Kenneth Russell Kenyon v Joan Clough

[2005] NZCA 201

IN THE COURT OF APPEAL OF NEW ZEALAND

CA106/04

BETWEENKENNETH RUSSELL KENYON AND ALAN ROSS KENYON

Appellants

ANDJOAN CLOUGH

First Respondent

ANDBRIAN RICHARD KENYON

Second Respondent

ANDJOAN CLOUGH AND JOHN WILLIAM MAASSEN

Third Respondents

Hearing:7 June 2005

Court:Anderson   P, William Young and Robertson JJ

Counsel:G A Paine for Appellants

C M Earl and T A Gunn for First Respondent
J Rowan QC for Second Respondent

Judgment:10 August 2005 

JUDGMENT OF THE COURT

AThe appeal is allowed and the orders made in the High Court are quashed.

BFurther provision is made for the First Respondent by substituting for the legacy of $70,000 in clause 5(b) of the will of the testatrix, a legacy of $150,000.

C        Clause 7 of the will is not altered.

D        Clause 8 of the will is not altered.

E        No orders as to costs.

REASONS

(Given by Robertson J)

Introduction

[1]       This is an appeal against a decision delivered by Wild J in the High Court at Palmerston North on 6 May 2004 under the Family Protection Act 1955.

[2]       There was a hearing on 20 February 2004, and further affidavits and financial information were provided to the Court during the ensuing period.

[3]       The litigation related to the Estate of Marjorie Sybil Kenyon (“Marjorie”) who died on 6 August 1999.  Probate of her last Will dated 2 April 1993 was granted to the Third Respondents on 30 August 1999. They have not participated in the hearing of the appeal.

[4]       On 17 August 2000, two of Marjorie’s children (Nan and Brian) commenced Family Protection proceedings seeking further provision from her estate.

[5]       In respect of these claims Wild J noted:

The nub of the claims made by Nan and Brian is that Marjorie recognised that discharge of her moral duty to them as a wise and just testatrix required that the four children be treated equally and fairly in terms of the overall provision which had been and was made for them by both their parents, both in terms of their wills and during their respective lives.  Marjorie’s husband Aubrey died many years ago.  Nan and Brian argue that Marjorie’s will does not achieve that, and that discharge of Marjorie’s moral duty to make proper provision for them requires significant adjustment to the terms of Marjorie’s will.

Factual background

[6]       Marjorie had been married once, in December 1944, to Aubrey Kenyon (“Aubrey”).  They had four children – Russell, Nan, Brian and Ross.  All are in their 50’s or 60’s and are, or have been, married.  Only Ross still has dependent children.

[7]       Aubrey had been married previously and there were two children of that marriage, although they do not directly impinge upon the issues in this case.

[8]       Aubrey and Marjorie were initially farmers on a modest property which Aubrey had purchased during his first marriage.  The farm was eventually registered in the name of a family farming company called Kenyon Farms Limited (“Farms”).  Early in the marriage, Marjorie commenced knitting garments and eventually this business flourished and became the Kairanga Knitwear Company Limited (“Knitting”).

[9]       The business was first located in rented premises, but later in a property purchased by Kenyon Properties Limited (“Properties”). The shares in all three companies have always been held by various family members.

[10]     Substantial assets were built up during the marriage.  Both Marjorie and Aubrey worked in Knitting.  Brian commenced working in Knitting in 1966 and remained there until April 1982.  In 1970 he was given two founders shares and 495 ordinary shares in Knitting and then a further 2,500 ordinary shares in March 1972.  Ross joined the business in December 1973 and Russell in 1975.  In March 1970 Russell was gifted 495 shares in Knitting, a further 2,500 in March 1972 and a final 3,000 in January 1979.  Ross was given 2,995 in December 1972 and a further 3,000 in January 1979.

[11]     As a result of these transactions each of the three sons had 5,995 ordinary shares in Knitting.  As well, Brian had two founders shares.  All three brothers were working in the business at that time.

[12]     Brian left Knitting in 1982.

[13]     Although there were undoubtedly strains from time to time within the family, particularly with Brian leaving the family business, there was nothing so serious as to constitute disentitling conduct.

[14]     Aubrey died on 16 December 1983.  A Family Protection claim was commenced by Brian and by Margaret Benjamin, an estranged daughter of Aubrey’s first marriage.  It was determined by McGechan J. 

[15]     As Wild J noted:

[17]     The provisions of Aubrey’s will as compared with the outcome of the Family Protection Act claims brought against Aubrey’s Estate by Margaret and Brian were succinctly set out in tabular form in the affidavit sworn in this proceeding by Brian on 28 November 2000 thus:

SCHEME OF WILL OF AUBREY ERNEST KENYON Will dated 24 July 1981: Died 16 December 1983
Beneficiaries (Two families)		Will Provisions		Result of FP Proceedings Final Judgment (McGechan J) 24.11.89
Children of First Marriage
Margaret Benjamin (somewhat needy circumstances) No children	No provision		$40,000.00 cash (from residue)
Ian Kenyon (no claim) Three children	1/6th residue (subject to life interest) and his three children each 1/6th residue
Widow
Marjorie	Remaining ½ share incomes and dividends in shares for life plus life interest in residue
Children of Second Marriage
Russell Kenyon and Ross Kenyon	2 Founders shares in Knitting ¼ income Knitting and shares for life of Marjorie and half in remainder 1/3rd Knitting shares founders and ordinary shares worth $49,000 ¼ Properties (KK Property Co) shares 1/3 Farms shares each (worth $45,000 1/36th residue each		Deleted for both brothers to go to Brian
Jan (Nan) Clough	¼ Property shares 1/6th residue (subject to life interest)		2/3rd shares in Kenyon Farms = $45,000
Brian Kenyon	¼ Property shares worth $45,000 1/3 Farms shares 1/6th residue (subject to life interest)		2/3rd shares in Kenyon Farms = $45,000

[18]     The dispute over Aubrey’s will entrenched tensions in the Kenyon family, in at least two respects.  First, Brian’s claim, and the opposition of Russell and Ross to it, coupled with their appeal against McGechan J’s judgment, exacerbated the rift between Brian and his two brothers.  Secondly, Marjorie did not approve of Brian’s claim against Aubrey’s Estate, particularly because of its potential to alter the ownership of Knitting.  Although Brian deposes to a good relationship with Marjorie right up to the time of her death, Brian’s claim against Aubrey’s estate cannot have warmed his relationship with Marjorie.

[16]     Russell and Ross appealed to this Court against the decision of McGechan J.  Eventually a compromise was reached with a Deed of Settlement entered into in October 1991.  Under that Brian transferred to Russell and Ross equally all the shares he held in Knitting and Properties.  Russell and Ross transferred to Brian all the shares each of them held in Farms.  Russell and Ross were required to pay $60,000 to Brian which he was required to apply to repaying the $60,840.46 loan that Farms owed Aubrey’s estate.  The estate used that cash to pay to Margaret Benjamin the sum she was entitled to from Aubrey’s estate.

[17]     It is to be noted that Nan’s position did not alter materially in either the McGechan J decision or in the subsequent settlement.

[18]     Marjorie’s will was simple. 

(a)It gave to Nan jewellery and clothing and distributed items of furniture having a sentimental value amongst the four children. 

(b)Nan was given $70,000 as a pecuniary legacy and a granddaughter a legacy of $1,000.

(c)Russell and Ross were given Marjorie’s remaining shares in Knitting. She forgave any debts that were owing by Russell and Ross to her in respect of shares they had sold in Knitting and Properties. 

(d)The residue of her estate was divided equally between her four children.

[19]     The will specifically provided:

The legacy to my daughter Nan is given in recognition of the fact that she received less than my sons from the estate of my late husband Aubrey Kenyon, and because of the support and care she has provided to me in my old age.

It is not difficult to understand why Marjorie was concerned to act in this way in light of the various family transactions which had taken place over the years but which had done little for Nan.  Her non-involvement in the challenge to Aubrey’s estate and the anticipation that Nan would have a major responsibility with regard to Marjorie’s care in old age were clearly important considerations.

High Court decision

[20]     Of pivotal importance to the reasoning and approach of Wild J was the opening paragraph of the “Decision” sector of his judgment.  It says:

[70] All four children agree that their mother Marjorie, by her will, attempted to achieve overall equality in the provision she and Aubrey had made for the children, both during their lifetimes and in their wills.  I referred to that in para [46] above.

[21]     The Judge undertook a detailed and comprehensive assessment of what had been provided to each of Marjorie’s four children during the lives of their parents, under their father’s will, and now under their mother’s will.  He undertook an analysis of the financial position of each and eventually concluded:

[76] On that basis the additional provision required for Nan was approximately $253,650, not the $70,000 made by Marjorie. Additional provision of approximately $118,650 was required for Brian.  I calculate those figures thus:

(a)       Brian’s assets:

(i)       Farms – 100% ownership in Farms                  $135,000

(b)       Each of Russell’s and Ross’s assets:

(i)       50% shareholding in Knitting  $347,000

(ii)      40% shareholding in Properties  $142,800

Less still owing to Marjorie, approximately                  $  50,000

Total  $439,800

(c)Thus, total value of provision already made to Brian, Russell and Ross totalled $1,014,600.  Divided by four, that is provision of $253,650 for each child.  Having received no provision, Nan needed provision of that amount to achieve equality.  Brian had received provision of $125,000, so he needed additional provision of approximately $118,650.

(d)In this calculation, I have ignored the provision each child received from the residue of Aubrey’s Estate, as it was equal (and also comparatively insignificant).  The $50,000 which I have deducted from the provision made to each of Russell and Ross as being the amount each still owed Marjorie is difficult, on the material available to me, to calculate with any accuracy.  My approximate figure of $50,000 is based on the gift schedules exhibits “B” and “E” to the affidavit in reply sworn by Nan on 19 June 2001.  I think that is the most accurate information before the Court.

Some questions can be raised about the arithmetic but it generally encapsulates the overall information.

[22]     The net effect of the conclusions of Wild J were:

(a)the specific bequest to Nan was increased to $300,000;

(b)the balance of the debt owing at the date of Marjorie’s death by Russell and Ross were not to be forgiven; and

(c)the residue of the Estate was to be paid entirely to Brian.

Appellants’ submissions

[23]     Russell and Ross now appeal against that assessment.  First, they submit that Wild J erred in his overall approach to the case.  They contend that there was no breach of the testatrix’s moral duty as required by s4 of the Family Protection Act, and consequently that there was no jurisdiction to make any orders at all.  Wild J stated that the testatrix had miscalculated, or was mistaken as to the value of her Estate, when she made her will.  The appellants argue this was not a proper basis on which to make the orders which were made by the Judge.

[24]     Secondly, if there was a breach of moral duty, they submit that the Judge intervened too much in attempting to achieve overall equity in the provision Marjorie and her husband had made for their children. They specifically contend that there was no proper basis for the Judge’s assertion in para [70] of the judgment that there was agreement as to the outcome which the testatrix had sought to achieve by her will.  They accept that there were acknowledgements that something needed to be done for Nan to compensate for the fact that she had not been involved in the activity surrounding their father’s will, but say that the will made sufficient provision to achieve this objective.  There was not, it was submitted, any basis upon which Wild J could take into account the provisions of Aubrey’s will in determining how Marjorie’s will should be re-written.

[25]     Thirdly, their position is that the $70,000 provision for Nan was an appropriate allowance for a just and wise testatrix to make, and that there was no justification to interfere with that assessment.  The Judge’s orders meant that Russell and Ross were deleted entirely from any provision from their mother’s Estate.

Respondents’ submissions

[26]     The position of the respondents was that this was an appeal against an exercise of discretion and therefore an appellate Court should not substitute its view lightly.  The respondents contend that Wild J was not mistaken in his findings in respect of the testatrix’s intention to treat her children equally, the inadequacy of the legal advice provided, and the mistaken view that the testatrix had of the facts and circumstances surrounding the provision.

[27]     Secondly, the respondents submit that this was a case where the lawyer who had prepared the will not only swore affidavits but was cross-examined on the issue and the Judge had an opportunity of hearing and seeing him. 

[28]     Thirdly, that the testator had been clearly in breach of her moral duty to her daughter and that the assessment made was, in all the circumstances, fair and reasonable having regard to the other provisions which had been made within this family over many decades.

Discussion

[29]     Section 4 of the Family Protection Act 1955 provides that the Court may, in its discretion, make provision for a claimant where a testator or testatrix has not, by his or her will, made “adequate provision… for the proper maintenance and support” of the claimant.

[30]     This Court in Williams v Aucutt [2000] 2 NZLR 479, stated at 487:

Testamentary freedom remains except to the extent that there has been a failure to make proper provision for the maintenance and support of those who are seen at the date of death as entitled to such maintenance and support. The statutory scheme gives the Court a wide discretion in making that determination.

[31]     It is axiomatic that: “The Court does not undertake the exercise of rewriting a will merely because it can be perceived as being unfair to a family member who is not actually in need of maintenance and support” (Lewis v Cotton CA152/00 18 December 2000).  Wild J referred to this as a ‘forbidden approach’ (para [71]).

[32]     The proper inquiry is whether this testatrix fulfilled her “moral duty” to provide adequately for the maintenance and support of her daughter, whom she expressed a clear intention to benefit.

[33]     In Bosch v Perpetual Trustee Co & Ors [1938] AC 463 at 476, Lord Romer, delivering the judgment of the Privy Council, stated:

The first thing to be noticed is that the powers given to the Court only arise when any of the persons mentioned is left without adequate provision for his or her proper maintenance… The use of the word “proper” in this connection is of considerable importance.  It connotes something different from the word “adequate”.  A small sum may be sufficient for the “adequate” maintenance of a child, for instance, but, having regard to the child’s station in life and the fortune of this father, it may be wholly insufficient for his “proper” maintenance.  So, too, a sum may be quite insufficient for the “adequate” maintenance of a child and yet may be sufficient for his maintenance on a scale that is “proper” in all the circumstances. 

[34]     His Lordship continued at 478 (quoting Stout CJ in the New Zealand case of In re Allardice (1910) 29 NZLR 959, 969:

Even in cases where the “Court comes to a decision that the will is more unjust from a moral point of view, that is not enough to make the Court alter the testator’s disposition of his property.  The first inquiry in every case must be what is the need of maintenance and support; and the second, what property has the testator left”.

[35]     Such an approach was adopted in Williams v Aucutt, where Richardson P said:

The test is whether adequate provision has been made for the proper maintenance and support of the claimant.  Support is an additional and wider term than maintenance.  In using the composite expression, and requiring “proper” maintenance and support, the legislation recognises that a broader approach is required and the authorities referred to establish that moral and ethical considerations are to be taken into account in determining the scope of the duty.

[36]     Richardson P went on to state that support includes recognition of belonging to the family, and of having been an important part in the life of the deceased.

[37]     Several general points appear.  First, the Court may only interfere in situations in which the testatrix has failed to meet her “moral duty” (that is, she has not made adequate provision for the maintenance and support of the claimant).  Secondly, this is a composite expression, which is not restricted to mere financial need, but includes moral and ethical considerations.

[38]     None of the children in this case is in a position of economic need in a literal sense.  To that extent they do not require maintenance.  That of course is not the sole criterion: William v Aucutt; Auckland City Mission v The Salvation Army CA118/01 26 March 2002. The children are all established people with their own homes, in employment and with other assets of one sort or another.  On any reckoning they are all in a strong financial position compared with the size of their mother's estate.  There are inevitably some aches and pains associated with middle-age, but the only serious health issue is a disability of Nan. She is in receipt of ACC of $30,000 a year so economic need in the narrow sense does not arise especially as Marjorie’s estate is not large.

[39]     Secondly, there is no disentitling conduct with regard to any of Marjorie’s children.  In voluminous evidence presented in the High Court there is some unenlightening and disappointing descent into nit-picking about matters which should never have figured in the proceedings at all.  There were the ebbs and flows of relationships that are common in all families.  There was, however, a general thread of support and concern for ageing parents and not unreasonable responses by everybody to the various situations that arose over the years.

[40]     What, then, was adequate provision for this testatrix to make for her daughter, about whom she had expressed a clear concern and an obligation to make good, but without going to the point of saying that this Will was to be the instrument by which equality between all siblings was to be achieved in respect of all previous inter-family financial arrangements?

[41]     The assessment made by Wild J was heavily influenced by what he considered to be an acceptance by all four children that Marjorie attempted to achieve overall equality in provision between the children. 

[42]     Russell and Ross, who were in the strongest financial position, accepted, in somewhat fuzzy terms, that it was appropriate for their mother to have made provision to advantage their sister, but they could not fairly or sensibly be taken to have conceded that Marjorie sought to achieve overall equality between all the siblings in respect of all financial transactions (both inter vivos and under the wills) throughout the family’s history.

[43]     Likewise, we are satisfied that there was no scope for a finding of fact that Marjorie had sought to achieve such absolute overall equality.

[44]     Mr Maassen, in his affidavit, indicated that:

The figure of $70,000 seemed to me reasonable having regard to a range of factors.  It was in the round, and not an accounting exercise.  Those factors included:

(a)       The fact that Nan was financially independent;

(b)       The approximate size of Marjorie’s estate;

(c)Recognition of the lesser provision Nan received from her father’s estate;

(d)The fact that so far as Ross and Russell were concerned, a bequest of the Kairanga Knitting Mills Limited shares may have reflected the special contribution that they had made during most of their adult lives as did the specific bequest of the Kairanga Knitting Mills founder share by Marjorie.

(e)       The fact that Marjorie was living with Nan at the time.

[45]     All that can fairly be concluded is that Marjorie wished to have some recognition of her daughter beyond the position of her brothers relating to their father’s will, and her involvement in care and support in old age.  That does not justify a jump to the point of saying that she intended that there should be overall equality (even in the round) having regard to all financial dealings in this family over many decades.

[46]     On the other hand it is clear that Marjorie was heavily dependent upon Mr Maassen in determining an appropriate equalising figure to include by way of pecuniary legacy.  There is no doubt that Mr Maassen had no knowledge about the substantial debt owed by Marjorie to Knitting.  It would be imprudent to conclude that Marjorie had an independent recollection of this debt at the time she was making the will.  Given this and the paucity of the provision actually made for Nan, we infer that Marjorie’s intention to provide for Nan partly miscarried because of the failure to allow for the effect on her estate of her indebtedness to Knitting.

[47]     The fact that a will fails to achieve the testator’s stated purpose cannot, in the absence of a failure to perform the moral duty, provide the Court with a licence to re-write the will.  On the other hand, the conduct of a testator may reveal an acceptance of a moral obligation and where an attempt by the testator to discharge that obligation miscarries by mistake, the situation may warrant intervention under the Family Protection Act, see Bosch v Perpetual Trustees [1938] AC 463, 481. We take the view that this is the situation here; that Marjorie recognised a more significant moral obligation than she in fact discharged because of her mistake over the size of her estate associated with her indebtedness to Knitting.

[48]     Although the Judge was entitled to grant relief under the Family Protection Act, the relief he granted was on the basis of his conclusion that there had been a much wider area of error than can be justified on the totality of the evidence.  We note as well that the Judge appears to have overlooked the equally clear intention in the will designed to ensure that Russell and Ross had their interests in Knitting unencumbered by any outstanding debt relating to sale of shares.  It is necessary for us therefore to determine the appropriate relief.

[49]     We are advised that the current value of the estate is $292,000.  The amount owing jointly by Russell and Ross to their mother is $68,000.  

[50]     It is clear that within the family arrangements, the gifting to Russell and Ross of all the indebtedness left owing in respect of the final transfer of shares in Knitting was a matter of clear importance.  Within the available resources we are satisfied that a pecuniary legacy of $150,000 was justified and appropriate. 

[51]     As far as the position of Brian who basically supported his sister is concerned, we are satisfied that there is no reason to interfere with the testamentary arrangement for dealing with the residue outlined in the will.

Conclusion

[52]     Accordingly the appeal will be allowed and the orders made in the High Court are quashed. 

[53]     We order that:

(i)The appeal is allowed and the orders made in the High Court are quashed.

(ii)Further provision is made for the First Respondent by substituting for the legacy of $70,000 in clause 5(b) of the will of the testatrix, a legacy of $150,000.

(iii)      Clause 7 of the will is not altered. 

(iv)      Clause 8 of the will is not altered.

[54]     In all the circumstances it is not appropriate to make any orders as to costs.

Solicitors:

Fitzherbert Rowe, Palmerston North, for Appellants
Baltrop Graham, Feilding, for First Respondent
Wadham Goodman, Palmerston North, for Second Respondent