Mahon v Mahon
[2015] NZHC 2143
•4 September 2015
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2013-419-871 [2015] NZHC 2143
IN THE ESTATE OF MELVA EILEEN MAHON IN THE MATTER OF
an application seeking the declaration of a constructive trust
IN THE MATTER OF
an application pursuant to the Family
Protection Act 1955BETWEEN
SUSAN ELIZABETH MAHON First Plaintiff
DAVID WILLIAM MAHON AND RACHAEL MAHON
Second Plaintiffs
AND
JOHN ROY MAHON AND DONALD COLIN GRANT MCKINNON
First Defendants
JOHN ROY MAHON AND ROGER NEWTON STANICH
Second Defendants
Hearing: 13-17 and 27-30 July 2014 Counsel:
C T Gudsell QC and S C Dench for Plaintiffs
H Fulton and R W Bell-Booth for J R Mahon, his children, and the J R Mahon Family Trust
M D Branch for First Defendants, the executors of the estate of
Melva Eileen Mahon (leave to withdraw)
D M O'Neil for Second Defendants, the trustees of the Melva
Mahon Inheritance Trust (leave to withdraw)Judgment:
4 September 2015
RESERVED JUDGMENT OF MACKENZIE J
I direct that the delivery time of this judgment is
4.45 pm on the 4th day of September 2015
MAHON v MAJOH [2015] NZHC 2143 [4 September 2015]
Table of contents
Introduction [1] A thumbnail sketch of the family [2] The business and associated properties [7] Melva’s wills [20] Melva’s Estate [26] The Undue Influence claim [27] (a) The claim [27]
(b) General principles [28] (c) The previous equality between the two families [34] (d) Melva’s health [40] (e) Other evidence of undue influence on the three challenged wills [42] (i) The 2004 will [44] (ii) The 2006 will [56] (iii) The 2008 will [63] (iv) Overview of the undue influence claim [77]
The Common Intention Trust claim [82] (a) The plaintiffs’ contention. [82] (b) General principles [83] (c) The Ngaruawahia properties [86] (d) The Farm [91]
The Family Protection Act claim [95] Result [104]
Introduction
[1] Melva Mahon died on 29 October 2012 at the age of 88.1 Her husband Roy had predeceased her. She had two sons, Bill who died in April 2004, and John. This is a claim by Bill’s estate, and two of Bill’s three children, against Melva’s estate. There are three bases for the claim: first, that Melva’s will resulted from undue influence on the part of John; second, that some of Melva’s assets at the time of her death were subject to a constructive trust; and third, a claim is made under the
Family Protection Act 1955.
1 In this judgment I use first names for all members of the Mahon family for ease of reference. In doing so, I intend no disrespect.
A thumbnail sketch of the family
[2] Melva and Roy were married in 1944. They had two sons: Bill was born in 1949 and John was born in 1953. Roy left work as a coal miner to found and run a business providing rides, sideshows and other entertainment at events such as Agricultural and Pastoral Society shows throughout the North Island. The family went on the road for several months each year, travelling to venues. Bill and John both helped out in the business during their childhood, but did not immediately go to work for the family company when they became adults. Bill trained as an accountant and worked in that field for a time. He joined the family company fulltime in about 1972. John trained as a teacher and taught for a time before he too joined the family company in about 1978. Bill and John over time assumed greater responsibilities in the business, while Roy eased back.
[3] Bill married Sue in 1972. John married Judy in 1978. Bill had three children: Rachel (1973), David (1976) and Paul (1981). John and Judy had four children: Anne (1980), Jane (1981), Kate (1983) and Christopher (1986). Sue and Judy both worked in the business and their children also helped out as appropriate. The families travelled on the circuits when circumstances allowed. It was very much a family business.
[4] Roy died in 1999. He had by then retired to the extent that he had little ongoing active involvement in the business. The business carried on, managed by Bill and John.
[5] Tragedy befell the family in April 2004. Bill was killed at the Easter Show while servicing a mechanical ride. The entire family rallied together and the business was able to carry on. John assumed the overall management role which had previously been divided between him and Bill. Two members of the next generation, Paul and Christopher, also worked full time in the company.
[6] Roy and Melva lived for many years in their family home in Chartwell Crescent, Hamilton. After Roy’s death, Melva continued living there. As she grew older, she had the caring support of both Bill and Sue, and John and Judy. After Bill’s death, support from Sue continued, as did that of John and Judy. She
wished to stay in the family home as long as possible. Her ability to do this was enhanced by the support provided by Sue, John and Judy. She suffered from a number of health issues. In 2007 she yielded to the reality that the large family home was too much for her. She sold it and purchased a unit in Sovereign Isle, where she was living when she died.
The business and associated properties
[7] I describe the business arrangements of the family, as background to the issues I later address. The evidence and documentation has some gaps, which mean that this description contains some assumptions based on the documents. Any error in those assumptions is not material to the matters I must decide. I address the relevant evidence in more detail when I discuss the issues.
[8] In 1961 Roy incorporated Electric Speedway Limited (ESL) to operate the business. The initial capital was £1,000, divided into 200 Class A (voting) shares and 800 Class B (non-voting) shares. They were all owned by Roy apart from the obligatory single share held by a second shareholder. Roy was the sole director. Melva later became a director as well. In 1973 the original 1,000 £1 shares were converted to 2,000 $1 shares, being 50 voting A shares and 1,950 non-voting B shares. Roy continued to hold the voting shares, but transferred about half of his non-voting shares to Bill and John, equally. He and Melva remained the directors. At the time of that change, Bill and Sue were both working full time in the business but John and Judy were not. In 1988, the capital of ESL was increased to $650,000 by the issue of 648,000 B shares, issued equally to Bill and John. Bill and John became directors, along with Mr Stanich, the company’s accountant.
[9] In 1974 Roy purchased two sections at Great South Road, Ngaruawahia (the Ngaruawahia properties). They were used by ESL for its business purposes, though there is no evidence of any formal arrangement between Roy and ESL to that effect.
[10] In 1981, ESL purchased a farm property at Whatawhata (the farm). That was farmed as a dairy unit by a sharemilker. A shed and yard on the property were used by ESL to store equipment not currently in use. That storage later required a land
use consent. That was refused by the local council. The refusal was upheld on appeal in 1993.
[11] In 1986, Roy and Melva entered into a matrimonial property agreement. That agreement dealt with two specific items of property, both previously owned by Roy. These were the two Ngaruawahia properties and debts owing by Bill and John of about $150,000 each, related to their acquisition of shares in ESL. Under the agreement, the Ngaruawahia properties and about one half of the debts were transferred to Melva. Roy retained the other half of the debts.
[12] The Inland Revenue Department (IRD) investigated ESL. Mr Hart, the company’s accountant, described this in his evidence. He first became aware of the investigation in about 1989, when the IRD visited his office to uplift the company’s financial records. There were a number of meetings with the IRD through 1990. In
1990, two significant payments were made to the IRD on account of tax arrears. The investigation continued. It became clear that the IRD would assess Roy, Bill and John, as well as ESL, for tax arrears. Mr Hart’s evidence is that the family, led primarily by Bill, moved to protect assets when they could.
[13] A new company, Mahons Amusements Limited (MAL), was formed in 1990 to take over ESL’s business. The capital was 1,000 dollar shares, being 100 A (voting) shares and 900 B (non-voting) shares. Melva held the A shares.2 Sue and Judy each held 450 B shares. The assets of ESL were transferred to MAL at valuation and the purchase price was paid over several years. Those payments went to the IRD. Bill and John became the directors of MAL, which continued to operate the business in the same way that ESL had done. Bill and John broadly divided their responsibilities by each taking responsibility for a separate circuit of shows to which
they travelled.
[14] The business sold by ESL to MAL did not include the farm. That was sold to
Melva. The purchase price was $525,000, fixed by a valuation dated 30 July 1990. Mr Hart’s evidence is that the price was paid by three separate payments, recorded in
2 Melva held 98 A shares and the accountant, Mr Stanich, held two. I infer his ownership was not of the beneficial interest.
ESL’s accounts. Mr Hart says the mechanics and accounting for the farm transaction were devised by the accountants after the event and introduced into the company’s accounts in 1992/93.
[15] First, about $113,000 was paid by reducing the amount owed by ESL to Roy on his current account. That was an accounting entry and no money changed hands. Mr Hart says “the fact that the debt was owed to Roy and not Melva was glossed over”. Second, about $247,000 was paid into ESL’s account. Mr Hart’s evidence is that this amount was used by ESL to fund part of a sum paid to IRD in October 1990 on account of the tax (yet to be quantified) payable by ESL. He says that payment was made before the farm was transferred to Melva and allocated to the purchase price after the event. He does not know where Melva got the money for the payment. The third component of the purchase price was $165,000, initially recorded as a vendor’s mortgage, registered at the same time as the transfer to Melva in July 1991.
[16] That mortgage was repaid, in accounting terms, by reducing Bill’s and John’s current account balances with ESL by $82,500 each. Mr Hart is not aware of how or whether Melva compensated Bill and John for that write down of the amount owed to them by ESL. Under the 1986 matrimonial property agreement between Roy and Melva, Melva owned one half of Bill’s and John’s original debts to Roy; $76,600 and $79,100 respectively. Melva signed a deed of forgiveness of debt in September
1990, forgiving $13,500 of debt for each son. One possibility is that the $76,600 and
$79,100 debts were intended to be written off to compensate Bill and John for that write down of their debt from ESL, though there would still have been a total shortfall of $9,300. The amount forgiven by the deed of forgiveness appears to have been fixed having regard to the limit then in place for non-dutiable gifts, and it might have been intended that the balance of the debts would be forgiven in subsequent years. There is however no documentation to support any later write-off. Further, the terms of Melva’s wills made around that time suggest that she considered the full debts of about $76,600 and $79,100 remained owing in full.
[17] While the IRD investigation was ongoing, Bill and John both entered into matrimonial property agreements, under which each of them transferred his interest
in his family home to his wife. Those matrimonial property agreements were both dated 10 August 1990 and the transfers pursuant to them were dated 10 August 1990 (for John and Judy), and 20 November 1990 (for Bill and Sue).
[18] The IRD investigation continued, and was finally resolved by a settlement, concluded in 1998, under which ESL made a further payment to the IRD. There was no separate payment by Roy, Bill or John. Following that settlement, ESL was removed from the company register.
[19] After the settlement with the IRD, the shares in MAL were transferred from Melva, Sue and Judy to Bill and John in equal shares, in about 1999. The shares held by Sue and Judy (450 B shares each) were transferred to their respective husbands pursuant to the matrimonial property agreements. In the 1999 annual return, Bill and John are shown as each holding 50 A shares and 450 B shares. The mechanism for the transfer of Melva’s A shares, and the consideration for that transfer, is not apparent from the evidence. After Bill’s death, his shares passed under his will to Sue. She subsequently transferred 50 of those shares to Paul.
Melva’s wills
[20] Melva made no fewer than 12 wills between 1972 and 2008. It is necessary to describe briefly the main dispositions in each of them, leaving aside some money legacies.
[21] The first will, made in 1972, left everything to Roy if he survived or, if he did not, equally to Bill and John, with a gift over to their children. The second will, made in 1976, left furniture to Roy and the residue to Bill and John as tenants in common in equal shares, again with a gift over to their children. Subsequent wills made in 1986, 1990, 1992, 1993 (two wills), 1994 and 1998 each left to Roy Melva’s personal belongings and her interest in the Ngaruawahia properties, together with a life interest in the income of her residuary estate. The capital of the residuary estate was to go equally to Bill and John, again with a gift over to their children. Under the
1994 will, Bill’s and John’s interests were left not to them directly, but to a family
trust established by each of them.
[22] The final three wills, all of which were made after both Roy and Bill had died, departed from that pattern of broad equality between Bill and John and their respective families. Under the undue influence cause of action, the plaintiffs challenge all three of these wills.
[23] The will made on 7 October 2004 (the 2004 will) left to John the Ngaruawahia properties. There were also specific bequests of $20,000 to each of the grandchildren and $10,000 to each of Sue and Judy, and some bequests to charities. The residue was left three fifths to John, with a gift over to his children if he predeceased Melva, and two fifths to such of Rachael, David and Paul as survived Melva (with provision for the share of any of those who predeceased Melva to go to the survivors).
[24] Under the next will, made on 21 December 2006 (the 2006 will), the same pecuniary legacies were provided. The specific bequest to John was increased to include, as well as the Ngaruawahia properties, Melva’s principal residence and motor car. John’s interest in the residuary estate, of three fifths with a gift over to his children if he did not survive, remained unchanged. The proportions for Bill’s children were altered. David and Rachael were each to receive one tenth, and Paul two tenths, of the residue (again with provisions for survivorship).
[25] The final will, being that of which probate was granted, was made on
27 November 2008 (the 2008 will). The monetary legacies were unchanged. The specific bequests to John under the 2006 will, namely the Ngaruawahia properties, Melva’s residence and her car, were left instead to the J R Mahon Family Trust. The whole of the residue was left to the Melva Mahon Inheritance Trust, settled by a deed of trust dated 21 November 2008. Broadly, the beneficiaries of that trust are in the proportions of 60 per cent to John (or to his children if he died before the final appropriation of the trust), 20 per cent to Paul and 10 per cent to each of David and Rachael. Those amounts are payable on the date of final appropriation, being
80 years or such earlier date as the trustee appoints. The Trust Deed was accompanied by a memorandum of wishes. In that, Melva expressed the wish that the trustees use their discretion in deciding whether to retain the farm, and the expectation that the trustee will retain the farm for no longer than 10 years after her
death. She wished the trustees to exercise their unfettered discretion in specifying the date of final appropriation.
Melva’s Estate
[26] The value of Melva’s estate is set out in an affidavit of the executors. The farm and the Sovereign Isle property have been sold. The net value of the estate, after meeting liabilities, is about $5.27 m.3 In broad terms, the effect of the will (leaving aside the specific money legacies) is that John will receive the Ngaruawahia properties (valued at $485,000), the proceeds of sale of the Sovereign Isle property, ($345,000), and the car (unvalued). On these figures the residue has a value of about
$4.44 m. John or his children will receive 60 per cent of that, or about $2.67 m. Bill’s children will receive about $1.78 m: Paul about $888,000; David and Rachael about $444,000 each.
The Undue Influence claim
(a) The claim
[27] The plaintiffs allege that the 2004 will, the 2006 will and the 2008 will were all executed as a result of the undue influence of John, and did not reflect the free exercise of Melva’s independent wishes.
(b) General principles
[28] There is essentially no issue between the parties as to the legal principles to be applied to a claim of undue influence in the execution of a will. It is now routine, in cases in this Court, to refer to the summary of principles set out by Fisher J in Re Dudley (deceased).4
Counsel have helpfully referred me to many authorities concerning the legal tests for testamentary undue influence. Notable among these have been Banks v Goodfellow (supra); Hall v Hall (1868) LR 1 P & D 481; Re Annie Nissenbaum (Deceased) [1939] NZLR 94; Wingrove v Wingrove (1885) 11
PD 81 at 82; and Craig v Lamoureux [1920] AC 349. I was not referred to any recent New Zealand authorities but in my view the principles have not
3 This does not include the value of the car.
4 Re Dudley (deceased) HC Auckland P 1042/92, 14 May 1993 at 11.
changed. They can be summarised in slightly unorthodox but gender-neutral terms as follows:
(a) The key question is whether, because of extraneous pressure from others, the willmaker has signed a will contrary to his or her own wishes.
(b) Persuasion which has left the final choice to the will-maker is not undue influence. Where there is evidence of strong influence or pressure, the Court will approach the question of the will-maker's own wishes with suspicion. However, if satisfied that the will- maker's wishes have not been overborne, and that in the end he or she wanted the will in that form, the Court must uphold the will. In those circumstances the ultimate source of the will is not the external pressures but the exercise of the will-maker's own free judgment.
(c) The onus of proof lies upon the proponent of undue influence.
However direct evidence of undue influence is not to be expected. These cases usually turn upon the strength of the circumstantial evidence. The question is whether from all the surrounding circumstances, with particular emphasis upon the result of the will and the circumstances in which it was actually executed, undue influence is to be inferred.
(d) For this purpose all the circumstances bearing directly or indirectly upon the free will of the will-maker at the time of execution are relevant. These include illness, pain and suffering, physical weakness and mental deterioration falling short of testamentary incapacity. They also include dependency upon others in legal, business, social, medical and/or domestic matters. One should view with special care any powerful need, obligation, or vulnerability on the part of the deceased which others might be in a position to exploit.
(e) However, it is not enough to show that others had the means and opportunity to unduly influence the deceased and that there has been a recent testamentary disposition in their favour. The Court must be satisfied both that the power was exercised and that the will would not have resulted but for that exercise.
[29] Further guidance as to the application of the principles is also given by
Elias J in Norton v Carey where she said:5
Influence will be "undue" if shown to have precluded "independent and informed judgment": Lloyds Bank v Bundy at 342 per Sir Eric Sachs; Zamet v Hyman [1961] 1 WLR 1442, at 1446 per Lord Evershed MR; Bank of Credit and Commerce v Aboody at 968. Influence is "undue" if it operates to deprive the person influenced of independent and informed judgment irrespective of the motives of the person possessing the influence.
5 Norton v Carey HC Auckland M191/95, 1 July 1996 at 54 to 55.
What is undue is necessarily a question of degree and will turn on all the circumstances. In the case of some relationships (particularly those fiduciary in character) the circumstance of personal benefit without independent advice may be strong evidence of undue influence: see the discussion drawing on the cases where fiduciary duties are owed in CIBC Mortgages plc v Pitt at 209 per Lord Browne-Wilkinson. So too, an otherwise unexpected outcome may be powerful evidence from which influence which is undue can be inferred in the absence of other explanation. In cases where a disposition is to a family member something more may be required. If undue influence is established, however, clear disadvantage or unfairness in result is not required to be shown: CIBC Mortgages plc v Pitt.
What has to be proved in cases of actual undue influence is the converse of that by which in cases of presumed undue influence a defendant can rebut the presumption. It is for the plaintiff to show that the transaction was not "the result of the free exercise of independent will": (Inche Noriah v Sheik Allie Bin Omar) at 135 per Lord Hailsham LC.
All the circumstances in which the will was made are relevant in establishing the fact of such influence. They include those which in the case of inter vivos dispositions would give rise to a presumption. …
[30] For completeness, I add two points to Elias J’s statement of the principles. First, the authorities to which she refers are concerned with alleged undue influence in an inter vivos transaction. There is a significant difference in that in challenging an inter vivos transaction, a plaintiff may benefit from an evidential presumption where there is a relationship of trust and confidence, or the transaction calls for an
explanation.6 As Elias J recognises, where undue influence affecting a will is
alleged, no such evidential presumption arises.7
[31] Second, as the Court of Appeal observed in the appeal from Elias J’s
decision, the alleged undue influence need not be accompanied by malign intent.8
‘Undue’ relates to impairment of judgment rather than the improper conduct on the
part of the person possessing influence. It will be “undue” when it can no longer be
said that the will represents the will-maker’s independent and informed judgment.
6 Hogan v Commercial Factors Ltd [2006] 3 NZLR 618 (CA) at [36].
7 See also Silbery v Silbery-Dee HC Wellington CIV-2005-485-2499, 22 August 2007 at [67]-[68]; Puru v Puru HC Auckland CIV-2007-404-3881, 5 November 2008 at [79]-[80]; and Green v Green [2015] NZHC 1218 at [101].
8 Carey v Norton [1998] 1 NZLR 661 (CA).
[32] There is a recent helpful statement of the principles to be applied in claims of undue influence, both in respect of an inter vivos transaction and in respect of a will, by Winkelmann J in Green v Green.9
[33] Applying the principles set out in those cases, I now discuss the matters upon which the plaintiffs rely as establishing undue influence on the part of John.
(c) The previous equality between the two families
[34] A fact upon which the plaintiffs place strong reliance is the marked difference between the three contested wills and the nine earlier wills. The earlier wills all provided, in one form or another, for broad equality between Bill and John and their respective families. Mr Gudsell submits that there was no differentiation whatsoever between Melva’s treatment of Bill and John and their children, and that the same principle of equality is also reflected in Roy’s final will. He further submits that the evidence clearly establishes that Roy and Melva always treated their two sons and their grandchildren equally. He submits:
With the sole exception of the three wills executed by Melva following Bill’s death, a clear and consistent picture emerges from the evidence as to the principle of equality underpinning the operation of the family business and the personal relationships that Roy and Melva had with their two sons, daughters-in-law, and seven grandchildren.
[35] In the light of that submission, it is necessary to emphasise that Melva was under no obligation to treat her sons and their children equally, and her earlier equal treatment of them did not create any obligation on her to continue doing so. Melva was, like any will-maker, entitled to deal with her estate as she thought fit.
[36] A will-maker must understand the extent of the property involved, the nature of claims arising from the family or other relationships, and the way in which the will will operate in carrying out the will-maker’s wishes.10 That is a question of testamentary capacity. As I later discuss, there is no challenge to Melva’s capacity to make any of the three challenged wills. That being so, the general principle to be applied is that Melva could dispose of her estate as she saw fit. A will is not invalid
merely because in making it the will-maker is moved by capricious or frivolous motives. A will-maker who has testamentary capacity:11
… is left free to choose the person upon whom he will bestow his property after death entirely unfettered in the selection he may think proper to make. He may disinherit, either wholly or partially, his children, and leave his property to strangers to gratify his spite, or to charities to gratify his pride …
[37] For these reasons, there can be no presumption arising from the earlier equal treatment that this should continue. Nor does it give rise to any obligation on the part of those supporting the will to provide a reason for a departure from equal treatment.
[38] That is not to say that the equal treatment in the former wills, and within the family generally, is irrelevant. It is a circumstance to be taken into account, along with all the other circumstances, in determining whether an inference of undue influence should be drawn. But the weight to be given to it needs to have regard to the principle I have described at [36].
[39] I need also to make it clear that there is no suggestion in the evidence of any disentitling conduct on the part of any family member. I accept without hesitation that Melva’s dispositions were not motivated by any view that any of her family had, by their conduct, lessened the esteem in which she held them. It emerges clearly from the evidence that Melva was rightly very proud of all her family: her sons, her daughters-in-law, and her grandchildren.
(d) Melva’s health
[40] I have observed that there is no challenge to Melva’s testamentary capacity. It is right that there should be none. There is no evidence to support such a challenge. The evidence of those who interacted with Melva, including family and friends, over the four year period in which the three challenged wills were made, indicates no concern that her mental faculties had declined to an extent which would call into question her capacity to understand the matters described in [36]. In giving
instructions for, and in signing, each of the three wills, Melva was attended by a
11 Boughton v Knight (1873) 3 LR P&D 64 (Ch) at 66.
solicitor, Mr McDermott in 2004 and Ms McDermott in 2006 and 2008. Ms McDermott gave evidence. She expressed no concerns as to Melva’s capacity. There is no medical evidence which addresses her testamentary capacity at any time in the relevant period.
[41] The plaintiffs place considerable reliance on what they say was Melva’s failing physical health over this period. Sue, in particular, had concerns. She is a registered nurse, although she has not worked as a nurse since 1973. She describes Melva as having a range of medical issues such that she was chronically unwell for probably the last 20 years of her life. Sue chronicles a very extensive list of medical issues, supported by medical records. Other family members do not in their evidence agree with the extent of Sue’s concern. I do not propose to discuss this evidence. Sue’s evidence is of her perception as a very caring and loving daughter- in-law to Melva, concerned for her welfare. However, accepting Sue’s evidence does not support the undue influence claim. Melva’s physical health could be relevant only if it supported an inference that she had become physically dependent upon John or Judy to an extent that she was susceptible to John’s influence, or to a desire to act towards him in a way which would ensure continued physical support by him or his family. The evidence about Melva’s physical or mental health does not support such an inference.
(e) Other evidence of undue influence on the three challenged wills
[42] There is little direct evidence of anything said or done by John to influence the content of his mother’s will. The plaintiffs refer to evidence of involvement by John in arrangements for giving instructions for the will, and of discussions between John and Melva about how his inheritance under the will would be structured. I address the detail of that evidence later. But, apart from that, there is no direct evidence of any discussion or interaction between John and Melva in which he said or did something requiring a judgment about whether that was undue influence. In
this respect, this case is different from Norton v Carey12 or Green v Green.13 The
plaintiffs’ case relies primarily upon inferences which counsel submits should be
drawn from the circumstances as they appear from the evidence.
[43] I address the evidence in the way Mr Gudsell dealt with it in closing, namely by reference to each of the three wills. I then review the matter more broadly.
(i) The 2004 will
[44] On 11 May 2004, John contacted the family solicitor, Mr McDermott, to arrange an appointment for him and Melva to discuss their affairs. Mr McDermott is now retired. He did not give evidence, but it was not suggested that he was unavailable to give evidence. In referring to his file notes, I bear that in mind. The file notes were produced in the common bundle. Each is admissible and can be considered as what it appears to be, under r 9.5 of the High Court Rules.
[45] A file note by Mr McDermott dated 13 May 2004 describes his meeting with Melva and John at her home. John’s evidence is that he attended the first part of this meeting, but left when Melva’s will was about to be discussed. The file note does not record that. The file note records that Melva described the extent of her estate and gave instructions for her will to be similar to her existing 1998 will, with some changes. The typed file note lists several changes, including: “[i]n cl 4, the property at Ngaruawahia will go to John”. There is also a handwritten note below that which reads: “Residue to John 1 share and Bill’s children – one share equally”.
[46] Mr McDermott prepared a draft will and other documents which had been discussed, and sent them to Melva on 18 May 2004. There is among the documents a copy of the draft will which contains notes in Melva’s handwriting. Some of these were reflected in the will which was later signed, whereas others were not.
[47] The next record is a file note dated 6 September 2004.14 This records an appointment with Melva at home, and a request by her to make several changes to the draft will, including: “She wanted Clause 4 to be amended to provide for John to have 60% of the residue and Bill’s three children to have 40%”.
[48] A further draft with these changes was sent by Mr McDermott on
13 September 2004. That version was signed on 7 October 2004. A file note, probably by Mr McDermott, records a visit with Melva’s accountant, Mr Stanich, to sign the will.15 It records that “[s]he confirmed she was happy with her will which was read to her again although she said she had read the copy we had sent her”.
[49] Mr Gudsell refers to a number of “contextual matters” which he submits are relevant background. He submits that those show that Melva was an elderly and vulnerable woman, living alone, who had recently faced serious medical issues and personal tragedy and was becoming increasingly reliant on family members. He submits that much of the three hour meeting on 13 May was spent discussing John’s concerns about the business, following Bill’s death in early April. Counsel invites the Court to find, contrary to John’s evidence, that John was present when the will was discussed at the meeting on 6 September 2004. Counsel refers to the lack of a record in the file note of Melva’s reasons for the changes to her will, and to the discrepancies between Melva’s handwritten notes on the draft and the final will.
[50] Mr Gudsell submits that having regard to all the surrounding circumstances, with particular emphasis on the will and the circumstances in which it was executed, an inference can be drawn that it was executed as a result of undue influence. He submits that Melva had suffered a series of setbacks. She was elderly, living alone, in declining health, suffering from depression and serious medical problems, and had just lost her son in tragic circumstances. As a very private person the extent of her condition may not have been apparent, but she was chronically unwell and depended upon family members, including John, to be able to live alone. She was dependent on John in her personal affairs, such as would create a relationship of trust and confidence giving rise to the presumption of influence for an inter vivos disposition, and that is relevant to this case. Following Bill’s death, John discussed the business extensively with Melva, when there was no need for him to involve her in his concerns about the business. There was no “antidote”, to use Mr Gudsell’s term, to John’s influence and side of the story.
[51] I do not find in the evidence, or the circumstances relied on by Mr Gudsell, any evidence which would support the conclusion that the 2004 will was the result of undue influence from John. The only involvement by him of which there is evidence is his arranging and attending part of the meeting on 13 May 2004. I accept his evidence that he left before the will was discussed. There is nothing to suggest the contrary. It is improbable that an experienced solicitor would have been content for him to remain, without recording that in his file note. The circumstances do not give rise to an inference that he must have had some influence on Melva. She had the draft will for several months. She clearly considered it, to the extent of writing notes on it, and she gave instructions for changes when John was not present. It is possible that the decision which she made, at some point between 13 May and 6 September, to depart from equal sharing of the residue, may have been influenced by the circumstances that more of the burden of running the business had fallen on John following Bill’s death. Her view about that may well have been affected by discussion with John about the business. But that falls far short of giving rise to an inference that her decision to depart from equality was the result of undue influence from John.
[52] Melva’s view of the circumstances of members of her family would naturally be shaped to some extent from her interactions with family members, and her perceptions based on these interactions. Her ability to bring a free will and properly informed mind to bear on the terms of her will is not impaired by taking into account such perceptions. Melva appeared to factor into her thinking the future of the business. The business had been her and Roy’s life work, so that this is understandable. I do not accept the submission that it was inappropriate for John to involve Melva in his concerns about the business. It was natural that she would be interested in the fortunes of the family business, despite having no ongoing involvement with it. Her understanding of the state of the business after Bill’s death would naturally come principally from John, and would reflect his own views about that. There is no evidence that John, in discussing the business with his mother, may have deliberately given her a false impression about the position.
[53] At least some of the dispositions in the 2004 will seem, on my assessment of
the evidence, to have been influenced by Melva’s views about the family business.
Melva would have seen John as key to its continued success at that stage. The Ngaruawahia properties which were left to John were important to the business. The differential in residue favouring John is not an irrational one, if motivated by such concerns.
[54] The evidence establishes that Melva was a strong-willed person. Her insistence on continuing to live independently despite what was, on Sue’s evidence, strong advice to the contrary bears that out. The evidence of other witnesses describes a woman who was not easily susceptible to influence.
[55] I cannot exclude the reasonable possibility that the changes were motivated by Melva’s concerns about the continuation of the family business, and the burden which she perceived as falling on John. That possibility, coupled with my finding that Melva was not easily susceptible to influence, particularly when any undue influence would have to be sustained over a period of months, means that I cannot infer that it is more likely than not that the 2004 will was the result of undue influence by John. Such a finding would be speculation.
(ii) The 2006 will
[56] The 2006 will was prompted by Melva’s wish to give each of her grandchildren a substantial sum as a Christmas present. Ms McDermott had taken over responsibility in her firm for Melva’s affairs. John rang Ms McDermott on
15 December 2006 to tell her this, and Ms McDermott suggested that this be done by making loans, to be forgiven in the will, otherwise gift duty would be payable. Melva spoke by phone on 18 December to Ms McDermott. The file note records the discussion about the gifts to be grandchildren and continues:
3We discussed the terms of her Will and she said she would like the grandchildren to take equally but she would like Paul to get twice as much as Bill’s other children because he had stayed working in the business.
4 She said she would like John’s children to get something on her
death as they might not get anything until John dies.
[57] The file records several contacts or attempted contacts between them by telephone, in which an appointment was arranged for 21 December. Ms McDermott’s file note of this meeting records:
She confirmed that her existing Will will remain unaltered and the proportions going to John and Bill’s children would remain the same except that she wanted Paul to have twice the amount that was going to David and Rachael.
Attendance on Mrs Mahon
1We went through the draft Will and Mrs Mahon said she would like the shares of Bill’s children to go to the remaining two if one of them died.
2 She also said she would like John to get her home and her car.
3 She signed the amended Will.
[58] Ms McDermott prepared the will during that meeting, and it was signed then.
[59] Mr Gudsell submits that it is clear that Melva relied on John to contact her solicitor, and that she discussed her legal affairs with him. Ms McDermott accepted that there was a relationship of trust and confidence between Melva and John, and that John assisted Melva with her legal affairs. Mr Gudsell also examined in detail what he submits were inconsistencies between aspects of Ms McDermott’s notes of her instructions and the will itself.
[60] There were two main changes from the 2004 will relevant for present purposes. The first was to increase the specific bequest to John by adding Melva’s house (then at Chartwell Crescent) and car. The second was to give Paul twice the amount going to David and Rachael. Both changes resulted from instructions given by Melva at the meeting on 21 December. John was not present at that meeting. When he spoke to Ms McDermott on 15 December, these two changes were not mentioned. At the meeting between Melva and Ms McDermott (which John did not attend) on 18 December, the second was discussed but the first was not.
[61] That sequence of events does not suggest that these changes resulted from undue influence by John. Melva gave the instructions at the meeting alone with her solicitor.
[62] The evidence does not give rise to the inference that John exercised undue influence over the terms of the 2006 will. It goes no further than establishing that he assisted her in the initial arrangements for instructing Ms McDermott. The changes went beyond those contemplated at that initial stage.
(iii) The 2008 will
[63] On 24 August 2007, Ms McDermott wrote to Melva reporting on the purchase of Sovereign Isle and the sale of Chartwell Crescent. At the end of that letter she enclosed for her information a copy of the 2006 will and said “[i]f you require any amendments to your will we look forward to receiving your further instructions”. John rang Ms McDermott on 21 November 2007 to discuss his own and David’s affairs. John said that David has raised with him repaying the loan made by Melva to David and re-advancing it to David’s trust. Ms McDermott advised on that and her file note says:
I confirmed that there should be no problems readvancing the loan to David’s trust. I also advised John that it might be desirable to amend Mrs Mahon’s Will.
[64] Ms McDermott attended on Melva and John at Melva’s home in Sovereign Isle on 9 June 2008. They discussed the fact that it would be desirable to leave any substantial asset (e.g. the farm) to John’s Trust rather than him personally. Melva then said she was thinking of changing her will, and John left the meeting. Of the discussions between Ms McDermott and Melva, the file note records, inter alia, the following:
7Melva said that she was worried that she was not doing what Roy had said i.e. leave her estate equally to Bill and John which would mean that Bill’s share would go to Bill’s three children.
…
12I pointed out that Bill’s children might not be happy with the terms of the Will as their inheritance had reduced because their father had died before Melva. Melva said that she did not think this would be an issue.
13I advised Melva that I did not think any of the grandchildren could claim against her Will under the Family Protection Act.
14Melva wondered whether it would be appropriate for her to discuss the Will with John and, in particular, what John intended to do with his assets on his death. I advised her that if she wanted to do this there is no harm in doing so.
[65] Ms McDermott prepared a will in accordance with the instructions in that file note. She also prepared a deed for the Melva Mahon Inheritance Trust, and a deed of indemnity between Melva and the trustee of that trust.
[66] Melva and Ms McDermott spoke by telephone on 26 August 2008 to arrange an appointment. Ms McDermott confirmed to Melva that she had seen John last week and was going to contact her and discuss her affairs. Ms McDermott attended on Melva at Sovereign Isle on 27 August 2008. The discussion at the meeting is recorded in Ms McDermott’s file note. Melva confirms that she had discussed her will with John and her main concern was that John’s children would not receive any benefit from her estate when Judy died. The idea of leaving the residuary estate to a separate trust was discussed.
[67] Following that meeting Ms McDermott wrote to Melva on 14 September
2008 recording her objectives and suggesting, in particular, ways to enable John’s children to benefit on John’s death if he died before Judy. These included establishing a separate trust to which the residuary estate could be left. She enclosed a draft will, a draft trust deed for the proposed Melva Mahon Inheritance Trust, and a memorandum of wishes for the trust. Melva rang Ms McDermott on 1 October 2008 to make an appointment. They met on 3 October 2008. What transpired at the meeting is recorded in Ms McDermott’s file note. Of particular relevance for present purposes is the following:
10I queried with Melva whether she thought Rachel and David would accept the differential and how she had left her estate. She said she had not discussed it with them but thought that they would understand. I advised her of the possibility of children and grandchildren claiming against the estate where that child or children could show that the parent or grandparent had not discharged their moral obligation to provide for them. Melva queried whether any of the grandchildren could claim against her Will for this reason. I advised her I did not think the differential in what they were receiving was so great that they would have any valid claim under the Family Protection Act.
[68] Ms McDermott prepared new documentation in the light of that discussion and sent it to Melva under cover of a letter dated 24 October 2008. In that letter she gave advice on the Family Protection Act 1955, and said:
You may recall that on 3rd October, 2008 we discussed whether Rachel, David and Paul would be aggrieved in any way because they were taking less from your estate than John, and also whether Rachel and David Wednesday be aggrieved because Paul was inheriting more than them.
[69] Shortly after this, Melva was admitted to hospital with pneumonia. John contacted Ms McDermott by email on 15 November 2008 and said:
This season has been hectic and we are now in Wanganui as we slowly wind our way north, so catching up with you is a little difficult.
2 main reasons for contacting you. Firstly trying to get a progress report on my own planning re Trusts etc. I am pleased Philip has at last got back to you, but now I am not really sure where we are at. I know one of the questions was whether to tip House and life Policy (presently [on] Jude’s name) into a Trust, or leave at least 1 in Jude’s name. Eventually insurance will be stopped as it becomes too expensive (I hope that’s the outcome any way!).
Secondly mum has been in hospital for about a week with pneumonia. I flew up when she was admitted and the kids have been flying the flag since. It all looks OK now and if I can I will get back up next week. I have spoken to her Doctor and she could get discharged next week. She is as sharp as ever but has a concern about her will. She wanted me or the kids to take it up for her to sign, but I think that’s a little too negative. However she is under the impression you were dropping something else off to her for her to read before signing? Can you shed any light on that or is there some confusion by her? Perhaps when she gets out you can follow it up and sort everything. I think it would be a little rough for me to get her to sign anything while in hospital……….I will leave it to you.
[70] Ms McDermott responded by email on 17 November 2008 in which she
discussed John’s affairs, and said:
I dropped a letter off to your Mum on 24 October with (hopefully) final drafts of her will and other documents. I was waiting to hear back from her that everything looked ok. If she is happy with everything I could call on her at home so she could sign the documents.
[71] John spoke with Ms McDermott on 20 November 2008. Her file note records:
1 John confirmed that his mother was now recovering and she was going to spend a week in Trevellyn. He said that she could spend more than a week at Trevellyn if she felt she needed to. 2
John said that Melva had discussed her Will with him and he had read the Will. John said that Melva had confirmed that John could discuss her affairs with me.
3
John said that his mother had had a fright and now wanted to sign
the documents. …
[72]
Ms
McDermott attended on Melva at Trevellyn Rest Home on
27 November 2008 when the will and other documents were signed.
[73] Mr Gudsell submits that the evidence as to the circumstances surrounding the
2008 will supports an inference that the will was executed as a result of undue influence. He submits that a pattern emerges whereby all of the wills were executed by Melva after John discussed his personal legal affairs and business concerns with Melva and Ms McDermott. John also initiated the contact and setting up of the meetings. The 2008 will arose only as a result of the personal asset protection and estate planning matters by John. He raised personal legal matters with his solicitor which directly led to Melva executing a will that significantly advantaged him over Bill’s children. He submits that the notion of the inheritance trust was new, difficult and confusing. He submits there is a striking disconnect between Melva’s supposed objectives and what the 2008 will and inheritance trust ultimately provided for. He submits that Melva was clearly seriously unwell at the time the 2008 will was drawn up and signed.
[74] I do not consider that the evidence gives rise to an inference that John exercised undue influence in relation to the 2008 will such that Melva’s free will was impaired. There is nothing in the contemporary documentation that suggests that John had persuaded Melva as to the extent of the disposition to him under the will. His evidence is that his discussions with Melva related to how his share, whatever that might be, would be structured in the will. The contemporary documentation in the file notes, and Ms McDermott’s oral evidence, is consistent with that. It is clear from the documents, and from Ms McDermott’s evidence, that Melva was conscious of the differential treatment between the families of her two sons. At the meeting on
9 June 2008 this was discussed quite specifically. Melva’s statement that she was
worried she was not doing what Roy had said is not, on my assessment, a comment of a woman who has been induced to act in a way which over-rode her own independent judgment. Rather, it suggests to me that she had made a conscious decision to depart from equality, being fully aware that doing so was contrary to what had been done earlier. Similarly, her response that she did not think that the inequality would be an issue with Bill’s children suggests to me the exercise of an independent judgment to reach that conclusion, rather than having been improperly influenced by John to create that inequality. Her question to Ms McDermott as to whether it would be appropriate for her to discuss the will with John suggests that the will to that point was the result of her independent thought and had not been previously discussed with John.
[75] The basic 60/40 division of the residue between the two branches of the family which was established by the 2004 will and maintained in the 2006 will was not changed. Nor was the differential between Paul and his siblings, created by the
2006 will, altered by the 2008 will. The way those objectives were achieved was altered by what was, for a non-lawyer, a quite complex trust arrangement, suggested by Ms McDermott. She explained that to Melva. It is apparent, both from the documentary record and Ms McDermott’s evidence, that Melva was able to engage with the proposed arrangement, and understood its effect. The only evidence to which the plaintiffs can point to suggest that Melva was confused or did not understand what she was doing is a comment in an email from John to Ms McDermott that Melva was under the impression Ms McDermott was dropping something else off for her to read, when in fact Melva had all the documents. That falls far short of indicating that Melva was confused. The other evidence shows she was not.
[76] John to some extent participated in and discussed the proposed arrangements. I do not find that the Trust arrangement, which was new to the 2008 will, resulted from his involvement. In any event that involvement fell short of undue influence. But, more importantly, any influence which he may have exercised in relation to the
2008 will did not lead to any change in the unequal division which had been established in 2004 and confirmed in 2006.
(iv) Overview of the undue influence claim
[77] The essence of the plaintiffs’ claim is that Melva was, over a four year period from 2004 to 2008, so influenced by John that her judgment throughout the period, and particularly at the times when she made the three wills, was impaired to the extent that none of these wills is the result of her independent judgment. The direct evidence of influence by John is slight. Such direct evidence as there is goes generally to his involvement in making arrangements with Melva’s lawyer, accompanying his mother to appointments, discussing with her the structuring of dispositions to him under the will, and generally discussing business affairs with her. The plaintiff’s case is based largely on the proposition that the terms of the wills, in not treating both branches of the family equally, are not explicable other than by John’s undue persuasion, and that on the evidence there is no other equally possible explanation.
[78] The plaintiffs rely upon Melva’s personal circumstances to assert that she was vulnerable to John’s influence throughout that period, as I have described. The evidence does not support that proposition, as I have discussed. The evidence of all witnesses, some of whom I have discussed and others I have not, conveys a clear picture of a strong-minded woman not easily susceptible to persuasion against her better judgment. She was able to live throughout the years in issue largely independently.
[79] The departure from equality is understandably distressing to the plaintiffs. That distress will be partly as to the financial consequences and partly as to their perceived standing in Melva’s affections. It will provide little comfort to them, but I repeat what I have said, that I find in the evidence no suggestion that Melva held any member of her family in less esteem than any other. I am satisfied that Melva acted for reasons which appeared to her to be good, and not with the intention of hurting any of her family. These reasons were centred on the future of the business which had been her and Roy’s life’s work. That is evident not only from the greater provision for John, but also from the greater provision for Paul. The only distinction which Melva could possibly have drawn between Paul and his siblings is his involvement in the family business.
[80] It is not for the Court to examine the soundness of those reasons, or to consider whether, objectively, they were a reasonable justification for the dispositions Melva made. As I have said, Melva was not obliged to act reasonably. The only concern of the Court is to be satisfied that Melva’s reasons were her own, unaffected by improper influence from others. For the reasons I have given, I find that Melva’s reasons were, for good or ill, her own.
[81] The undue influence cause of action must fail.
The Common Intention Trust claim
(a) The plaintiffs’ contention.
[82] The plaintiffs contend that the farm and the Ngaruawahia properties do not form part of Melva’s estate, in that she was not the beneficial owner of those properties, because they were subject to a common intention constructive trust. The statement of claim alleges that when the Ngaruawahia properties were transferred to Melva in 1986, and the farm was transferred to her in 1991, there was a common intention expressed or understood between Roy, Melva, Bill and John that given the potential tax liability faced by ESL, assets held by ESL, Roy, Bill and John, would be transferred to Melva or Susan or Judy. It alleges that the transfer of the Ngaruawahia properties and the farm from Roy to Melva was made on the understanding that they would be held by Melva for her lifetime and would not form part of the pool of assets available to meet any claim by the IRD. Following her death they would be held for the benefit of Bill and John in equal shares and that, should either Bill or John predecease Melva, their children would receive the benefit of the share which their father would otherwise have received.
(b) General principles
[83] The type of constructive trust which the plaintiffs claim arises here is of the type which has been recognised in a line of cases dealing with the division of property between de facto partners, before the Property (Relationships) Act 1976
was extended to such relationships. The leading case is Lankow v Rose.16 There are
16 Lankow v Rose [1995] 1 NZLR 277 (CA).
two essential requirements for the imposition of such a trust: that the claimant had contributed in more than a minor way to the acquisition, preservation, or enhancement of the relevant assets, whether directly or indirectly; and that in all the circumstances the parties must be taken reasonably to have expected that the plaintiffs would share in them. The contribution must manifestly exceed the benefits which the claimant has received. The expectation of an interest in the property must be a reasonable one, in that the circumstances must be such that it was reasonable both for the claimant to have an expectation of an interest and for the legal owner of the property to expect there to be such an interest.
[84] In addressing those two requirements in this case, I should not be taken as holding that this type of trust potentially extends beyond the limited range of relationships that are now covered by the Property (Relationships) Act. The requirements of such a trust are clearly referable to the dynamics of a de facto relationship and the intentions, contributions, and expectations which arise from such a relationship. As the Court of Appeal noted in Harvey v Beveridge the authorities on the “common intention” constructive trust are all concerned with such
relationships.17 It left open the question whether in New Zealand a “common
intention” constructive trust could be recognised in the context of a different relationship. I expressed similar doubts as to the availability of a common intention constructive trust outside the de facto relationship context in Albon v Albon.18 I venture to doubt whether the requirements could ever be established, in situations in which there are no intentions, contributions, or expectations inherent in the nature of the relationship. In such circumstances, the evidence necessary to establish a
common intention, and a reasonable expectation, might well need to be sufficiently cogent and specific to establish an express trust. However, despite those reservations, I turn to consider the plaintiffs’ claim on the hypothesis that a common intention constructive trust could, as a matter of law, arise from the relationships involved here.
[85] In considering the matter on that basis, it is necessary to address separately the Ngaruawahia properties and the farm.
17 Harvey v Beveridge [2014] NZAR 677 (CA) at [45].
18 Albon v Albon [2014] NZHC 1490 at [26].
(c) The Ngaruawahia properties
[86] These properties were transferred by Roy to Melva under the matrimonial property agreement in 1986. That was before the tax investigation began in 1989. The plaintiffs plead that by 1985 Roy, Bill and John became aware of the potential that they and ESL could face substantial tax liabilities and that in or about 1986 ESL, Roy, Bill and John sought legal advice about identifying and protecting assets which had previously been acquired by them. Those allegations are admitted in the statement of defence. In closing, as signalled earlier in the hearing, Mr Fulton sought leave to amend the statement of defence, to deny those allegations. I can deal very briefly with that application. In all the circumstances, I consider it appropriate to address the defence on the basis originally pleaded, including those admissions. I therefore decline leave to amend.
[87] The statement of defence admits that the family was aware of the possibility of a subsequent tax investigation. It does not admit that the transfer of the Ngaruawahia properties was motivated by that possibility. There may be other potential motivations. However, I need not decide that point. Even assuming that the transfer was, in part at least, motivated by a possible tax investigation, there is no evidence that Bill and John were involved in any way in the decision by Roy and Melva to enter into the matrimonial property agreement. Unless Bill and John had some involvement in the decision to transfer the properties to Melva, there could be no common intention, to which they were privy, that Melva would retransfer the properties at some time and in some way. Also, there is no evidence of any intention common to Roy and Melva, let alone Bill and John, that the transfer would be unwound at the end of any tax investigation, if that occurred. That would have required a considerable degree of prescience and foresight as to both the commencement and the outcome of the tax investigation. There is no evidence that the transfer of the Ngaruawahia properties was approached in that way. The inference of a common intention that the transfer would be temporary, and unwound when the investigation was over, is not an inference which I could properly draw from the evidence.
[88] Furthermore, even if the inference was drawn that there was a common intention that the transfer to Melva would be reversed at the end of the investigation, it is more likely that the intention would be for Melva to transfer the Ngaruawahia properties back to Roy. There is no evidence to support an intention that they would instead be held for the benefit of Bill and John, or their children, as the plaintiffs allege. The more likely expectation, if there was to be a transfer, was that the Ngaruawahia properties would be transferred back into Roy’s name.
[89] Furthermore, there is no evidence of a contribution by Bill or John to the Ngaruawahia properties. Neither Bill nor John made any direct personal contribution to the Ngaruawahia properties. Any contribution by them must have been through ESL. The properties, when owned by Roy and then by Melva, were used by ESL, and subsequently MAL. There is no evidence of any formal lease or other arrangement between ESL and the owner. This was a family business, so the absence of such an arrangement is not necessarily remarkable. There is no evidence of what, if anything, ESL or MAL paid for its use of the property. ESL could not be said to have made a contribution to the property by using it. That was a benefit from the property, not a contribution to it. Only if ESL paid more than a commercial rent for the property could any question of a contribution arise. There is no evidence about that. Further, whatever rights or liabilities attached to the use of the Ngaruawahia properties, those involved ESL, not Bill and John personally.
[90] The claim that the Ngaruawahia properties are subject to a constructive trust as alleged must fail.
(d) The Farm
[91] The plaintiffs claim that the farm was subject to a constructive trust under which it was to be held for the benefit of Bill and John in equal shares. The allegation is that there was a common intention that it would be held by Melva for her benefit during her lifetime and subsequently for the benefit of Bill and John in equal shares. The circumstances are not consistent with that claim.
[92] First, the farm was, before its transfer to Melva, owned by ESL. There is no basis whatsoever for inferring any intention that the property which Melva acquired
from ESL would be held for the benefit of her sons. I do not find, for the farm anymore than for the Ngaruawahia properties, any common intention that Melva would transfer the property back once the IRD issues were resolved. There is no evidence of any direct involvement by Bill or John in any discussion about what Melva would ultimately do with the farm. But even if it were possible to infer any such intention, as counsel for the plaintiffs urges, then the more likely intention would be that the property be restored to its original owner, ESL, or its successor MAL. There is nothing to support the proposition that Bill and John would be the beneficiaries of a common intention trust.
[93] There is evidence which weighs heavily against the existence of a common intention that the farm would be transferred back to the company when the IRD investigation ended. The farm was not simply transferred to Melva, it was sold to her. It is clear from the evidence that the farm had never been a core asset of ESL’s business. Its use for storage (subsequently disallowed by the Planning Tribunal) was at the most incidental for the company. ESL needed to find money to pay the IRD. Roy and Melva were able to arrange funds so that Melva could buy the farm, to yield cash to pay the IRD. The proposition that Melva, having paid for the farm, acquired it subject to a trust such as alleged cannot stand in the face of those circumstances of the transfer.
[94] The constructive trust claim to the farm must fail.
The Family Protection Act claim
[95] Under s 5 of the Family Protection Act 1955, a claim may be made where adequate provision is not available from the estate for the proper maintenance and support of the persons by whom the application is made. David and Rachael are entitled to claim under s 3(1)(c) as grandchildren of Melva. The issue, on this claim, is whether the provision available to them from the estate under the terms of the will is adequate for their proper maintenance and support.
[96] The test for “proper maintenance and support” for an adult claimant not under any disability is enunciated in Williams v Aucutt by Richardson P in these terms:19
[52] Second, for reasons which will be apparent from the earlier discussion, we reject the argument that the Court must expressly find a need for proper maintenance and support. 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. ``Support'' is used in its wider dictionary sense of “sustaining, providing comfort”. A child's path through life is supported not simply by financial provision to meet economic needs and contingencies but also by recognition of belonging to the family and of having been an important part of the overall life of the deceased. Just what provision will constitute proper support in this latter respect is a matter of judgment in all the circumstances of the particular case. It may take the form of lifetime gifts or a bequest of family possessions precious to its members and often part of the family history. And where there is no economic need it may also be met by a legacy of a moderate amount. On the other hand, where the estate comprises the accumulation of the family assets and is more than sufficient to meet other needs, provision so small as to leave a justifiable sense of exclusion from participation in the family estate might not amount to proper support for a family member.
[97] As that case makes clear, the focus is not the reasons for treating family members differently. It is up to the claimant to satisfy the Court that the provision in the will was not adequate for the proper maintenance and support of the claimant. Blanchard J said:
[70] It is not for the Court to be generous with the testator's property beyond ordering such provision as is sufficient to repair any breach of moral duty. Beyond that point the testator's wishes should prevail even if the individual Judge might, sitting in the testator's armchair, have seen the matter differently. As I have said, the Court's power does not extend to rewriting a will because of a perception that it is unfair. Testators remain at liberty to do what they like with their assets and to treat their children differently or to benefit others once they have made such provisions as are necessary to discharge their moral duty to those entitled to bring claims under the Family Protection Act.
[98] In Auckland City Mission v Brown, the Court of Appeal rejected a submission that those comments applied only to wealthy claimants.20 It applies also to less
19 Williams v Aucutt [2000] 2 NZLR 479 (CA).
20 Auckland City Mission v Brown [2002] 2 NZLR 650 (CA).
well-off children. The Court is not authorised to rewrite a will merely because it may be perceived as being unfair to a family member.
[99] In the present case, significant provision was made for both David and Rachael. As I have noted, each of them will receive about $445,000 when the Melva Mahon Inheritance Trust is distributed. Their evidence shows them to be established in life, but not wealthy. Neither of them has adduced evidence of financial need. In this case, the estate comprises the accumulation of the family assets, so that the question is, as enunciated by Richardson P in Williams v Aucutt, whether the provision is so small as to leave a justifiable sense of exclusion from participation in
the family estate.21
[100] Proper regard must be paid to Melva’s freedom to dispose of her estate as she thought fit. The amount of the provision was not so small as to leave a justifiable sense of exclusion from participation. Rather, what is complained of is that there was no equality of participation. That is not a proper basis for a claim. The purpose of the Act is not to enable the Court to redress a perceived inequity in the proportions in which the estate is distributed. Melva was entitled to make the differentiation she did between the families of her two sons. She was also entitled to make the differentiation she did between Bill’s children. The differentiation she made was specifically raised with her by Ms McDermott at the meeting on 3 October 2008. Ms McDermott queried with Melva whether she thought Rachael and David would accept the differential and how she had left her estate. Melva said she had not discussed it with them but thought that they would understand. It is clear from the present claim that they do not understand or accept the differentiation. But the discussion demonstrates that the differential did not arise from any inadvertence or misapprehension on Melva’s part. Melva made significant provision for them. To hold that further should be awarded under the Family Protection Act would create an inroad into Melva’s testamentary freedom which would necessarily go beyond ensuring that adequate provision is available from her estate for the proper
maintenance and support of David and Rachael.
21 Williams v Aucutt, above n 19.
[101] It is also relevant that the expectation of all family members to the fruits of Melva’s and Roy’s lifetime labours is not limited to their inheritance from Melva’s estate. The business which they had founded, and built up with the help of their family, has already passed in equal shares to each branch.
[102] Counsel for the plaintiff points to the possibility that David’s and Rachael’s inheritance may be deferred for up to 80 years under the Melva Mahon Inheritance Trust. I consider that this possibility can be discounted. Melva’s memorandum of wishes recognised the trustees’ sole and unfettered discretion as to the date of distribution, but her expression of her aims clearly linked that to the sale of the farm, which has now occurred. If the trustees do not exercise their powers properly, the plaintiff may have other remedies. The intervention of this Court on the present claim is not appropriate.
[103] The Family Protection Act claim must also fail.
Result
[104] For these reasons, all of the plaintiffs’ claims are dismissed. There will be
judgment for the defendants.
[105] I have as directed received submissions on costs from the parties, which I have not yet seen. I will deliver a separate judgment on costs shortly, after considering those.
“A D MacKenzie J”
Solicitors: Raymond S Walker, Barristers & Solicitors, Auckland, for plaintiffs
Bell Booth Sherry, Takapuna,
Harkness Henry, Hamilton, for first defendantsNielsen Law, Hamilton for second defendants
3
0