Horne v Public Trust (in its Capacity as Personal Representative of the Estate of Webster) HC Nelson CIV 2010-442-44

[2010] NZHC 655

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV 2010-442-44

IN THE MATTER OF     the Property (Relationships) Act 1976

AND IN THE MATTER OF  the Family Protection Act 1955

BETWEEN  SUZANNE JOAN HORNE AND EDWARD JOHN WEBSTER Appellants

ANDPUBLIC TRUST (IN ITS CAPACITY AS PERSONAL REPRESENTATIVE OF THE ESTATE OF EDWARD HOWARD WEBSTER)

First Respondent

ANDPHYLLIS EDNA WEBSTER Second Respondent

Hearing:         29 April 2010

(Heard at Wellington)

Counsel:         P R McRae for Appellants

G W Allan for Respondents

Judgment:      4 May 2010

JUDGMENT OF RONALD YOUNG J

Introduction

[1]      Edward and Phyllis Webster were married on 30 May 1980.  They remained married until Mr Webster’s death in November 2007.  Both had previously married. Mrs Webster had three children from her first marriage, Mr Webster two children and a step-child from his first marriage.  They were respectively 53 and 49 years of

age when they married.

SUZANNE JOAN HORNE AND EDWARD JOHN WEBSTER V PUBLIC TRUST (IN ITS CAPACITY AS PERSONAL REPRESENTATIVE OF THE ESTATE OF EDWARD HOWARD WEBSTER) AND ANOR HC NEL CIV 2010-442-44  4 May 2010

[2]      At marriage both the Websters owned their own homes.   Not long before Mr Webster died they bought a villa in a retirement village at Stoke.  Mr Webster’s will provided for his cash savings to go to his two children and his step-child.  His share in the villa went by law (as joint tenants) to his wife.

[3]      Mr Webster’s   children,   Suzanne   Horne   and   Edward Webster   brought proceedings in the Family Court pursuant to s 88(2) and s 25(1)(a) of the Property (Relationships)  Act 1976  for  the  division  of  Mr  and  Mrs Webster’s  relationship property and for further provision, pursuant to s 4 of the Family Protection Act 1955, from  Mr Webster’s  estate.     In  the  Family  Court  the  Judge  dismissed  both applications save for one order by consent of the parties.

[4]      Mr Webster’s children now appeal to this Court.  They submit:

a)       the Judge misconstrued the serious injustice test;

b)the Judge underestimated the appellant’s economic need and therefore the support needed from their father’s estate;

c)        recognising Mr Webster’s primary duty to Mrs Webster, the Court failed to give “fair weight” to the claim of his children;

d)the Judge wrongly emphasised the undesirability of a life interest in the estate.

Background

[5]      When Mr and Mrs Webster married, Mr Webster’s house was worth $21,000, Mrs Webster’s $43,000.  Mrs Webster also had $40,000 in savings.  With the sale of their homes and Mrs Webster’s savings the parties bought a house for $103,000.  As Mrs Webster said in her affidavit of 13 May 2009:

Although  the financial  contribution to  the  purchase of  the  Sherry River property was unequal between myself and Ted, it was purchased as joint tenants.  Both Ted and I were familiar with the issue of joint tenancy and accepted that on the death of one our home would transfer to the other.

[6]      This home was subsequently sold and a property in the Marlborough Sounds bought in substitution in 1985.   By 1997 they had sold the Marlborough Sounds property and shifted to Blenheim.  They bought a new house for $157,000.

[7]      Mr Webster had a stroke in early 2007 (at the age of 80) and they sold their house  in  Blenheim  for  $330,000.    They  then  shifted  to  Nelson  to  be  nearer Mr Webster’s daughter, Suzanne.  They bought a villa in the Oakwoods Retirement Village for $355,000.   The additional money for this purchase (at least $25,000) came from Mrs Webster’s savings.

[8]      The Villa is now worth approximately $245,000.  Both Mr and Mrs Webster had  savings  at  the  time  of  Mr Webster’s  death.     Mrs Webster  had  inherited approximately $300,000 from her mother’s estate in March 2006.  She set up a trust (the Clement Family Trust) with $200,000 of those funds to benefit her children, grandchildren and great grandchildren.  With the remaining $100,000 she gave some ($19,595) to Mr Webster.

[9]      In the last nine months of Mr Webster’s life he was in full time care in the retirement village.  This care came at a substantial weekly cost.  When he died most of his savings had been dissipated in paying for his care.   The $19,595 paid by Mrs Webster to Mr Webster’s account at the Public Trust built his capital up again to approximately $25,000, the sum currently to his credit with the Public Trust.  These are the funds that Mrs Webster has agreed can be shared between the two appellants. Thus the vast majority of the $25,000 paid to the appellants in fact came from Mrs Webster’s inheritance.

[10]     One problem arose with Mr Webster’s will.  In his will Mr Webster left his money in the Southland Savings Bank and the National Bank equally to his three children, including his step child.  Not long after the will was completed Mr Webster signed an enduring power of attorney in favour of the Public Trust.   Shortly afterwards, inexplicably, the Public Trust removed the money from the Southland Savings Bank and the National Bank and transferred it to the Public Trustee who then invested the money.   The effect of the Public Trust transfer was that when Mr Webster died his specific request to the three children could not be given effect

to.  There was no money in either the Southland Savings Bank or the National Bank to the credit of Mr Webster.  The money held to Mr Webster’s credit with the Public Trust, therefore falls into the residual estate and according to the terms of the will to be inherited by Mrs Webster.  With Mrs Webster’s consent it has been agreed that this sum invested in the Public Trust (approximately $25,000) should be transferred to the appellants by virtue of their claim under the Family Protection Act.   It will then be for the appellants to decide how they share that money with their half sibling, Sharon.  It is to Mrs Webster’s credit that she has agreed to this order on the basis that it reflected the testator’s intent (see also [9]).

Mrs Webster’s situation

[11]     Mrs Webster’s current position is that she has savings of $77,000.  She has a debt due to her of $147,000 from the Clement Family Trust.  She is a discretionary beneficiary of the trust.  She says she would never ask for repayment of the trust loan because  the  income  from  the  trust  fund  is  used  to  help  her  grand-daughter’s education.  Her superannuation is about $1,100 a month and the retirement village fee is $500 a month.  With the remaining $600 a month she has to meet her living expenses.

[12]     Unfortunately  Mrs Webster  is  not  especially  happy  in  Oakwoods  and uncertain  about  her  future.    She  has  no  friends  in  Nelson.    She  has  family in Adelaide.  She is used to having her own home and living independently.

[13]     She is also concerned that if her health deteriorates and she needs rest home care, given its cost, she may be required to call on the debt owing to her from the Clement Family Trust.   This is of considerable concern to her.   She stresses the agreement between herself and her husband was that they would each leave their share in the Villa to the other upon death.

Children’s situation

[14]     Counsel for the appellants made application for leave to file further affidavits from Mrs Horne and Mr Webster updating the position of their assets and liabilities. I am prepared to let them be read as evidence in this case, however, they do not particularly assist this decision.

[15]     Mrs Horne  is  married  and  has  four  children  now  aged  between  11  and

19 years  of  age.    Her  husband  is  62 years  of  age.    Their  position  at  the  time Mr Webster  died  is  as  follows.    They  had  a  mortgage  free  home  valued  at approximately $770,000.  In addition they own a holiday home worth some $35,000 also mortgage free. They had an investment of some $50,000 in the National Bank. Mrs Horne works part time as a teacher aid with modest earnings.   Her husband earns approximately $38,000 per annum.  Mr and Mrs Horne’s savings are intended to be used to help the children through their university education.

[16]     Edward Webster is aged 53 years of age.   He is not married.   He earns approximately  $40,000  per  annum.    He  owns  an  unencumbered  section  worth

$126,000 and is building a house on the section.  He had savings of approximately

$150,000 which have gone into the building of his house.  Mr Webster (Junior) is concerned about the increasing cost of completing his house and the size of his mortgage to complete construction.

[17]     Both children wish to help their half sibling Sharon who recently separated (although after Mr Webster’s will was signed).  She has a disabled son. Her home is heavily  mortgaged  and  she  has  no  savings.    Because  she  is  not  a  relative  of Mr Webster, being his first wife’s child, she has no claim on his estate pursuant to the Family Protection Act.

The law

[18]     There can be no criticism of the Judge’s identification of the relevant law. The first step is to consider the application for leave pursuant to s 88 of the Property (Relationships) Act.  Section 88(2) provides as follows:

88       Who can apply

...

(2)       The personal representative of the deceased spouse or [[partner]] may, with the leave of the Court, apply for an order under section 25(1)(a). The Court may grant leave only if it is satisfied that refusing leave would cause serious injustice.

[19]     If leave is granted then the Court may make orders pursuant to s 25(1) of the Act as the Judge recognised.   Assuming orders under the Property (Relationships) Act are made then the estate will have a half share of the Villa as an asset.  The final step is consideration of the claim under s 4 of the Family Protection Act against the estate identified.

[20]     The Judge identified the relevant appellate authority relating to s 88 correctly as Public Trust v Whyman [2005] 2 NZLR 696 (CA). He then considered other relevant authorities relating to the appellants’ family protection claim. This was the correct approach leading ultimately to an assessment as to whether serious injustice would be caused if leave to bring property relationship proceedings was refused.

Appellate approach to family protection appeals

[21]     The parties agreed,  based on Austin, Nichols  & Co  v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 that the first step in an appellate approach to this claim is for the Court to consider anew whether there was a serious injustice (Property (Relationships) Act, s 88). In considering whether there is a serious injustice an assessment whether there is a reasonable prospect of a successful family protection case must be undertaken. This involves an analysis of the legal principles involved in such a claim including whether the testator failed in his moral duty to his children (as relevant here) and if so, whether in the circumstances further provision from the estate was appropriate.

[22]     The first part of this analysis, namely whether the testator failed in his moral duty is a value judgment within particular parameters.  In my view, therefore, this aspect of the appeal is properly considered anew by me.   It is essentially a value judgment.   As the Court said in Stichting Lodestar at [16] as an appellate court I

must reach my own view as to whether there was a breach of moral duty.   If I conclude that there was a breach of moral duty and thereby differ from the Family Court Judge then I must go on to consider whether further provision from the estate is appropriate.   This decision, as to whether to make further provision from the estate, might ordinarily be seen as an exercise of a discretion by a first instance Judge and thereby the subject of limited review on appeal.  In this case, however, the Family Court Judge did not consider further provision from the estate because he found no breach of moral duty and therefore no serious injustice in refusing leave to bring property relationship proceedings.   Should this arise therefore I will have to exercise this discretion.

Grounds of appeal

Serious injustice

[23]     The appellant submits that while the Judge correctly identified the legal tests to be applied he essentially ignored those principles when he came to consider the relevant facts.   The appellant stresses that the correct approach for a Court in considering whether there is a serious injustice is, as the Court in Whyman said; “it seems sensible to apply the serious injustice test in such a way as to facilitate the making of claims in such circumstances”.

[24]     I consider the appropriate test to be that if a Court considers an applicant (here, an appellant) has a reasonably arguable family protection claim then it is likely to be a serious injustice to prevent such a claim being made by refusing to give leave to bring Property (Relationships) Act proceedings.

[25]     What must also be taken into account in such an assessment are the prospects of a successful Property (Relationships) Act claim.  After all it would hardly be a serious  injustice  to  refuse  to  allow  a  property  relationship  claim  to  ultimately facilitate a family protection claim if there was little or no chance of success in the property relationship claim.

[26]     This approach therefore requires an analysis of the facts as they relate to property relationship and family protection cases and the application of relevant legal principles.

[27]     In this case I focus on the family protection analysis.   As to the property relationship claim given this was the matrimonial home of a 27 year marriage with very modest other assets the entitlement of each spouse to equal shares in the home seems  very  likely  (Property  (Relationships)  Act 1976,  s 11(1)(a)).    I  make  this observation acknowledging that there was a probable 80/20 division of financial contribution  to  the  matrimonial  home  in  Mrs Webster’s  favour.    I  will  return, however, to the unequal provision of money as a relevant factor in considering any family protection claim.

[28]   I am satisfied that any family protection claim by the children in the circumstances of this case has little or no chance of success and therefore it would not be a serious injustice to refuse leave for them to apply for a s 25(1)(a) Property (Relationships) Act order.   In doing so I essentially agree with the Family Court Judge’s reasoning.

[29]     Firstly, I do not consider there was any breach of moral duty by the testator’s actions in this case.  There is no doubt that Mr and Mrs Webster both applied their minds  to  the  question  of  who  should  inherit  each  other’s  half  share  in  the matrimonial home.  It is clear that Mr Webster appreciated that he was leaving his half  share  in  the  matrimonial  home  to  his  wife  and  he  considered  that  was appropriate in fulfilling his moral duty to his wife.   His wife took the same view should she predecease him.

[30]     Mr Webster’s primary responsibility was to his wife.  This was especially so given her extensive financial contribution to the Webster’s assets.  For reasons to be given I consider Mr Webster had no maintenance duty to his children.  His duty was to support.   In a small estate Mr Webster gave all he could to his children and properly arranged his affairs so that his wife took his half share of their home.

[31]     Secondly,  as  I  have  noted  at  least  80 percent  of  the  total  financial contribution of the parties to the home came from Mrs Webster.

[32]     Thirdly, Mrs Webster needs, and is entitled to, the security of a home or the cash equivalent to use as best suits her particular circumstances.   I agree with the Judge to shackle her with a life interest in a half share of the house would quite unfairly dictate her living circumstances for those last years of her life.  She has a clear and obvious need for this money.   And as Mr Webster recognised he had a primary moral duty to her arising both from their 27 year marriage and because of her contribution to the property.

Appellants’ economic need and “fair weight” to their claim and life interest

[33]     In  contrast  is  the  position  of  the  appellants.    I  agree  with  the  Judge’s assessment, “they are adult and self supportive and have no special issues or needs which seem out of the ordinary”.  Thus, as the Judge identified the children’s family protection claim is properly assessed on the basis of support rather than maintenance and support.  This assessment does not, as the appellants claim, fly “in the face of the evidence and simply cannot stand”.

[34]     Mrs Horne   and  her   family  may  not   be  income  rich  but   they  have unencumbered assets of over $800,000.  I appreciate they wish to help their children with the cost of university education.   That “wish” however does not illustrate a need.  They are in the same position as thousands of New Zealand families.  They can only afford limited help for their children.  The children also, with thousands of other New Zealanders, will still be able to go to university but they will have to pay their own way either by working or borrowing or both.  This family’s desire to pay for their children’s university education cannot constitute some form of need in a family protection sense.

[35]     As to Mr Webster (Junior) there is nothing about his circumstances which indicates any particular need.  He has no dependants, and is in employment.  He is in the middle of building a house.  The house is reasonably expensive costing nearly

$500,000 to construct.   He owns the land on which it is built.  He had savings of

some $150,000 which he has put into the house.  He will have a mortgage to pay but he will also have a valuable house as a significant asset.

[36]     The appellant relied heavily on the judgment of Heath J in Public Trust v Relph [2009] 2 NZLR 819. The appellant said that this case illustrated similar circumstances but far more generous payments to the children and therefore that they would be justified in this case as well.

[37]     In Relph the husband had four children from a previous marriage.  When he died effectively all of the joint estate of $1.6 million went by survivorship to his wife.   Specific legacies could not be paid because his estate was modest at only

$13,000.  Leave to bring proceedings was given and a Property (Relationships) Act order made with respect of half the estate totalling some $800,000.   From this Heath J ordered the children receive some 50 to 60 percent with Mrs Relph, the remainder of that half share pursuant to the Family Protection Act.  Thus the children received between 25 and 30 percent of the total estate of Mr and Mrs Relph and Mrs Relph the rest.

[38]     This case does not assist the appellants.  The estate was large and therefore gave greater  flexibility for  payments  to  be  made without  reducing the  widow’s circumstances unduly.  The widow ended up with approximately $1.2 million.  As well, she was still in employment and not much older than the claimant children. Each of the children were in reasonable circumstances although none were wealthy and certainly not as wealthy as Mrs Relph.

[39]     This modest estate simply does not give the Court the flexibility available in Relph.  Any reduction in the capital of Mrs Webster or any restriction on her use of the capital represented in the house will, as I have noted, have a significant effect on her life and choices.   Mr Webster’s primary obligation was to Mrs Webster.   This obligation was properly reflected in his decision to leave his share of the house to Mrs Webster.  This was still a modest sum of money the majority of which was, in any event, money which Mrs Webster had herself contributed to the house.

[40]     As to “support” this concept is intended to reflect the recognition by the testator that he acknowledged the position of the children in his family and the fact that as the Judge said in the Family Court, they are “an important part of his overall life”.    While the two appellants have only a modest sum from their father’s estate there is only a modest sum to fairly share.   The Judge understood the appellants’ economic needs.  He gave what weight he could to the children’s circumstances but the modest value of the estate, Mrs Webster’s circumstances, and her contribution to the assets, all dictated that the capital in the house should be hers.

Exercise of discretion

[41]     Even if I had been satisfied that a modest claim could be made and had therefore been satisfied that a serious injustice had occurred, a very modest increase could only be justified.   The estate is worth approximately $150,000 (assuming a successful property relationship claim) of which the children have already received

$25,000.   For example, a further $25,000 would have moved the payment to the children  to  one  third  of  Mr Webster’s  estate,  a  very  significant  order  in  the circumstances.  And had the payment increased by $25,000 the appellants would be receiving part of the money that Mrs Webster had put into the house.  This would be in addition to the $19,950.00 the appellants have already received from Mrs Webster through their father’s estate.  I would not have exercised my discretion in favour of any further provision for the children.

Summary

[42]     The  inappropriateness   of  the  appellants’   approach  is  summed  up   in

Re Harrison (Deceased) [1962] NZLR 6 (CA) at [13] where the Court said:

It is rather unfortunate that there has crept into the cases over the years a disposition sometimes to consider first the “need” of the applicant and then to turn to a consideration of the extent of the estate and other claims there might be upon the testator.  These considerations do not admit of separate consideration; they are inter-related.  The “need” of an applicant, or rather his or her needs – the plural form is I think preferable – cannot be considered in vacuo.  What has to be assessed are the merits of the claim having regard to the applicant’s circumstances as at the date of the death of the testator; relations between the testator and the applicant in the past; and the extent of

his  estate  and  the  strength  of  other  claims.    A  child might  be  in  most necessitous circumstances yet because of the smallness of the estate and the necessity for the testator to make proper provision for a widow there might be no moral obligation upon him to do anything to relieve the child’s necessity.  So too a child might be in a reasonably strong financial position yet because of the size of the estate a testator might be under a moral obligation  to  allow  him  or  her  to  participate  to  some  degree  in  the distribution of the estate.

[43]     This was a relatively small estate.  The obligation on the testator to provide for his widow was clear.  He fulfilled that obligation.  There is no child in this case in “necessitous circumstances”.   The testator gave all of his estate to his children thus acknowledging their importance in his life.   I agree with the Family Court’s conclusions.

Costs

[44]     The second respondent is entitled to costs from the appellants on a 2B basis. [45]                For the reasons given the appeal will be dismissed.

Ronald Young J

Solicitors:

P R McRae, Barrister, Nelson

G W Allan, Pitt & Moore, Nelson, email: graham[email protected]