’t it?
A Well that’s why I entered into the agreement. Does that answer your question?
[95] Mr Harvey’s clear representation caused Brett to believe his father would forgive the debt in his will, Brett relied on that belief in entering into the agreement to by the home farm and that reliance was reasonable.
Detriment
[96] Mr Badcock submits that Brett has suffered no detriment because the farm he purchased for $1.58 million is now worth approximately $4.37 million. Mr Badcock reaches that latter figure on the basis of a Waikato District Council QV in the amount of $6.52 million for the entire farm which, Mr Badcock submits equates to
$4.37 million on a prorated two-thirds basis for the relevant titles comprising the home farm. Mr Badcock submits that even if the titles are now valued at the same amount as in 2004, at worst, Brett is in a neutral position.
[97] Brett’s evidence was that it was an unsound process to value the three titles, comprising the home farm, on the basis that that land comprises two-thirds of the total value by virtue of it being two-thirds of the total area. He said the land sold to him in 2004 was amongst the worst pieces of land that comprise his current farm. His evidence is that it has approximately the same value today as in 2004, because it is bare land comprising steep hill country land with some fencing and a couple of sets of yards. Further, it is likely to be subjected to environmental restrictions as to its use in the near future.
[98] I do not accept Mr Badcock’s submission. First, the issue as to loss or detriment is not to be determined by a comparison of value then and now. Instead the issue is whether Brett has suffered loss from entering into the agreement. The detriment must be independent of the failure to obtain the benefit of the transaction.22
22Pollard v Pollard [2015] NZHC 1140 at [63]–[64] and Welch v Fraser HC Hamilton, CIV-2003-419-491, 9 September 2003 at [30].
[99] Brett’s evidence was that the market value of the home farm as assessed in 2004 included the large amount of fencing that Brett had erected on the home farm and the building of several sets of stock yards. Those improvements were made before Mr Harvey put to Brett the proposal that he should buy the home farm. In other words, the then market value of the land (as assessed by a valuer) included Brett’s improvements. Brett’s evidence was:
I already owned the stock on the farm. I had re-fenced half of the farm and built three sets of new stock yards. Those improvements had added considerably to the increased value of the farm (and formed part of the 2004 sale price).
[100]Brett was not cross-examined on that evidence.
[101] Second, if the debt is required to repaid, the farm, or at least some part of it, will need to be sold. That was recognised by Mr Harvey, as referred to by Brett in his evidence:
… Dad told me that he wanted me to have the hill country block as part of my inheritance, but he did not want the burden of the debt to be something that negatively impacted on my children. Accordingly, Dad promised that he would either transfer or forgive the balance of the debt on his death. …
[102]And further:
Dad never asked us to repay the loan and always maintained that they would be forgiven (or transferred to our Trust) upon his death. He knew the only way we could have repaid the loans would have required each of us to sell his farm. Dad did not believe in selling assets, and he never sold any of the significant assets that he had acquired during his lifetime, except to his children. …
[103] That evidence from Brett is supported by evidence that the income of MHLS is insufficient to borrow further because it is unable to increase its current debt servicing. The consequence of that is that Brett will not receive the one-fifth share of the residue of his father’s estate. That would be netted off against the amount of the debt.
[104] There is also the detriment to Brett that if the promise is not upheld, he will not receive the home farm by way of an inheritance. That is separate and distinct from whether or not the debt is repaid.
[105] For all the above reasons, I accept that Brett has suffered a detriment by relying on his belief.
Unconscionability
[106] I accept it would be unconscionable for Mr Harvey (and now his executors) to depart from the expectation and belief that the debt would be forgiven. Mr Harvey consistently promised Brett that the debt would be forgiven and he instructed his solicitor to forward a copy of Will 4 to Brett executed in the month following the 23 November 2004 agreement to demonstrate that he had carried out the promise and was committed to fulfilling his obligations.
Conclusion on estoppel claim
[107]Brett has established his claim in estoppel on the balance of probabilities.
Relief
[108]The relief Brett seeks is as follows:
(a)A declaration that the executors are estopped from denying that the debt should be forgiven and/or assigned in favour of the trustees of the BHFT, upon condition that Brett/MLHS/BHFT agrees to continue to make the repayments of $1,000 each month to Mrs Harvey for the rest of her life;
(b)A declaration that Brett is entitled, upon his undertaking to continue making the repayments of $1,000 each month to Mrs Harvey for the rest of her life, to the assignment in favour of BHFT of so much of the debt as remained outstanding at the date of Mr Harvey’s death; and
(c)Alternatively, equitable damages.
[109]In Wilson Parking, the Court of Appeal, discussing equitable remedies, said:23
23 Wilson Parking New Zealand Ltd v Fanshaw 136 Ltd, above n 21, at [114]–[117].
[114] … The three main elements relevant to relief stem from the ingredients necessary to establish equitable estoppel in the first place. These are the quality and nature of the assurances which give rise to the claimant’s expectation; the extent and nature of the claimant’s detrimental reliance on the assurances; and the need for the claimant to show that it would be unconscionable for the promisor to depart from the assurances given.
[115] As a general approach, the clearer and more explicit the assurance is, the more likely it is that a court will be willing to grant expectation-based relief. That is because a clear assurance is more likely to engender an expectation by the promisee that it will be fulfilled. Similarly, the greater the degree and consequences of detrimental reliance by the claimant, the more likely it is that the court will be prepared to hold the defendant to the promise rather than make an award (generally of a more limited nature) designed to compensate for reliance-based losses.
[116] Unconscionability is the third key consideration. As Brennan J explained in Waltons Stores unconscionability is the element which both attracts the jurisdiction of a court of equity and moulds the remedy. In assessing the appropriate remedy, all the relevant circumstances are to be considered. The aim is not to satisfy the claimant’s expectation (although that may be what the relief requires in appropriate cases) but to satisfy the equity that has arisen in the claimant’s favour.
[117] While some authorities continue to refer to relief as being the minimum necessary to satisfy the equity, the emphasis in more recent cases has been on a broad consideration of the relief necessary to achieve a just and proportionate outcome.
[110] In this case, the assurance by Mr Harvey was clear and explicit; the detrimental reliance by Brett is significant and the unconscionability in departing from the expectation is also clear. Accordingly, expectation relief is appropriate to satisfy the equity that has arisen in Brett’s favour.
[111] I will make the orders in [108](a) and [108](b). They are in the alternative to the orders in the contract claim.
Testamentary Promises Act (Brett)
[112] This claim is an alternative to the first two claims on which I have found in favour of Brett. I therefore consider the claim only briefly.
[113] Under s 3 of the Testamentary Promises Act, the claimant is required to prove an express or implied promise by the deceased to reward them for services or work by making some testamentary provision for them.24
[114] Mr Badcock submits that Brett’s claim overlooks the fact that s 3 of the Testamentary Promises Act requires a nexus or linkage between the services or work provided and the alleged promise. He submits the alleged promise relied on by Brett relates to the (purported) forgiveness of a debt relating to a commercial transaction, not any reward for services or work provided by Brett. He says Brett was compensated by Mr Harvey for work and services that Brett provided up to the time of the 2004 agreement. The 1999 arrangements were put in place to ensure that Brett received compensation for his work and the value that he had added to Mr Harvey’s farm assets and of MLHS and NZWD. The value to Brett at the time of the 1999 arrangements as sole shareholder of MLHS was $550,000 which Mr Badcock submits is far greater than any services ever rendered by Brett.
[115] Mr Badcock further submits that Brett’s approach also overlooks that he leased the home farm from 2001 and that once he entered into the written agreement in 2004, Brett no longer worked for his father. He says that after 2004 there is no evidence that Brett provided any further services beyond those arising from his ordinary love, affection and assistance to his father. He submits that to the extent that he did, he has been compensated in the probated will through the gift of one-fifth of the residue of the estate.
[116] Mr Gay acknowledges that there is a certain logic to Mr Badcock’s submission that under the 1999 arrangements Brett had been fully compensated for his 16 years of work in the family businesses and farms. But Mr Gay points to the
$60 per week wages and says often Brett would work on all three of Mr Harvey’s family farms and sometimes for 15 to 20 hours a day and for seven days a week. Having said that, Mr Gay acknowledges that even if Brett should have been paid an additional sum of say $40,000 per annum on average, the “compensation” benefit of the MLHS shares would have come close to providing compensation for Brett.
24 Law Reform (Testamentary Promises) Act 1949, s 3.
[117] Mr Gay further says if Mr Badcock’s figure of approximately $550,000 was taken to be the net value of the MLHS shares at the time of the 1999 arrangements there would still be a shortfall to Brett of just under $100,000 for the 16 years that he worked on his father’s farms. Nevertheless, Mr Gay acknowledges that the 1999 arrangements go a significant way towards providing compensation.
[118] But with those acknowledgments and concessions, Mr Gay submits that still leaves as unaccounted for, Brett’s work and services after the 1999 arrangements and share transfer and the fact that under the 1999 company restructuring Brett took responsibility for a debt totalling $857,000 secured against the home farm. That meant his father was relieved from further liability for that debt.
[119] Mr Gay submits that further relevant matters for the Court to take into account in the exercise of its discretion include the fact that Brett has been a dutiful son taking over the farming enterprises of the Harvey family which had started with his paternal grandfather dating back to the 1920s and 1930s. He says that Brett has continued to support his father and mother after the 23 November 2004 transaction, pointing to the fact that the Owen Road farm is next to his mother’s farm and the family home.
[120] I find against Brett on this cause of action. His services have (mostly) been compensated for through the 1999 arrangements. Any further services or assistance provided to his father are in the nature of services a member of a farming family might be expected to provide. They do not go beyond that.
Conclusion
[121]Brett’s claim under the Testamentary Promises Act fails.
Delwyn’s claims
[122] Delwyn’s primary claims are in contract and alternatively estoppel. In many respects they are very similar to Brett’s claims. Like Brett, Delwyn also makes a claim under the Family Protection Act, which I will consider along with the other Family Protection Act claims in the last part of this judgment.
[123] Mr Harvey set up a company, Del Properties Ltd, named after Delwyn, which acquired four residential properties in Northland, where Mr Harvey had spent some time. He moved back and forth between his interests in Northland and his interests in the Waikato area.
[124] Mr Harvey transferred his shareholding in Del Properties to Delwyn and her husband in December 2009 (the Del properties transaction). As part of the arrangement there was a debt back to Mr Harvey of $918,694 (the debt). It is Delwyn’s case that (as with Brett) her father said the debt would be forgiven in his will. The debt was not forgiven in Will 9, hence Delwyn’s claims.
[125] I now set out some more detail surrounding the Del properties transaction. Mr Harvey was the sole shareholder and director of Del Properties. He had made shareholder’s advances to Del Properties of $918,694. Del Properties also had BNZ borrowing of around $250,000 which was personally guaranteed by Mr Harvey. Del Properties owned three residential properties in Houhora and one in Awanui in the Far North.
[126] In May 2009, Delwyn and her husband and children were on holiday in Fiji with Delwyn’s parents. Delwyn says her father told her of his proposal to transfer his interests in Del Properties to her as her “inheritance”. On return to New Zealand, Mr Harvey’s solicitor in Hamilton, Ms McDermott, was instructed to prepare the documentation for the Del Properties transaction. The transaction was constructed so that Mr Harvey transferred his shareholding in Del Properties to Delwyn and her husband for $2. This reflected the balance sheet book value of the houses and market value of the company assets, which were negative. At the time of the Del Properties transaction, the book value of the assets was $1,068,676. The liabilities were the shareholder’s current account of $918,694 plus BNZ borrowing of $248,978. The total of those two amounts is $1,167,672 resulting in a negative total equity of
$98,996 at the time of the Del Properties transaction. The share price and valuation were arrived at with both Mr Harvey and Delwyn having separate accounting advice.
[127] Delwyn’s evidence is that she believed the value of the houses was even less than the book value having regard to the drop in values of houses in the area at that
time. The value she estimates is around $800,000 to $840,000 although there is no valuation evidence to support that sum.
[128] The parties to the Del Properties transaction were Del Properties, Mr Harvey as sole shareholder, Delwyn and her husband as purchasers of the shares, and Delwyn and Mrs Harvey as the trustees of Delwyn’s trust, the Maraetai Trust.25
[129] Mr Harvey’s shareholder’s advances of $918,694 were assigned to the Maraetai Trust and in return the trustees agreed to be indebted to Mr Harvey for that amount. In other words, Del Properties became indebted to the trustees for $918,694 instead of Mr Harvey following his assignment of his shareholder’s current account. Mr Harvey assigned his debt to the trustees and in return the trustees became liable to Mr Harvey for the same amount. Mr Harvey was discharged from his guarantee to the BNZ of the Del Properties debt to the bank. This was replaced by a new guarantee to the BNZ by Delwyn and her husband. Delwyn paid for her father’s legal costs for the Del Properties transaction.
[130] Delwyn’s case is that her father agreed he would forgive the debt in his will and she relied on that statement from her father in entering into the Del Properties transaction. Mr Harvey made a new will on 25 November 2009 (Will 6). That will expressly provided for forgiveness of any debt owing by any child or any family trust. Mr Harvey’s next will of 14 January 2014, made with his Hamilton solicitor, Ms McDermott, similarly provided for forgiveness of debt as did Will 8.
Breach of Contract (Delwyn)
[131] Delwyn’s case is that the Del Properties transaction, that is the contract, was partly written and partly oral. The oral component was the agreement by Mr Harvey to forgive the $918,694 debt in his will.
[132] Delwyn says that her father referred to the Del Properties transaction as providing her with her “inheritance” during her lifetime. She says that from a value standpoint, the combined amount of the debt and the BNZ borrowing exceeded the
25 Mrs Harvey’s liability as trustee was limited to the assets of the trust.
value of the company assets. Delwyn says that the transaction was of no value to her and was no inheritance at all without her father’s agreement to forgive the $918,694 debt on his death.
[133] Bryce defends Delwyn’s contract claim and says she owes the estate a debt in the sum of $918,694. He says that the oral term alleged by Delwyn is contradictory to and incompatible with the express terms of the written agreement, in particular the upon demand term in the written agreement. Associated with that argument, Bryce relies on the parol evidence rule. Further he says the insertion of the alleged oral term makes the contract unworkable and uncertain. He also says that the oral term alleged by Delwyn relates to an agreement for the disposition of an interest in land and by virtue of s 24 of the PLA it must be in writing. The alleged contract is therefore not enforceable. These are all familiar arguments to the reader who has read the earlier part of this judgment addressing Bryce’s defence of Brett’s claim.
Did Mr Harvey agree to forgive the debt in his will?
[134] The evidence clearly establishes that Mr Harvey agreed to forgive the debt in his will. First, as part of the background, the Del Properties transaction was initiated by Mr Harvey himself. It was not a proposal either requested or prompted by Delwyn. I accept the submission Mr Piggin, counsel for Delwyn, makes that this adds weight to Mr Harvey’s intention that the debt would be forgiven. Next, although there is nothing in writing from Mr Harvey (because of his illiteracy), there are many references in the communications between the professional advisors on both sides as well as Delwyn herself in which the issue of the debt was closely bound up with the promise by Mr Harvey that the debt would be forgiven in his will. It is apparent too from the communications that the existence of the debt was a serious concern for Delwyn and her husband. I mention just some of the communications.
[135] There is a file note by Barbara McDermott dated 20 May 2009 where she refers to an attendance on Mr Harvey in person. The heading on the file note is “Re: Sale of Share [sic] in Del Properties Limited to Delwyn”. The file note records “… I also advised Martin that he would need to amend his Will so that the debt owed to him for the properties would be forgiven on his death …”. Further on in the file note
it states “… Martin said he would like Delwyn to have the benefit of the properties while she was young and he confirmed that he had no need for them”.
[136] Ms McDermott included the following in her reporting letter of the same date to Mr Harvey:
Scope of work – Transfer of Del Properties Limited to Delwyn
The work we will undertake in relation to the above matter will include:
… Advising you in relation to gifting of amount owing by Delwyn for the transfer of the shares (or properties).
Preparing amended will providing for forgiveness of debt owing by Delwyn.
[137] Again, on the same date Ms McDermott wrote to Mr Harvey’s accountants, Cowley Stannich, saying:
… Martin also discussed with us the transfer of the shares in Del Properties Limited to Delwyn (Martin would consider transferring the properties themselves if it was not desirable to transfer the shares).
The transfer of the shares (or properties) will be subject to Delwyn taking over the existing debt of about $250,000 with BNZ. The purchase price would be repayable interest free and upon demand. Martin intends to eventually gift the debt for the transfer of the shares (or properties) to Delwyn. … Martin would also amend his will to forgive the debt owed to him by Delwyn.
[138]On 12 June 2009, an email from Cowley Stannich to Ms McDermott stated:
… There would have to be a loan back to Martin for the difference which he would have to gift off annually or be forgiven in his will.
[139] An email of 25 August 2009 from Delwyn’s solicitor to Delwyn stated: “… As I understand it the company has no value in as much of the buildings and the account values are off-set by debts …”.
[140] On 9 September 2009, a further email from Delwyn’s solicitor to Delwyn stated: “… I discussed with [your accountant] a trust as the holder of the shareholders advances which is effectively your father’s gift to you and she is in agreement with that …”.
[141] On 21 September 2009, a letter from Cowley Stannich to Delwyn’s accountants stated, “The debt will be forgiven on Martin’s death”.
[142] On 21 October 2009 an email from Cowley Stannich to Ms McDermott stated, “Shares are valued at a $1 … The shareholders advance can be assigned by Martin to the DM Sinclair Family Trust26 and ultimately be gifted by Martins will”.
[143] There is a handwritten file note by Barbara McDermott on 6 November 2009 which records:
… TT Martin … Martin confirmed … he would [illegible] his will if necessary although he thought he had already forgiven children’s debts in will. …
[144] Delwyn says that in the period of October to November 2009, she and her husband argued about whether to take over Del Properties with liability to her father for $918,694. That was especially in the context of her estimate at that time that the properties owned by Del Properties were worth about $800,000 to $840,000 as against cost of $1,063,057.
[145] On 25 November 2009, Mr Harvey executed Will 6 which included a clause (as appeared in previous wills) forgiving any child of his or any family trust who or which was indebted to him at the time of his death from payment of such indebtedness. Delwyn’s evidence is that in the following weekend of 28 and 29 November, her father told her he had made a new will with his lawyer in Kaitaia forgiving the debt. The documents for the Del Properties transaction were signed in the week following, on 1 December 2009.
[146] On 4 December 2009, there was an exchange of emails between Delwyn’s solicitor and Ms McDermott about forgiveness of the debt in Mr Harvey’s will. Delwyn’s solicitor asked Ms McDermott to confirm that she had discussed with Mr Harvey the need to ensure that his will protected the intention that the advance would not be recovered in the event of his death. Ms McDermott responded that she had discussed with Mr Harvey the need to change his will, but said she would raise
26Another trust, the Maraetai Trust, formed by Delwyn with Delwyn and Mrs Harvey as trustees was substituted for the DM Sinclair Family Trust.
this with him again to let him know it should be done as soon as possible to protect his intention that the debt would not have to be repaid. Delwyn emailed her solicitor on the same day telling him that her father had told her the previous weekend that he had updated his will the week before and had forgiven all debts and that it was his Kaitaia lawyer, not Ms McDermott who prepared the will.
[147] A short while later, on 14 December 2009, there is a handwritten file note by Ms McDermott which states:
… 1) Martin advised - will change recently so all debts owed by children written off. He will let me have a copy.
[148] There is no question, on the basis of the evidence, only part of which I have summarised above, that there was an agreement by Mr Harvey to forgive the debt in his will. It was a term of the contract for the sale of the shares in Del Properties to Delwyn and her husband.
Is the term that the debt be forgiven contradictory of and incompatible with the terms of the written agreement?
[149] I discussed the law in relation to the parol evidence rule in the context of Brett’s claim (at [71] to [73] above). It is not necessary to repeat that discussion here.
[150] I am satisfied on the evidence, only part of which is reproduced above, that the parties did not intend the written contract to be the “all-embracing written formula”. Not only are there the written communications referred to above, but I accept that at the time, Delwyn had serious concerns as to what would happen if she were liable to repay the debt on demand. Her husband was opposed to entering into the Del Properties transaction. His concern was understandable. He was a co-shareholder/director of the company and, under the transaction, was required to enter into a bank guarantee in circumstances where the debt was almost equal to, or (on Delwyn’s evidence) likely greater than the value of the assets. Delwyn and her husband argued about entering into the transaction but Delwyn persuaded her husband that they should proceed because of her father’s assurance that the debt would be forgiven in his will.
[151] Looking at the situation from Mr Harvey’s side of the transaction, there is a good and understandable explanation as to why the agreement was not reduced in its entirety to writing. I accept that Mr Harvey wished to have the documented debt in place as a protection for Delwyn if she ever separated (the same rationale applied to Brett’s debt). The provision of funds being structured as a debt meant that those funds were not converted to relationship property to be divided equally, but the loan advance remained as a relationship debt which, if the couple separated, Mr Harvey could then call for.
[152] On Delwyn’s side of the equation, there was no perceived need to have the forgiveness of debt recorded in writing. Her father’s assurance and agreement was enough. Not only was he a close and loving father, but her evidence was that he was known to be a man of his word. Delwyn was not alone in holding this view. It was echoed by the rest of the family, including Bryce.
[153] I accept that the oral term has more than the required degree of certainty. It has a very specific focus on what should occur, and that is that the debt would be forgiven on Mr Harvey’s death. Further, I do not accept Mr Badcock’s submission that there is a contradiction between the oral term and the written term that the debt was payable on demand. There is no conceptual difficulty in the debt being able to be called up (in the situation contemplated by Mr Harvey, namely Delwyn separating from her husband) but otherwise the debt would continue (undemanded) until the date of Mr Harvey’s death when it would be forgiven in his will. That takes me back to the reality of Mr Harvey’s intention and description of the Del Properties transaction as an “inheritance” for Delwyn, albeit to be received by her in his lifetime.
[154] In summary, the oral term is not uncertain and is not contradictory of the written terms of the contract.
Section 24 of the Property Law Act 2007
[155] Mr Badcock’s submission on the application of s 24 of the PLA can be disposed of in short order. That section has no application. The Del Properties transaction contained no provision for the disposition of land. The residential
[286] As far as the debt owed to Mr Harvey referred to in the financial accounts for OHL as at 31 March 2009, Bryce accepted that this debt was his father’s. He also accepted that if it is written in the accounts, it is written in the accounts.
[287] Neither the shares nor the current account are listed in schedule B of the contracting out agreement, either specifically or by category. Further, in relation to the HHL shares, Mr Harvey sold his shares to Paul in 2008.
[288] In relation to the OHL bank statements in evidence, under cross-examination Bryce acknowledged that they show that there was personal expenditure for his father for Sky TV and that drawings for his mother were paid from the OHL bank account. The company bank account was also used to fund Mr Harvey’s personal expenses, as drawings.
[289] I accept on the evidence referred to above, Mrs Harvey has a relationship property interest in both the shares and the shareholder advances in OHL pursuant to s 8(1)(e) of the PRA. They were not Mr Harvey’s separate property.
43The Fruit Shop was sold on 17 September 2015 to an unrelated third party for the purpose of funding 29 Awanui Avenue, Te Kauwhata (discussed at [302] and following)
44 Fisher on Matrimonial and Relationship Property, above n 39, at [10.23].
45At [10.23]. See also Hedley v Hedley (1980) 4 NZFLR 33 at 34 and Reid v Reid HC Wellington M 503/79, 20 December 1982 at 2.
[290] Although the shares and current account for OHL are a specific gift to Bryce in Will 9, s 78 of the PRA applies. Mrs Harvey’s relationship property claim has priority over any beneficial interest to which any person is entitled under the will (if any) of the deceased spouse or partner.
BC Harvey Industries Ltd (one share)
[291] Mr Harvey owned one share in Bryce’s company, BC Harvey Industries Ltd (BCHIL) which was incorporated on 15 December 1993 just prior to Bryce leaving for the United Kingdom. The share existed at the time of the contracting out agreement. That agreement does not refer to any shares in BCHIL as the separate property of Mr Harvey even though he owned the share at the time of the agreement.
[292] However, Bryce insisted that the one share held by his father was referred to in the schedule to the contracting out agreement although clearly it is not. Over almost two pages of cross-examination Bryce stubbornly insisted that he could see the one share in BCHIL in the agreement as his father’s separate property.
[293] Mr Badcock submits that Mr Harvey held the share in BCHIL as a bare trustee and he did not have a beneficial interest in the share. He refers to Bryce’s evidence that he received advice when he created the company that at least two directors and two shareholders were required. He says his father was appointed as a director and allocated one share which his father did not pay for. Bryce says he later learned that advice was incorrect and his father was removed as a director but they did not bother reallocating the father’s shareholding. He says the company has always been solely his company.
[294]A commonly used definition of a bare trustee is as follows:
A bare trustee is a person who holds property in trust for the absolute benefit and at the absolute disposal of other persons who are of full age and sui juris in respect of it, and who has themself no present beneficial interest in it and no duties to perform in respect of it except to convey or transfer it to persons entitled to hold it, and he is bound to convey or transfer the property accordingly when required to do so.
[295] Bryce’s evidence does not go far enough to establish that his father was a bare trustee and holding the share for the beneficial interest of Bryce.
[296]The share is relationship property.
150 Russell Road, Huntly (now sold) and 8 Ohinewai North Road, Ohinewai
[297]It is convenient to consider these properties together.
[298] Both of these properties were in Mr Harvey’s name. Both were acquired after the date of the contracting out agreement. The Russell Road property was purchased on 27 February 2009 and the Ohinewai North Road property was purchased in August 2009. As both properties were acquired after the relationship commenced and as no separate property status arises under the contracting out agreement, s 81 applies. The Russell Road property was sold by the executors after Mr Harvey’s death and the net sale proceeds were applied to the construction of the Awanui Road property, which I will refer to next.
[299] Both properties are listed in Mr Harvey’s financial statements as is the mortgage debt for the properties and rental income was earned from them.
[300] Bryce insists that because his mother made no financial contribution to the properties, nor because there was no common intention that the properties would be used for the benefit of both his parents, it is not relationship property.
[301] That submission overlooks the application of s 8(1)(e) to these properties. Under that section they are relationship property. Bryce has not discharged the onus on him to establish otherwise.
29 Awanui Avenue, Te Kauwhata
[302] The property at 29 Awanui Avenue was held in Mr Harvey’s name. In Will 9 Mr Harvey left a life interest in this property to Mrs Harvey.
[303] The background to the acquisition of this property is as follows. At the time of his death Mr and Mrs Harvey were living in the farmhouse on Mrs Harvey’s farm.
The Awanui Avenue property was under construction at the time of Mr Harvey’s death and was intended to be their retirement home (the house has since been completed and Mrs Harvey is living there).
[304] Under s 8 of the PRA, 29 Awanui Avenue is not the family home and is not relationship property on that legal basis. However, Mrs Harvey submits it is relationship property. Bryce says it is his father’s separate property.
[305] Mr Wilson, the solicitor who prepared Will 9 for Mr Harvey had earlier carried out the conveyancing work for the purchase of the land at 29 Awanui Avenue. Mrs Harvey’s evidence was that she asked Mr Wilson to put the property in their joint names. Mr Wilson said he did not remember meeting Mrs Harvey in 2015 and could not remember the conversation she referred to. But he accepted that “if she says that she is probably right but I can’t recall that going back”. Further, the construction agreement for the house on the site was in the joint names of Mr and Mrs Harvey.
[306] The property was funded in part by funds paid to Mr Harvey from OHL into Mr Harvey’s bank account and which were referred to as his personal property in his financial accounts and in the estate financial accounts. After Mr Harvey died, the estate continued to fund the balance of the payments due under the construction agreement up until completion. Sale proceeds from the Russell Road property (referred to above) were paid to the estate and used to fund payments due after Mr Harvey’s death.
[307] Mrs Harvey contributed a sum of $190,716. Mr Badcock submits that given Mrs Harvey has been repaid that sum by the executors she has no financial interest in 29 Awanui Avenue. In response to that submission, first, the $190,716 was money that Mrs Harvey inherited from an aunt and was thus her separate property.46 But in any event, financial contribution is not the sole benchmark.
[308] The property was purchased after the contracting out agreement was signed, after Mr Harvey had undertaken the further property transactions with his separate
46 Property (Relationships) Act, s 10.
property and using funds that were paid into his personal bank account. It was acquired after the relationship commenced, and no separate property status arises under the contracting out agreement. Section 81 applies as does s 8(1)(e). The house is relationship property.
[309] Mrs Harvey also seeks an ancillary order under s 33 of the PRA that the life interest left to her under Will 9 should be set aside and the property vested in her own name. Having regard to my finding that the property is relationship property, that is an order I will make.
Half share in 37 Raleigh Street, Cambridge (now sold)
[310] Mr Harvey purchased 37B Raleigh Street, Cambridge in joint ownership with his sister after the date of the contracting out agreement. Mr Harvey’s half share interest in the property was transferred to him on 15 November 2002. The property was sold by the executors on 31 January 2018 after Mr Harvey’s sister’s death. Mrs Harvey claims a relationship property interest in the half share of the net sale proceeds.
[311] Mr Badcock submits that the purchase closely followed the contracting out agreement of 29 June 1999 and the May 2002 deed, completing the 1999 arrangements. Mr Badcock acknowledges there is no evidence as to how Mr Harvey funded the purchase, but he submits that given the temporal connection of the purchase to the contracting out agreement and the 1999 arrangements, the Court can safely infer that Mr Harvey obtained this half share from his separate property at the time.
[312] As Mr Badcock correctly acknowledges, there is no evidence before the Court that any separate property of Mr Harvey was used to fund the purchase of the property. Bryce claims that separate property was the source of the purchase price, but has not produced any evidence to substantiate the claim. He would have to show that money from either HHL or the home farm was the source of the purchase price. Mr Badcock purports to rely on an answer in cross-examination from Mrs Harvey agreeing that Mr Harvey must have paid for the house out of his separate property. However, there is no evidence of that and I note that the contracting out agreement
does not refer to bank accounts. They are relationship property. I therefore place no weight on Mrs Harvey’s answer in cross-examination.
[313] The Raleigh Street property was acquired after the relationship commenced, no separate property status arises under the contracting out agreement, and s 8(1)(e) applies. Mrs Harvey therefore has a relationship property interest in the net sale proceeds of half the property.
[314] The estate will need to account to Mrs Harvey for any post-death income from the estate part of the pool of property I have found to be relationship property.
Conclusion on relationship property claim
[315] Mrs Harvey succeeds on her claim on the balance of probabilities that all the items she identifies as relationship property are relationship property. The items are listed in Schedule A to this judgment.
Overall monetary result using Mr Kemp’s chart (before considering the Family Protection Act claims)
[316] It was apparent to counsel and the Court at the hearing that a number of “scenarios” were possible depending upon my decision on the various claims. With the agreement of all counsel, the Court received a chart prepared by Mr Kemp which adopted a structure reflecting the order in which it was proposed to the Court that I should consider the claims. I have followed that order in this judgment. A copy of Mr Kemp’s chart, which runs across three pages, is annexed as Schedule B. As is apparent the first part of the chart, “chapter 1”, relates to the steps in determining the claims by Brett, Delwyn and Bryce. The second part, “chapter 2” sets out the steps that follow in determining Mrs Harvey’s relationship property claim. The final part, “chapter 3” sets out the steps for final distribution.
[317] There are eight alternatives or permutations each setting out in monetary terms the outcome for the particular permutation. In this judgment I have found in favour of Brett and Delwyn. The debt for each of them is not required to be repaid. I have found against Bryce. For Mrs Harvey I have found in her favour on each of
the items she claims as relationship property. As a consequence, Mr Kemp’s permutation number 2, which is the second horizontal line on the chart, applies. That is subject to an adjustment in the final part of the chart, chapter 3, for legal fees paid by the estate, which I will address in the next part of this judgment. It is also necessary to make a minor adjustment in column 2 to the amount of Delwyn’s debt. There is a typographical error in the chart. The amount in the chart is stated to be
$918,654. The correct amount is $918,694. I will not amend the chart but will make the necessary $40 adjustment in my paragraph below.
[318]Subject to the adjustment for legal fees, the position in summary is as follows:
(a)The value of the estate before adjustments is $4,435,553;
(b)The balance of the estate after Delwyn’s debt (column 2) and Brett’s debt (column 3) are forgiven, i.e deducted, and Bryce’s claim is refused, i.e. no deduction (column 5) is $2,162,984 (column 6);
(c)The total relationship pool is $2,567,469 (column 10). That total is arrived at by adding the balance of the estate, $2,162,984 (column 8) and $404,485, being Mrs Harvey’s relationship property (column 9);
(d)The balance required to be paid to Mrs Harvey to equalise on a 50:50 sharing basis is $879,250 (column 11);
(e)The balance of the estate after equalising is $1,283,734 (column 12);
(f)The value of the bequest to Bryce in Will 9 is $874,052 (column 13); and
(g)The balance of the estate, which will form the residue after the deduction of the bequest to Bryce is $409,682 (column 14).
Estate’s legal fees
[319] The financial accounts for the estate prepared by the executors show legal fees for the 2017–2021 financial years as $180,984. The estate should account to Mrs Harvey for half of those legal costs because the estate has used relationship property funds to pay for its full legal costs. Mrs Harvey should be compensated for 50 per cent of that expenditure by allowing for a further adjustment in the sum of
$90,492 to be credited to her. This adjusts Mrs Harvey’s total in column 11 to
$969,742.
[320] The consequential adjustment to the balance of the estate after equalising, in column 12 is $1,193,242 (i.e. $1,283,734 less $90,492). That results in a further adjustment to the balance in column 14, so that the balance of the estate after the bequest to Bryce would be $319,190 (i.e. $1,193,242 less $874,052).
[321] I will adopt the sum of $319,190 as the amount in the residue of the estate for the purpose of considering the claims by all four plaintiffs under the Family Protection Act to which I now turn.
[322] For completeness, I note that the estate’s legal costs can be considered and allocated, if necessary, as part of a costs judgment following the issue of this judgment.
Claims under Family Protection Act 1955
Mrs Harvey’s claim
[323] Mrs Harvey seeks an order pursuant to s 4 of the Family Protection Act for further provision from her late husband’s estate because, she says he breached the moral duty that he owed to her as his wife of 48 years. She says that when Mr Harvey made his last will on 4 April 2016, he should have recognised her position as a widow and provided for her proper maintenance and support in that will. She says his failure to do so was a breach of the moral duty that is owed to surviving spouses under the Family Protection Act.
[324] Ms Stephenson, for Mrs Harvey, submits that even after Mrs Harvey’s claim under the PRA is determined and with the deduction of Mrs Harvey’s relationship property share from her late husband’s estate, Mrs Harvey should be awarded further provision from the estate because of the breach of moral duty.
[325] In short, Ms Stephenson submits that Mr Harvey did not adequately provide for Mrs Harvey in his last will. She says Mr Harvey should have recognised that Mrs Harvey had a relationship property claim to property that they had acquired after the date of the contracting out agreement. Mr Harvey was told that there could be a relationship property claim to his assets when he gave his will instructions to his solicitor, Ms McDermott, between August 2013 and January 2014 for the preparation of Will 8.
[326] Ms Stephenson notes that during that period of five months, Ms McDermott’s notes disclose that she referred Mr Harvey to the possibility of a claim on a number of occasions including at the first meeting and in a letter she sent to Mr Harvey. Not only was Mr Harvey told of the possibility of a relationship property claim, Ms McDermott also recorded in her file note that Mr Harvey said to her, “If Marg wants more she can claim more”.
[327] Ms Stephenson refers to the fact that Mr Harvey had left his residuary estate to Mrs Harvey in Wills 1 to 6 between 2 November 2001 and 25 November 2009 after he had signed the contracting out agreement. Under Will 7, executed in 2011, the residuary estate was no longer left to Mrs Harvey but to the five children in equal shares. Ms Stephenson submits that the breach of moral duty was perpetuated in the terms of the 4 April 2016 will. She says that the breach will be cured by the provision to Mrs Harvey of her own home, a sufficient capital sum which recognises her need for maintenance and support. She seeks an order that 29 Awanui Avenue is vested in her as her absolute property (I have already said I will make such an order) and further that she receive from the residuary estate a sum sufficient to provide her with a nest egg for her future expenses associated with that property. Ms Stephenson submits a sum of $100,000 (calculated on the basis of 10,000 per year for 10 years) would be reasonable.
[328] The legal principles to be applied by the Court are settled and well understood. Testamentary freedom remains except to the extent that there has been a failure to make proper provision for the maintenance and support of those entitled to it.47 The Court’s inquiry under s 4, namely whether there has been “proper maintenance and support provided” turns on whether there has been, what has come to be referred to as a “breach of moral duty”.48 The test is whether, objectively considered, there has been a breach of moral duty by the deceased, judged by the standards of a wise and just testator or testatrix.49 Mere unfairness is not sufficient and it must be shown in a broad sense that the applicant has a need of maintenance and support.50
[329] In Flathaug v Weaver, the Court of Appeal discussed dual claims brought under the PRA and the Family Protection Act and said:51
[14] The claim by Mrs Weaver precipitated claims by Mrs Flathaug under the Property (Relationships) Act 1976 and the Family Protection Act. It was not contested that she was entitled to an equal division of relationship property. That totalled $1.1M, comprising the testator’s estate, the debts owed by the family trust to the widow, a bank account, furniture and a motor vehicle. An award of half the relationship property reduced the testator’s estate to $550,000.
[15] The Judge had no difficulty concluding that the widow was entitled to further provision under the Family Protection Act. He rightly recognised her claim as paramount. He accepted a submission that her needs for comfort and financial security warranted further provision by vesting in her the deceased’s half interest in the matrimonial home and the adjacent house property and the household furniture and the car. There is no challenge to that finding.
[330] In this case, in her PRA claim, Mrs Harvey was simply asking the Court to make orders clarifying her entitlement to relationship property. I have accepted her claim. But under the probated will, Mrs Harvey received nothing from the estate (bar some small items of property) once her relationship property share is credited to her. She receives no portion of the residue.
47 Little v Angus [1981] 1 NZLR 126 (CA).
48 Williams v Aucutt [2000] 2 NZLR 479 (CA) at [38].
49 Little v Angus, above n 47, at [127].
50 Williams v Aucutt, above n 48, at [37] citing Re Leonard [1985] 2 NZLR 88 (CA) at [92].
51 Flathaug v Weaver [2003] NZFLR 730 (CA) at [14] and [15].
[331] The instructions to Mr Wilson for the preparation of Will 9 and the lack of advice from him were in contrast to the manner in which Will 8 was prepared with full advice from the solicitor acting at that time. Mr Wilson says Mr Harvey was not seeking advice and knew what he wanted in terms of his will. However, it would appear that in relation to Will 9, Mr Wilson did not give consideration to the overall value of Mr Harvey’s assets and did not advise him on the implications of his proposals for his will and did not note the possibility of claims under both the PRA and the Family Protection Act and the consequences for Mrs Harvey.
[332] Further, as already noted, Mr Wilson was not aware of Mr Harvey’s reading disability. The consequence of that is that it was only Mr Wilson’s reading out of the will that gave Mr Harvey the opportunity to confirm its contents before he executed it. A draft was not provided in advance as had occurred with previous wills. On at least some of those previous occasions Mrs Harvey had assisted her husband with reading over the will and discussing its implications. Additionally, Mrs Harvey’s evidence was that her deceased husband was hard of hearing and often did not wear his hearing aid.
[333] I consider that if Mr Harvey had received full advice about the position for Mrs Harvey, he would have been able to acknowledge that he was in breach of his moral duty owed to her and that “she could claim more” as he had said to Ms McDermott when he received her careful advice between August 2013 and January 2014 prior to the preparation of Will 8.
[334] Mrs Harvey has provided evidence of her financial position. Her income comprises National Superannuation, payments from Brett’s company for the leasing of Mrs Harvey’s farm and the net rental income, less running costs, from the residential properties on Mrs Harvey’s farm. Her updated financial information, which includes Mrs Harvey’s income and tax summary for the year ended 31 March 2020, shows that her taxable income was $44,659.
[335] In his text, Bill Patterson refers to the approach by the Courts that unless it cannot reasonably be avoided, a widow should not be required to meet out of her income outgoings on the family home such as rates, insurance premiums,
maintenance and similar outgoings, including (Mr Patterson submits) interest on mortgages secured over the home.52 It is accepted that the property at 29 Awanui Avenue was not the “family home” for PRA purposes. However, the home (construction now completed) was being built as Mr and Mrs Harvey’s retirement home at the time of his death. For present purposes, under the Family Protection Act, I treat it as akin to the family home.
[336] In all the circumstances as set out above, I consider Mrs Harvey has established a breach of moral duty on the part of Mr Harvey. Any award will come out of the residue and as a consequence will reduce the amount to be distributed to her five children. It is not for the Court to be generous with a testator’s property beyond ordering such provision as is sufficient to repair the breach.53 But equally, an award should not be “unduly niggardly”.54 The Court has a broad discretion which is required to be exercised in the particular circumstances of a case having regard to the factors in the authorities I have identified.55
[337] I consider the $100,000 lump sum as claimed by Mrs Harvey will repair the breach of moral duty. I will make an order to that effect. I take into account her age of 74 (or 75) years, the long and happy marriage extending over 48 years, Mrs Harvey’s circumstances and income in making that decision.
[338]Mrs Harvey succeeds on her Family Protection Act claim.
Brett’s claim
[339] Brett brings his claim on a contingency basis in case his primary claims were to fail. It is only the basis of the failure of his primary claims that Brett argues that his father did not make adequate provision for his maintenance and support in his probated will. Brett has succeeded on both his contract claim and his alternative claim in estoppel. It is therefore unnecessary to consider his claim under the Family Protection Act.
52Law of Family Protection and Testamentary Promises, above n 9, at [8.5] citing Re McNaughton (dec'd) [1976] 2 NZLR 538 (SC) at 543.
53 Vincent v Lewis [2006] NZFLR 812 at [81](g).
54 Fisher v Kirby [2012] NZCA 310 at [120].
55 At [120].
[340] Although Brett receives less by way of his one-fifth share of the residue than he calculated, that is as a consequence of his mother’s primary claim under the PRA and her further claim under the Family Protection Act succeeding. Brett supported his mother in her claim under the PRA and he acknowledges that his mother’s claim under the Family Protection Act is primary.56
[341] Brett’s claim under the Family Protection Act is dismissed. He will receive a one-fifth share of the residue, namely a sum of $63,838.
Delwyn’s claim
[342] Delwyn’s case under the Family Protection Act was advanced on the same basis as Brett, namely on a contingency basis. What I have said in relation to Brett above applies equally to Delwyn.
[343] Delwyn’s claim under the Family Protection Act is dismissed. She will also receive a one-fifth share of the residue, namely a sum of $63,838.
Bryce’s claim
[344] Bryce advances his claim under the Family Protection Act on the basis of his interpretation of being “evened up”. His claim under the Family Protection Act, as with Brett and Delwyn, is contingent on his primary claim in estoppel failing and on the outcome of Brett and Delwyn’s claims and his mother’s claim. I have held against Bryce on his claim and in favour of Brett, Delwyn and Mrs Harvey on their primary claims. In those circumstances Bryce seeks an order pursuant to s 4 of the Family Protection Act for such provision out of the estate for his proper maintenance and support. That is because he says the effect of the success of those claims has reduced his entitlement under the probated will.
[345] Mr Badcock acknowledges that, pursuant to the principle in Little v Angus, Mr Harvey’s will should be disturbed only to the extent required to remedy any
56Re Harrison (dec) [1962] NZLR 6 at 14, “The testator was bound to regard his wife as having the first and foremost claim upon his estate”. In Re Rough (decd) [1976] 1 NZLR 604 (SC) at 607, White J stated: “the widow of course has the “foremost claim””. See also Re Z (decd)[1979] 2 NZLR 495 (CA); and Clements v Clements [1995] NZFLR 544 (CA).
breach to Bryce. He also acknowledges the mere fact that there is inequality (and the testator has preferred one beneficiary over other claimant members of the family) would not necessarily result in a finding that there has been a breach of moral duty. He also acknowledges that his mother’s PRA claim has paramountcy.
[346] I do not consider that Bryce has demonstrated a breach of moral duty by his father. Bryce received assistance from his father in establishing his commercial property portfolio as already referred to above. I have also found against Bryce on his notion of what was meant by “evening up” things for him. Bryce has also not demonstrated any financial need or need of maintenance. As a claimant he failed to disclose his own financial position. His financial accounts were obtained on discovery and were produced by Delwyn. They indicate that Bryce has assets of some millions of dollars. A one-fifth share of the residue ($63,838) and the additional bequest meet any support or recognition for Bryce.
[347]Bryce’s claim under the Family Protection Act is dismissed.
Result and orders
Claims out of time
[348] Leave is granted to parties whose claims were out of time to pursue their claims.
Brett’s claims
[349] Brett succeeds in his claim for breach of contract. I make the following orders:
(a)That the executors specifically perform the contract by executing an assignment of the debt in the sum of $1,353,875 in favour of the trustees of the Brett Harvey Family Trust, upon condition that Brett agrees to continue to make the payments of $1,000 each month to Mrs Harvey for the rest of her life; and
(b)I make a declaration that Brett is entitled, upon his undertaking to continue making the repayments of $1,000 each month to Mrs Harvey for the rest of her life, to the assignment in favour of the Brett Harvey Family Trust of so much of the debt as remained outstanding at the date of Mr Harvey’s death.
[350] Having made the above orders, it is not necessary to make an order for equitable damages.
[351] Brett also succeeds in his alternative claim of estoppel. I make the following orders which are in the alternative to the orders by way of relief for breach of contract:
(a)I make a declaration that the executors are estopped from denying that the debt should be forgiven and/or assigned in favour of the trustees of the Brett Harvey Family Trust, upon condition that Brett/MLHS/BHF Trust agrees to continue to make the repayments of
$1,000 each month to Mrs Harvey for the rest of her life; and
(b)I make a declaration that Brett is entitled, upon his undertaking to continue making the repayments of $1,000 each month to Mrs Harvey for the rest of her life, to the assignment in favour of the Brett Harvey Family Trust of so much of the debt as remained outstanding at the date of Mr Harvey’s death.
[352] Having made the above orders, it is not necessary to make an order for equitable damages.
[353] Brett fails in his further alternative claim under the Testamentary Promises Act. That claim is dismissed.
Delwyn’s claims
[354] Delwyn succeeds in her claim for breach of contract. I make the following orders:
(a)That the executors specifically perform the contract by executing a Deed of Forgiveness of the debt in the sum of $918,694;
(b)In the alternative, I make an order that the executors transfer the debt to Delwyn in her personal capacity and/or Delwyn and Mrs Harvey as trustees of the Maraetai Trust.
[355] Having made the above orders, it is not necessary to make an order for equitable damages.
[356] Delwyn also succeeds in her alternative claim of estoppel. I make the following orders which are in the alternative to the orders by way of relief for breach of contract:
(a)I make a declaration that the executors are estopped from demanding or reinforcing payment of the debt of $918,694;
(b)In the alternative, I make an order that the executors execute a Deed of Forgiveness of the debt in the sum of $918,694;
(c)In the further alternative, by transferring the debt to Delwyn.
[357] Having made the above orders, it is not necessary to make an order for equitable damages.
Bryce’s claim
[358]Bryce fails in his estoppel claim. That claim is dismissed.
Mrs Harvey’s claims
[359] I make an order granting an extension of time for making a choice of options pursuant to s 62 of the Property (Relationships) Act 1976.
[360] Mrs Harvey succeeds in her claim under the Property (Relationships) Act 1976. I make the following orders:
(a)An order that each item of Mr Harvey’s property held in his sole name as at 6 April 2016 as itemised in Schedule A to this judgment is the relationship property of Mr and Mrs Harvey pursuant to s 8(1)(e) of the Property (Relationships) Act 1976;
(b)An order that each item of Mrs Harvey’s property held in her sole name as at 6 April 2016 as itemised in Schedule A to this judgment is the relationship property of Mr and Mrs Harvey pursuant to s 8(1)(e) of the Property (Relationships) Act 1976;
(c)An order that Mrs Harvey is entitled to an equal one-half share in the relationship property of Mr and Mrs Harvey, and that the relationship property be divided equally between Mr and Mrs Harvey pursuant to s 25(1)(a)(i) and (ii) of the Property (Relationships) Act 1976;
(d)An order that the life estate interest in 29 Awanui Avenue, Te Kauwhata in Mr Harvey’s probated will of 4 April 2016 be set aside pursuant to s 25(3) of the Property (Relationships) Act 1976;
(e)An order that the executors account to Mrs Harvey for an equal one-half share of the value of the relationship property assets of Mr Harvey;
(f)An order that Mrs Harvey account to the executors for an equal one-half share of the value of the relationship property assets in her name; and
(g)An order that the executors account to Mrs Harvey for an equal one-half share of the net income from the relationship property assets in Mr Harvey’s name from the date of death to the date of this judgment.
[361] Mrs Harvey also succeeds in her claim under the Family Protection Act 1955. I make the following orders:
(a)The life interest in 29 Awanui Avenue, Te Kauwhata in Mr Harvey’s probated will of 4 April 2016 is set aside; and
(b)An order that the probated will of 4 April 2016 is varied to provide a lump sum of $100,000 payable to Mrs Harvey to provide for her proper maintenance and support from Mr Harvey’s estate.
[362] Mrs Harvey seeks interest on the amounts in her claims under the PRA and Family Protection Act expressed in her amended statement of claim simply as “Interest” for both causes of action. The Interest on Money Claims Act 2016 is not specified nor the section(s) in that Act relied on, nor the period for which interest is claimed. Under s 25(1) of the Interest on Money Claims Act, the Court may not award interest in those circumstances.57 However, s 25(4) enables the Court to make an award of interest where an amended statement of claim complies with the requirements in s 25(1).
[363]I will reserve the issue of interest and make further orders as follows:
(a)Mrs Harvey has leave to apply to amend her amended statement of claim so that it complies with the Interest on Money Claims Act;
(b)Mrs Harvey is to file and serve her application for leave to amend together with her proposed further amended statement of claim within 10 working days of the date of this judgment;
(c)Any party may file a notice of opposition to the application for leave to amend within 10 working days of the date of service of the application for leave to amend;
(d)Submissions in support of the application are to be filed and serve within five working days of the service of any notice of opposition; and
57Remnant v Mills [2020] NZHC 3414 at [90]; Leondale Ltd v Boyd [2021] NZHC 470 at [55]- [58]; and TPD 2018 Ltd v Godfrey and Company Ltd [2021] NZHC 1584 at [7]-[8].
(e)Submissions in opposition to the application are to be filed and served within five working days of service of the submissions in support.
[364] Submissions are to be no more than four pages. I will decide the issue of interest on the papers at the same time as I make my decision on costs.
Family Protection Act claims (Brett, Delwyn and Bryce)
[365] The claims by Brett, Delwyn and Bryce under the Family Protection Act fail and are all dismissed.
Costs
[366] Costs are reserved. Paul’s costs were earlier reserved. Brett, Delwyn, Paul and Mrs Harvey are prima facie entitled to costs. The Court will also hear from the executors on costs.
[367] If the parties are able to agree costs, a joint memorandum is to be filed within 25 working days of the date of this judgment.
[368] If costs cannot be agreed, the parties may file separate memoranda. Brett, Delwyn, Paul, Mrs Harvey and the executors are to file and serve their separate memoranda within five working days of the date for the joint memorandum. Bryce may reply within five working days of the date for the memoranda from Brett, Delwyn, Paul and Mrs Harvey. Memoranda must not exceed five pages (excluding any attachments).
[369]I will determine costs on the papers.
Gordon J
SCHEDULE A
| Asset | Asset Class | Legal Title |
| 24 Awanui Avenue, Te Kauwhata | House | Mr Harvey |
| 8 Ohinewai North Road, Ohinewai | Land and buildings | Mr Harvey |
| 150 Russell Road, Huntly (now sold) | Land and buildings | Mr Harvey |
| 37 Raleigh Street, Cambridge half share (now sold) | Land and buildings | Mr Harvey |
| 02 […] 25 000 | Bank accounts | Mrs Harvey |
| 02 […] 25 097 | Bank accounts | Mrs Harvey |
| BNZ 3007 | Bank accounts | Mrs Harvey |
| BNZ 3009 | Bank accounts | Mrs Harvey |
| BNZ 3010 | Bank accounts | Mrs Harvey |
| BNZ 3011 | Bank accounts | Mrs Harvey |
| BNZ 3012 | Bank accounts | Mrs Harvey |
| Kiwibank N/A Opened after 6 April 2016 | Bank accounts | |
| BNZ | Bank Accounts | Mr Harvey |
| Kiwibank | Bank accounts | Mr Harvey |
| Ohinewai Holdings Ltd (OHL)1000 shares | Company shares | Mr Harvey |
| OHL shareholders current account | Current account | Mr Harvey |
| (43 George Drive, Huntly) | Company shares | |
| B & C Harvey Industries Ltd 1 share | Company shares | Mr Harvey |
| AMP shares | Company shares | Mr Harvey |
| 2009 Peugeot 308 | Vehicles | Mrs Harvey |
| Golf Cart | Vehicles | Mr Harvey |
| Plant and machinery | Vehicles | Mr Harvey |
| Tax refund | Tax | Mrs Harvey |
| Tiki Village Timeshare (now sold) | Timeshare | Mr Harvey |
| Sundry assets in estate | Sundry | Mr Harvey |
| Tax liability | Tax | Mr Harvey |
SCHEDULE B
4
7
1