McMillan v Pretty
[2019] NZHC 1094
•17 May 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-613
[2019] NZHC 1094
IN THE MATTER of the Law Reform (Testamentary Promises) Act 1949 A N D
IN THE MATTER
of the Estate of VALERIE HELEN SVENDSEN
BETWEEN
NEIL PETER MCMILLAN
Plaintiff
AND
PAUL EDWARD PRETTY as Executor of the Estate of Valerie Helen Svendsen
Defendant
AND
LINDA MAY MCCARTHY
Party directed to be served
Hearing: 6 May 2019 Counsel:
A R Gilchrist for Plaintiff M T Arnet for Defendant
R O Parmenter for Ms McCarthy
Judgment:
17 May 2019
JUDGMENT OF BREWER J
This judgment was delivered by me on 17 May 2019 at 3:00 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
MCMILLAN v PRETTY [2019] NZHC 1094 [17 May 2019]
Introduction
[1] Mr McMillan claims under the Law Reform (Testamentary Promises) Act 1949 (the Act) against Mr Pretty as executor of the estate of Mrs Svendsen. Mr Pretty supports the will but essentially abides the decision of the Court. Mr McMillan’s claim is opposed by Ms McCarthy who, together with Mr McMillan, is a principal beneficiary under Mrs Svendsen’s will.
[2] Mrs Svendsen died on 17 October 2017. Her will, dated 28 August 2017, was granted probate by the Court on 19 January 2019. It provides for three minor bequests, with the residue of the estate (the major part being a house on Waiheke Island) to be divided equally between Mr McMillan and Ms McCarthy.
[3] Mr McMillan claims Mrs Svendsen and her late husband made a promise to him that, in consideration and reward for providing a loan of $185,415.60 interest-free to them in order to renovate the Waiheke Island house, he would inherit the house after their deaths and/or be the primary beneficiary of their wills. His case is that he provided the money as well as various domestic and other services as a loving and dutiful nephew. He seeks to be awarded a full interest in the house.
The law
[4] Section 3(1) of the Act provides that the estate of a deceased person is liable to remunerate persons for work done under promise of testamentary provision:
Where in the administration of the estate of any deceased person a claim is made against the estate founded upon the rendering of services to or the performance of work for the deceased in his lifetime, and the claimant proves an express or implied promise by the deceased to reward him for the services or work by making some testamentary provision for the claimant, whether or not the provision was to be of a specified amount or was to relate to specified real or personal property, then, subject to the provisions of this Act, the claim shall, to the extent to which the deceased has failed to make that testamentary provision or otherwise remunerate the claimant (whether or not a claim for such remuneration could have been enforced in the lifetime of the deceased), be enforceable against the personal representatives of the deceased in the same manner and to the same extent as if the promise of the deceased were a promise for payment by the deceased in his lifetime of such amount as may be reasonable, having regard to all the circumstances of the case, including in particular the circumstances in which the promise was made and the services were rendered or the work was performed, the value of the services or work, the value of the testamentary provision promised, the amount of the estate,
and the nature and amounts of the claims of other persons in respect of the estate, whether as creditors, beneficiaries, wife, husband, civil union partner, children, next-of-kin, or otherwise.
[5] This Court in Saunders v New Zealand Guardian Trust Company distilled the section’s requirements for an enforceable claim into four elements:1
a)the claimant must have rendered services to, or performed work for, the deceased in the deceased's lifetime;
b)there must be an express or implied promise by the deceased to reward the claimant;
c)there must be a nexus between the services and the promise; and
d)the deceased must have failed to make the promised testamentary provision or otherwise remunerate the claimant.
[6] “Work” and “services” have both been construed widely by the courts.2 However, services sufficient to ground a claim under the Act must be beyond those naturally incidental to a close family relationship.3 This distinction refers to the quality of the services (between those normally expected and those which go beyond that), rather than the intentions underpinning their performance.4
[7] Financial assistance has been considered a service for the purpose of the Act.5 So have emotional support and companionship.6 Counsel for Mr McMillan notes the Court of Appeal’s comments in Thwaites v Keruse that “companionship, affection, cohabitation, may properly be regarded as “services” in some circumstances, where for example the promisor is elderly or lonely or in poor health.”7
[8] Section 2 of the Act defines “promise” to include any statement or representation of fact or intention. The word is not used in a technical or legalistic
1 Saunders v New Zealand Guardian Trust Company HC Palmerston North CIV-2008-454-389, 12 August 2010 at [10].
2 See Tucker v Guardian Trust [1961] NZLR 663 (SC) at 776.
3 See Re Welch [1990] 3 NZLR 1 (PC) at 7.
4 Re Lamb HC Timaru, M11/91, 7 October 1992 at 9; and Parata v McGowan [1994] NZFLR 937 (HC) at 942–943.
5 See for instance Tangimai v Tangimai [2014] NZHC 2348, in which payments of outgoings on a mortgage and borrowing against a claimant’s own address was considered service enabling the deceased to build a home in the Cook Islands.
6 See for instance Byrne v Bishop [2001] 3 NZLR 780 (CA).
7 Thwaites v Keruse (1993) 11 FRNZ 19 (CA) at 23.
sense, and a promise need not amount to a contractual undertaking.8 It need not be in writing. A “promise” can include unilateral declarations by a deceased of their intention to reward a claimant for services or work performed by them by the making of a testamentary provision in their favour.9 The promise may be made before or after the work or services are performed, provided it is made in connection with them.10
[9] The courts primarily focus on the claimant’s understanding of the deceased’s words or conduct when determining whether a promise existed.11
[10] The nexus between that promise and the services or work is determined objectively with the focus on the promisor rather than the promisee’s motivation for performing the services or work. The reasons for this were described by Blanchard J in Byrne v Bishop (citations omitted):12
… it can really be of no importance where the promise is to reward things done for the promisor in the past. The requirement that there must have been a "promise" to reward the claimant is directed to the purpose of the promisor's provision rather than the motivation of the promisee and it is sufficient that the promise be in part only as a reward for services; family ties and other considerations may also have influenced the making of the promise. It would be repugnant if the fact that the services or work were performed out of a generous spirit and not for mercenary reasons or in the hope of reward should count against claimants by way of depriving them of a claim or devaluing it.
[11] In the present case, for Mr McMillan’s claim to succeed he must satisfy the Court that Mrs Svendsen made a promise to leave her house or estate to him as a reward for his provision of funds towards her and her late husband’s housing renovations, and that he provided the funds, as well as any others which are relevant to the promise.
[12] Should the Court be thus satisfied, Mr McMillan will not automatically be awarded what he was promised in entirety. The Act provides that the promise shall “be enforceable against the personal representatives of the deceased in the same manner and to the same extent as if the promise of the deceased were a promise for
8 Nealon v Public Trustee [1949] NZLR 148 (CA) at 161.
9 Jones v Public Trustee [1962] NZLR 363 (SC) at 374.
10 At 374; and Law Reform (Testamentary Promises) Act 1949, s 3(2).
11 Heathwaite v NZ Insurance Co Ltd [1951] NZLR 6 (SC) at 8.
12 Byrne v Bishop, above n 6, at [10].
payment by the deceased in his lifetime of such amount as may be reasonable, having regard to all the circumstances of the case”.13 Where the promise relates to real or personal property which forms part of the estate, s 3(3) enables the Court to make an order vesting all or part of a specific property in the claimant.
[13] The Court has a broad discretion to make an award, subject to the limitations that it should not be greater in value than what was promised, and it must be reasonable as recompense for the services provided.14
[14] Section 3(1) lists the “circumstances of the case” which the Court must take into account in making an award as including in particular:
(a)the circumstances in which the promise was made and the services were rendered or the work was performed;
(b)the value of the services or work;
(c)the value of the testamentary provision promised;
(d)the amount of the estate; and
(e)the nature and amounts of the claims of other persons in respect of the estate.
[15] The value of the services or work, particularly those of an intangible kind, is assessed primarily from the perspective of the deceased rather than that of the claimant or purely objective valuation.15 The same is true for the value of the provision promised, which may indicate the deceased’s assessment of the value of the services provided.16 The Privy Council in Re Welch noted that “an assessment, even a generous one, by a promisor able to exercise a sound judgment would not lightly be departed from”.17
13 Law Reform (Testamentary Promises) Act 1949, s 3(1).
14 See Re Collier-Cambus (dec’d) [1994] NZFLR 520 (HC) at 146.
15 See Powell v Public Trustee [2003] 1 NZLR 381 (CA) at [24].
16 At [40]; and see Thwaites v Kerr, above n 7, at 24.
17 Re Welch, above n 3, at 7.
[16] The Court typically has regard to any specific amount or property promised but is not bound to make an identical award to the promise. Often, awards will be reduced because the value of the property promised exceeds the value of the services to be rewarded.18 Nonetheless, Cooke J observed in Re Townley that the power was not intended to be used sparingly, and “in inflationary times … the Court should normally consider carefully whether the fairest order may not be to vest the specific property at least in part in the claimant”.19
Whether an operative testamentary promise exists
Mr McMillan’s case
[17] The nub of the dispute between Mr McMillan and Ms McCarthy hinges on the terms of the promise. Mr McMillan contends Mr and Mrs Svendsen made a discrete testamentary promise to leave him their home in return for one interest-free advance in 2007, which he provided, and this agreement was unaffected by their subsequent request for further contribution in 2011. Ms McCarthy contends that whatever agreement existed always required more than one payment to be made, meaning Mr McMillan never fulfilled his obligations and no testamentary promise crystallised.
[18] The parties provide widely divergent evidence as to the nature of Mr McMillan’s relationship with Mrs Svendsen. Where Mr McMillan adduces evidence casting himself as a fond and dutiful surrogate nephew, Ms McCarthy’s evidence portrays him as an interloper in the family affairs and an abusive, intimidating figure in her aunt’s life.
[19]Mr McMillan’s evidence provides a narrative as follows:
(a)Mr McMillan knew Mr and Mrs Svendsen all his life and considered himself close to them. They had no children. He referred to them as aunt and uncle, and they referred to him as a nephew.
18 See Byrne v Bishop, above n 6.
19 Re Townley [1982] 2 NZLR 87 (CA), at 89 per Cooke J.
(b)After a period of his life in New Zealand, Mr McMillan went to teach overseas in London, but remained in constant contact with the Svendsens. He returned to visit them in New Zealand at least once a year. In the six years leading up to their respective deaths he visited twice a year. This included returning to visit throughout Mr Svendsen’s radiotherapy treatment and eventual funeral in 2012, totalling four separate visits. In 2015 Mr McMillan returned permanently to New Zealand.
(c)Mr McMillan says the Svendsens telephoned him in early 2007 while he was in the United Kingdom. They told him they wished to renovate their house on Waiheke Island and did not have the financial resources to do it. According to Mr McMillan they promised that, in return for up to
$200,000 without payment of any interest or the registering of any mortgage, they would use the money to improve the house, and he would inherit the house after their deaths.
(d)Mr McMillan agreed to this proposal, and borrowed £68,000, amounting to $185,415.60, from his own bank (and paid interest on it). He transferred the money to Mrs Svendsen’s business account in March 2007.
(e)Mr McMillan points to a letter of advice provided to Mr and Mrs Svendsen by their solicitor, Mr Peters, dated 4 April 2007 as recording the basic structure of the agreement. That letter outlines an understanding that the Svendsens intended to carry out substantial alterations to the Waiheke Island house, which were to be paid for by Mr McMillan, who would become the legal owner of the property following both of their deaths. It recommends drawing up a contract obliging Mr McMillan to cover costs of alterations and any incidental costs such as fees or permits in return for the Svendsens undertaking to leave the property to him in the event the survivor still owned it at their time of death. It does not specify a total for Mr McMillan’s financial contribution. The proposed contract was never drawn up.
(f)During a Christmas visit in 2007–2008 Mr McMillan recounts Mrs Svendsen explaining that she and her husband were pleased he was willing to help them get greater enjoyment from their property and to have received the funds, and that no more would be asked of him. He recounts similar expressions of satisfaction at other points.
(g)The money provided was used to create a kitchen for Mrs Svendsen and a library for Mr Svendsen’s books. Mr McMillan also records that Mr Svendsen made clear that he wanted Mr McMillan to inherit his books. Mrs Svendsen’s previous will of May 2010 recorded that, conditional on his waiving the debt, he was to inherit both the house and the books.
(h)Mr McMillan’s evidence is that the Svendsens contacted him in 2011 to request a further $150,000 to complete the renovations. There were problems with an architect and unrealistic estimates.
(i)Mr McMillan discussed the possibility of putting in more money with the Svendsens and Mr Peters, their lawyer. Mr Peters suggested that steps should be taken to protect Mr McMillan’s interests.
(j)Mr Peters also requested Mr McMillan change his will to protect the Svendsens in case he predeceased them. Mr McMillan’s amended will of March 2012 left any interest in the Waiheke Island house back to the Svendsens.
(k)Mr McMillan points to a draft deed Mr Peters prepared for the parties in 2011. This acknowledged the money Mr McMillan provided in April 2007, and the prior agreement that he “would from time to time” contribute money towards the cost of alterations in consideration for which the Svendsens would leave the property to him in their wills. The draft deed referred to the April payment as “the first instalment” which went towards then-completed renovations to the upper flat of the
property and provided for him to contribute a further $150,000 towards renovations to the lower flat “payable on or before 31 December 2012”.
(l)The draft deed was not executed. Mr McMillan submits this was due to the death of a friend of his followed by Mr Svendsen’s sickness and then his death on 14 September 2012. Two further deaths, of a close friend and Mr McMillan’s civil partner, further delayed any progress.
(m)Mr McMillan says that following Mr Svendsen’s death Mrs Svendsen still wanted him to put more money into the property. He was willing to do this but wanted to formalise his interest in the property as she appeared to be wavering from the earlier promise.
(n)According to Mr McMillan, Mrs Svendsen advised at Christmas 2014 that she had changed her will, acknowledging this as a breach of the earlier agreement, on the basis that it no longer suited her. This version of the will, dated 18 August 2014, treated Mr McMillan’s money as a de facto loan, leaving him $185,415 plus interest at four per cent per annum, and directed that the Waiheke Island house be sold with proceeds distributed to her brother’s children.
[20] Submissions for Mr McMillan also emphasise various other acts and dimensions of his relationship with the Svendsens described in his evidence, which could be considered services under the Act as well as indicating the strength of his relationship with them. In particular:
(a)Mr McMillan telephoned the Svendsens fortnightly while living abroad.
(b)Mr McMillan helped prepare the house for Mr Svendsen’s return from hospital during his radiotherapy (and flew from London to be present for it).
(c)In 2014 Mr McMillan arranged for Mrs Svendsen and a companion to travel to Europe. He met a significant number of expenses, spending
$12,015.58 in total.
(d)Mr McMillan contributed $11,276.82 towards gardening and general upkeep of the Waiheke Island property, and provided further sums related to his interactions with his aunt. Many of these went towards the Waiheke Island property, including a toilet, plumbing and gas repairs, firewood, a new washing machine and dryer, and maintenance. He also purchased and prepared meals for Mrs Svendsen, as well as buying (and paying for) groceries.
(e)After returning to New Zealand Mr McMillan regularly visited Mrs Svendsen, often twice a day. He also helped Mrs Svendsen with various appointments and visits in Auckland.
[21] Mr McMillan supports his claim with affidavits from nine other witnesses. Two of these are his siblings and seven are various friends and acquaintances who knew the Svendsens through to their deaths. Each affidavit broadly supports Mr McMillan’s version of events, with the parties all separately recalling Mrs Svendsen discussing an arrangement wherein Mr McMillan would provide money towards renovations in return for inheriting the Waiheke Island property or becoming the primary beneficiary of the estate. They variously depose that Mrs Svendsen maintained and discussed this understanding with them across many years until after her husband’s death. They consistently describe the arrangement being discussed as current, including Mrs Svendsen saying that Mr McMillan was going to inherit the property in return for the funds he had provided. Only one of the witnesses explicitly says he believes Mr McMillan was required to provide more than
$200,000, although another mentions the amount to be contributed being raised to
$400,000 subsequent to 2007. Three of the affidavits also register a change in Mrs Svendsen’s attitude regarding the agreement towards the end of her life, when she began to consider changing her will to reduce Mr McMillan’s inheritance.
[22] These witnesses were not called for cross examination, so their evidence has not been tested directly, although counsel for Mr McMillan emphasises their impartiality between the parties in this case. I summarise briefly the evidence in the affidavits.
Winifred June Lee
[23] Ms Lee was a friend of Mrs Svendsen for 60 years, visited the Waiheke property many times, and was told by the Svendsens that Mr McMillan had provided financial assistance and was to inherit the house in return.
Faith Darleen Beyer
[24] Ms Beyer knew the Svendsens for 40 years. She deposed to being aware of Mr McMillan’s contributions and the agreement that he would receive the house and the memorabilia. Mrs Svendsen discussed the agreement with her in 2015 and onwards.
Hugh William McMillan
[25] Mr McMillan is the brother of the plaintiff. He deposes he heard about the arrangement from his father, and that the plaintiff told him separately about needing to mortgage his own property to raise the money. He deposes he discussed the renovations with the Svendsens, and them having wasted quite a lot of money on an architect whose plan was not buildable. They also referred to the money the plaintiff put in and said they would be leaving the property to the plaintiff in return as a certainty. He affirms the Svendsens had approached the plaintiff about the arrangement.
Lynne Marie McMillan
[26] Ms McMillan is the sister of the plaintiff. She deposes that in all her discussions with the Svendsens she was informed that the plaintiff was to be the sole benefactor of their estate and receive the Waiheke Island house in exchange for providing money to them to renovate the library and kitchen areas. On one of these
visits a “now deceased lawyer” arrived to help facilitate and document this arrangement.
James Richard Johnstone
[27] Mr Johnstone was a friend of the Svendsens for over 50 years. He considers himself to have been a trusted confidant. He deposes to having been involved in discussions with the couple about revising their wills. Both believed Mr McMillan should be the primary heir and receive their home in exchange for making a substantial loan towards renovations.
[28] He deposes that the agreement was initially for a contribution of $200,000, which was subsequently increased to almost $400,000 in the ensuing years.
[29] He deposes that the Svendsens regularly mentioned that Mr McMillan was funding the renovations in return for receiving the property once they had died.
[30] He also deposes as to his own observations that Mr McMillan made many gestures of support for Mrs Svendsen following her husband’s death, including upkeep of the house and grounds and replacing a considerable amount of equipment.
[31] He deposes that Mrs Svendsen became “depressed and confused” following her husband’s death, and that Mr McMillan, amongst others, continued to provide support.
Rosaria Hall-Bresolin
[32] Ms Hall-Bresolin had a professional relationship with the Svendsens since the 1970s and met her husband through them. She describes Mr McMillan as “like a son” to the couple.
[33] She also deposes she heard of the agreement that Mr McMillan would provide the couple with money in return for being left the house and books, while sentimental family possessions would be left to Ms McCarthy and Mrs Svendsen’s brother and his wife.
[34] She also deposes that in 2015 Mrs Svendsen asked her for her views on what she should do with her estate. Mrs Hall-Bresolin deposes she told Mrs Svendsen to honour the agreement to leave the property to Mr McMillan who had invested a large amount of money in the property, was like a son to them, was generous, and genuinely loved the Svendsens.
Vernon Leslie Tupper
[35] Mr Tupper met Mrs Svendsen in the 1970s and knew the Svendsens on Waiheke since they moved there in the early 2000s, having fairly regular contact with them. He was aware of an arrangement where Mr McMillan would receive the estate as major or sole beneficiary, in exchange for a large sum of money for renovations, which he believes was in excess of $200,000. He deposes that Mrs Svendsen was shaken by her husband’s death and subsequently considered changing her will to benefit her own side of the family.
Lynette Janet Friend
[36] Ms Friend is Mr Tupper’s partner. She confirms there was an arrangement for Mr McMillan to receive the house in exchange for providing funds towards renovations. She also deposes as to “expensive plans” which led to cost overruns, and that following Mr Svendsen’s death Mrs Svendsen started to “change her mind”, despite Mr McMillan providing constant family support with a high level of respect, care, and commitment.
Craig Andrew Mortland
[37] Mr Mortland describes having known the Svendsens since the 1970s. He became close to them in the 1980s. He confirms they discussed the agreement with him. He also deposes that, late in her life, Mrs Svendsen described Mr McMillan as “the closest that they had to a son and someone who had no agendas on them and someone that they loved deeply”.
[38]Mrs Svendsen’s earlier wills are relevant. I summarise:
(a)a will dated 28 May 2003, which makes no bequests to either Mr McMillan or Ms McCarthy;
(b)the will dated 17 May 2010, which leaves the Waiheke Island property, Mr Svendsen’s books and various other items to Mr McMillan, and leaves nothing to Ms McCarthy;
(c)the will dated 18 August 2014 which treated Mr McMillan’s money as a de facto loan repayable with four per cent interest per annum and leaves nothing to Ms McCarthy;
(d)a will dated 12 May 2016 which made various minor bequests before dividing the residue of the estate equally as tenants in common between Mr McMillan and Ms McCarthy; and
(e)the final will which makes some changes but essentially preserves the 2016 will’s arrangement regarding Mr McMillan and Ms McCarthy.
[39] Also in evidence is correspondence between a lawyer acting for Mr McMillan and a lawyer (not Mr Peters) acting for Mrs Svendsen in 2015. Mr McMillan’s representative’s first letter is dated 20 October 2015. It opens by making clear that “whilst Mr McMillan wishes to protect his own position, [he] has no wish to be involved in legal action with his Aunt, or to cause her any unnecessary stress.” It relays instructions that the lawyer treat Mrs Svendsen’s needs as “paramount” and disclaims any intention to restrict her dealings with regard to the property or any replacement (including relating to rest home arrangements). It goes on to stress that Mr McMillan desired to protect his interest in the house and uphold the original agreement. It explains the amount of money provided (the advance and approximately
$30,000 in further upkeep costs including hiring a gardener) and that Mr McMillan sought as consideration that Mrs Svendsen honour the original agreement or, in the alternative, repay the loan with interest. The letter recounts Mr McMillan’s narrative that the renovations had proved costlier than expected, and that Mr McMillan had been prepared to borrow and provide an additional $150,000 as requested, if he was put on the title.
[40] A letter in response from Mrs Svendsen’s lawyer, dated 30 October 2015, expresses Mrs Svendsen’s view that Mr McMillan was using “the veiled threat of legal action” to force her to leave him the property. The letter alleges Mr McMillan merely sought a windfall on his $185,000 investment. The letter impliedly accuses Mr McMillan of “ransacking” Mrs Svendsen’s desk to see her private will. It further states that “the balance of $150,000.00 was not fulfilled” and Mrs Svendsen had been required to spend her own money to complete the renovations. It also warns that Mr McMillan’s approach in the prior letter “is likely to do nothing more than further damage the relations between himself and his Aunt”. The letter gives Mrs Svendsen’s account that Mr McMillan intimidates her, and that she has put a lock on her bedroom door. The letter suggests that Mr McMillan focus on improving the relationship between the two or provide evidence to substantiate the amount of debt claimed in the alternative.
[41] Mr McMillan’s lawyer’s response, dated 12 November 2015, expresses dismay at the contents of Mrs Svendsen’s lawyer’s letter. It rejects the various assertions made and reaffirms Mr McMillan’s positive account of the relationship as well as the agreement. This appears to be the end of the correspondence during Mrs Svendsen’s lifetime.
[42] Submissions for Mr McMillan emphasise there is no credible explanation for his taking out a substantial loan himself and advancing it interest-free to the Svendsens without some underlying arrangement. He received no return on that money, took out a mortgage to secure it (which he did not pay off until 2015), and paid interest at rates of 6.5–7.6 per cent on the borrowing personally. There is no evidence of any expectation he would receive interest or repayment from the Svendsens during their lifetimes. His only expectation was that he would receive the Waiheke Island property following their deaths.
[43] Counsel submits the four elements of a successful claim are clearly made out. Mr McMillan rendered services in the form of providing money and various additional domestic and personal services and support. There was an express promise to reward him by leaving him the house and a clear nexus between his provision of money and
that promise. Mrs Svendsen failed to make the appropriate testamentary provision or remunerate him, having left him only half what was promised.
[44] Submissions for Mr McMillan accept that the courts are generally cautious regarding claims made by living claimants against estates, given the deceased cannot provide their account of events, but emphasise that his claim is supported by a range of corroborating evidence, in both contemporaneous documents and various affidavits.20 Mr McMillan has provided direct evidence and affidavits from nine witnesses, seven of whom are unrelated to him.
[45] Mr McMillan submits the affidavits alone provide a sufficient basis from which to infer the promise was made. In Chambers v Weston, the Court drew inferences from conversations third parties reported having with the deceased parties which supported the likelihood a promise was made.21
Ms McCarthy’s case
[46] Ms McCarthy’s evidence and submissions present a different narrative: that any agreement required Mr McMillan to fund two lots of renovations – one for the upper flat of the property and one for the lower flat – before the promise to leave the house to him would come into existence. Her counsel submits there was no promise, but only part performance of an unformed arrangement between Mr McMillan and the Svendsens. Mr McMillan is not entitled to relief under s 3(1).
[47] Submissions for Ms McCarthy note that Mr Peters’s letter of 4 April 2007 outlining the basic structure of the agreement appears to predate any firm sense of the overall costings of the planned renovations. The letter does not outline overall costs or a specific figure for Mr McMillan to contribute. Counsel submits this belies Mr McMillan’s claim that the agreement was originally for a sum up to $200,000.
[48] Counsel for Ms McCarthy points out that the architect’s plans discussed in the various affidavits, which were initially costed for $500,000 before being revised to
20 Ace v Guardian Trust and Executors Co Ltd [1948] NZLR 103 (SC) at 105; affirmed in Brown v Pourau [1995] 1 NZLR 352 (HC) at 370.
21 Chambers v Weston (1982) 1 NZFLR 377 (HC) at 380.
cost $350,000, predate the 2011 draft deed which recognises Mr McMillan’s earlier payment and anticipates the subsequent $150,000 payment. Counsel submits that if the plans were available from early on, this further discredits Mr McMillan’s claim that he was ever only to provide up to $200,000.
[49] Ms McCarthy’s submissions point to correspondence from Mr Peters for the Svendsens sent to Mr McMillan some time in 2012. That correspondence was seemingly written while Mr Svendsen was still alive, and references his unexpected illness, but the date is not clear. It is possible this letter is what Mr McMillan refers to in his submission that Mr Peters advised as to the need for him to protect his interest. It includes the following salient points:
(a)Mr Peters states he is “repeating the advice to you so that you will be aware of the need in my view for all parties to conclude binding arrangements.” Mr Peters advises of the potential need for the Waiheke Island property to be used to secure a loan in the event that either of the Svendsens requires supervised care, which would require more funds than they had access to.
(b)Mr Peters suggests treating the extent of Mr McMillan’s advances as transferring an interest in the property to him representing the value of his contribution against a current valuation. This would potentially assist in bringing the value of the survivor’s assets within the eligibility threshold for a governmental residential care subsidy.
(c)Mr Peters advises that “it would be in all parties’ interests for any further advance to be made as soon as possible up to the balance that you had agreed with [the Svendsens]” in order to ensure their cash position remains strong and the property is not required as collateral.
(d)Mr Svendsen is described as having mentioned “that the original arrangement involved contributions of $300,000 or thereabouts, but since then adjustments have been made to the timetable.”
[50] Counsel surmises that the referenced timetable adjustments arose out of the issues involving the architect’s plans.
[51] Counsel also provides an email dated 28 September 2012 from a Ms McGowan, acting for Mr McMillan, addressed to Mr Peters, acting for Mrs Svendsen. Counsel submits it is notable this letter appears to respond to Mr Peters’s correspondence. The email advises “it has been agreed” that, inter alia:
(a)Mr McMillan “will purchase the property and that the $187,000 will be used as a deposit”;
(b)Ms Svendsen will have the right to continue to live in the property for the rest of her life;
(c)Mr McMillan will complete improvements to “the basement area”;
(d)the balance of the money will be secured by a loan advance, with details pending as to whether a registered mortgage will be required or the loan will remain unsecured;
(e)Mr McMillan will provide any additional funds Mrs Svendsen requires as part of the mortgage;
(f)no interest is to be charged while Mrs Svendsen occupies the property;
(g)Mr McMillan is to pay for maintenance of the property including the gardens while Mrs Svendsen occupies it and she will pay for other outgoing costs; and
(h)“that in consideration of this arrangement [Mrs Svendsen] has made a promise to [Mr McMillan] that she will forgive the balance of the loan pursuant to the terms of her will.”
[52] The email requests confirmation as to whether the listed details suit the parties and proposes working to finalise an agreement.
[53] Mr Peters’s response email is dated 9 October 2012. In it he affirms that despite Mr McMillan making “proposals concerning the possible future ownership of the property and related financing” there was no binding agreement at present, and that Mrs Svendsen “may be sensitive to the implication that she has committed herself in some way”.
[54] Counsel emphasises that Mrs Svendsen lived five further years without Mr McMillan making any further contributions to renovation costs. Counsel submits that, had Mr McMillan satisfied his obligations under the parties’ agreement at any point, Mr Peters would inevitably have been informed as to its satisfaction. Counsel contends there was only ever an inchoate agreement regarding the house.
[55] The submissions for Ms McCarthy point to the amendments to Mrs Svendsen’s wills to support this interpretation. Counsel contends that the will dated 17 May 2010, in which Mr McMillan is left the house, books, and various other items in return for forgiveness of the $185,415.60, was made in anticipation of Mr McMillan completing obligations regarding the lower floor. His disinheritance by the will dated 18 August 2014, which leaves him only the initial advance and four per cent interest per annum, reflects his failure to complete his obligations. The 2016 and final will then expresses Mrs Svendsen’s ultimate view that Mr McMillan had completed half of his obligation to fund renovations, and therefore was entitled to half of the estate.
[56] Counsel also points to the 2011 draft deed as representing the substance of the agreement between the parties, which was never fulfilled. A similar account is laid out by Mrs Svendsen’s representative in the 2015 correspondence with Mr McMillan’s lawyer. Regarding the various affidavits supporting Mr McMillan’s claim, counsel submits the witnesses’ recollections are insufficient to overturn the documentary evidence in the lawyers’ correspondence that the agreement also obliged Mr McMillan to complete renovations of the lower floors.
[57] Ms McCarthy in her evidence disputes Mr McMillan’s positive account of his relationship with Mrs Svendsen, instead characterising their relationship as distant and abusive.
[58] Ms McCarthy says her aunt told her, two weeks before her passing, that she had never heard from or about Mr McMillan until Mr Svendsen contacted him regarding the renovations. She says Mrs Svendsen did not support seeking Mr McMillan’s help. Further, Mr McMillan was not even mentioned at family gatherings throughout her own life.
[59] Ms McCarthy describes her uncle’s recovery from treatment for chemotherapy prior to his death, during which he resided at his home with Mrs Svendsen’s niece, Patricia, as a caretaker. Ms McCarthy says she ate dinner each night with Patricia and Mr and Mrs Svendsen, and afterwards they would sit in the living room and talk or watch television. During this period, she says there was no mention of Mr McMillan or the McMillan family by any party, including many friends who paid visits. Her evidence is that Mr McMillan never visited during this time.
[60] Ms McCarthy gave evidence she learned of the alleged promise following Mr Svendsen’s death. Her understanding is that it was between Mr Svendsen and Mr McMillan, and that Mrs Svendsen had opposed it. It was a source of tension, and Mrs Svendsen described it as requiring Mr McMillan to pay over $400,000 in renovation costs in order to get the house in the end. His failure to meet all the costs depleted the Svendsens’ cash reserves, resulting in Mr McMillan becoming unwelcome at the house, and being refused title to the property. During this period, Ms McCarthy alleges, Mr McMillan refused to make the $150,000 payment unless his name was put on the title of the house, a state of affairs which endured until after Mr Svendsen’s death.
[61] Ms McCarthy characterises the relationship between Mrs Svendsen and Mr McMillan as abusive. She says Mrs Svendsen never referred to Mr McMillan as her nephew, except when introducing him in public, which she explained she did due to wanting not to upset him, as he was abusive when they were alone together. She contends that after Mr Svendsen died Mr McMillan began visiting regularly in order to harass Mrs Svendsen regarding title and attempted to coerce her to change the will in his favour. She gave evidence her aunt dreaded his visits and struggled to cope with his constant discussion of her will. When Ms McCarthy offered to “tell him to fuck off” Mrs Svendsen asked her to refrain because she was afraid of him. Ms McCarthy
recounts her aunt telling her she told Mr McMillan that Ms McCarthy had been added to the will, and that Mr McMillan reacted angrily, asserting that Ms McCarthy should just be given the chattels with the house left to him.
[62] Ms McCarthy also disputes Mr McMillan’s claim of having been involved with “duties, works, and services”, as cleaning duties were performed by herself and house-cleaners. She further contends that Mrs Svendsen did not appreciate Mr McMillan hiring a gardener for the property, which she described as him “acting like he owns my house”.
[63] Ms McCarthy gave evidence that prior to Mrs Svendsen’s funeral she spoke to Mr McMillan about the renovation payments. She told him the renovations cost close to $400,000 and asked if he had paid for the remaining invoices. She says he told her that he had and did not respond when she told him he would be asked for receipts to prove it (Mr McMillan denied this conversation occurred).
[64] In submissions Ms McCarthy’s counsel points to the 2015 lawyers’ correspondence, in which Mrs Svendsen is described as intimidated, and having put a lock on her door, as providing some support for this narrative.
[65] In response, counsel for Mr McMillan submits the single letter from Mrs Svendsen’s lawyer is the only evidence for this negative characterisation of his client’s behaviour, which is otherwise unsubstantiated. Counsel notes Mr McMillan’s relationship with Mrs Svendsen was positively portrayed across affidavits from a range of her other acquaintances. Counsel emphasises that Mr McMillan was referred to as “my nephew” in the wills of the deceased, was a pallbearer at both Svendsens’ funerals, and gave a eulogy at both. Mr McMillan also provided money to the Svendsens without any formal instrument at his own expense, and substantially paid for Mrs Svendsen visiting Europe with a friend, both of which speak to a positive relationship. Counsel for Mr McMillan explains the remarks in the 2015 email as a late-in-life shift in attitude not reflective of the substance of the relationship between the parties. He notes that by this stage Mrs Svendsen was in her mid-80s, 20 years into her retirement, eight years after the arrangement was first made, and
approximately three years a widow. A single account to her lawyer should not countermand the wider accounts of her life and the relationship of the parties.
[66] Submissions for Mr McMillan argue the progression of the wills is better understood on the basis he was to receive the entirety of the property in 2010, prior to the later requests for further contributions. Counsel submits any alleged intimidation is not reflected by the 2014 will, which makes Mr McMillan’s position worse by disinheriting him, although in 2016 the will changed entirely again, with bequests to Mr McMillan and Ms McCarthy on equal bases. The 2014 will and other correspondence also displace any relevance of Mrs Svendsen having purportedly initially opposed the agreement.
Submissions as to quantum
[67] Submissions for Mr McMillan characterise his services to Mrs Svendsen as clearly above and beyond what could normally be expected of a family relationship, particularly given the limited biological connection between them. The gist of the submissions is that, given the particular value of the promise and services received from the perspective of the deceased, giving full effect to the promise constitutes reasonable recompense.
[68] Counsel also notes the arrangement in this case did not involve mutual benefit during the life of the deceased, which might reduce what can be considered reasonable recompense.22 Mr McMillan borrowed at detriment to himself and provided other services in reliance upon the promise he would receive the property, leaving an “unremunerated balance”.23
[69] Mr McMillan has provided a “quantum affidavit” prepared by Matthew Kemp, a chartered accountant experienced in providing litigation support. He provides three calculations relating to the money Mr McMillan borrowed in order to provide
$185,415, and the $30,000 contributed towards various other costs. His conclusions are:
22 See Samuels v Atkinson [2009] NZCA 556, [2010] NZFLR 980 at [78].
23 Powell v Public Trustee, above n 15, at [31].
(a)That if Mr McMillan were to be repaid the initial funds he provided and the various property and travel expenses he paid for with interest calculated in accordance with the relevant Judicature (Prescribed Rate of Interest) Order and Interest on Money Claims Act 2016 provisions he would be entitled to $354,619.98 as at 24 September 2018, and at current rates interest would accrue at $33.13 per day from 25 September 2015.
(b)That a time value of money/present value calculation relating to the funds provided and property and travel expenses would produce a figure of $347,455.97 as at 24 September 2018. Interest would accrue at $31.89 per day from 25 September 2018.
(c)That the financial opportunity cost of Mr McMillan obtaining the use of the funds and lending the money to the Svendsens would be around
$376,080.33 with interest accruing at a rate of $34.52 from 25 September 2018.
[70] These figures go towards the scale of the contribution Mr McMillan made to the Svendsens’ renovations and Mrs Svendsen’s life generally. Counsel submits the fact the money provided allowed the Waiheke Island property’s value to be increased from its then-current value of $720,000 is particularly relevant. The submissions posit the financial opportunity cost as the “real” measure of the contribution, given funds were provided in 2007 with no expectation of a return until after the Svendsens were both deceased.
[71] To guide the Court’s discretion, counsel points to Smith v Malley.24 That case involved a claimant spending around 15 years making twice-weekly visits to an elderly first cousin once removed, in which she provided food and fresh vegetables grown by her husband, as well as undertaking specific and regular tasks and housework. Following an accident and illness she became unable to visit in person, but the Court considered the two had remained on friendly and sympathetic terms. The Court in that case considered the services provided sufficient works to justify
24 Smith v Malley [1950] NZLR 145 (SC).
remunerating the claimant for the full value of the deceased’s promise that she would inherit her house.
[72] Counsel also cites Le Couteur v Norris in which an award of $590,000 was made out of an estate valued between $2,420,000 and $3,060,000, on the basis of the testatrix’s promise to leave a specific home to her daughter.25 This promise was in reward for generally including the deceased in her own family life, as well as a wide range of other services which “far exceed the normal services that a dutiful child might provide their aged parent”.26
[73] The quantum of the award was determined in light of other benefits the daughter had received prior to her mother’s death including financial benefits worth around $210,000 and in the context of a strong mother/daughter relationship enjoyed by both parties.27 The daughter was also to receive a one-third share of the balance of the estate.28
[74] Counsel submits it is clear the money and services in this case had great value from the perspective of the deceased, well beyond the value of the money paid. These contributions involved considerable detriment to Mr McMillan.
[75] Regarding competing claims, the submissions suggest there are no meaningful rival claims on Mrs Svendsen’s estate that would prevent an award reflecting the full promise. Mr McMillan submits Ms McCarthy had no real basis to expect to inherit under Mrs Svendsen’s will. No testamentary promise was made to her, and the submissions characterise her involvement with Mrs Svendsen as well within the normal incidence of family life. Counsel points to Jones v Public Trustee, in which the fact the testator had five living relatives who might otherwise benefit was not sufficient to prevent the Court of Appeal giving full effect to his promise to leave his house to the stepson and daughter who cared for him at great inconvenience for 25 years.29
25 Le Couteur v Norris [2018] NZCA 572.
26 At [41].
27 At [74]–[75].
28 At [76].
29 Jones v Public Trustee, above n 9.
[76] Counsel for Ms McCarthy contends that should the claim succeed any award should be heavily constrained in light of what is reasonable as recompense for the services provided. Counsel submits the total financial contributions made towards Mrs Svendsen by Mr McMillan represent only about 15.3 per cent of the value of the Waiheke Island property, which is insufficient even when paired with other services to make an award for the entirety of the property reasonable. Given the key service in Mr McMillan’s case is the provision of money, counsel for Ms McCarthy submits the contribution made is the appropriate measure for any award.
[77] Further, counsel disputes the analogy to Le Couteur, arguing that case involved a much greater degree of involvement and efforts to include the deceased in the claimant’s own life, compared to which Mr McMillan’s efforts are comparatively sparse.
[78] In her evidence Ms McCarthy also emphasises the relative strength of her own connection with Mrs Svendsen throughout her life and performance of duties by way of assistance during Mrs Svendsen’s later years. These go some way to rebut the submission for Mr McMillan that there are no “real” other claims to be considered.
Alternative Cause of Action
[79] Should his testamentary promise action fail, Mr McMillan makes a claim in debt for the sums advanced plus interest.
[80] Counsel for Mr McMillan submits this debt should be paid by the estate before the balance is distributed equally between Mr McMillan and Ms McCarthy as the will provides. Counsel submits it would not be fair to treat Mr McMillan and Ms McCarthy equally, given Mr McMillan has provided financial resources and Ms McCarthy has not, yet they stand to be treated equally under the will.
Discussion
[81] I accept Mr McMillan’s evidence that the promise was made in 2007 over the telephone as he describes:
(a)Mr McMillan was clearly in a close and affectionate relationship with Mr and Mrs Svendsen. His evidence of their support for him when he came out as gay is illustrative. They were a very important part of his life and even though he spent most of the period with which we are concerned in the United Kingdom he kept in close touch with them.
(b)The fact that in 2007 Mr and Mrs Svendsen felt able to ask him for a considerable sum of money shows the nature of the relationship.
(c)So too does Mr McMillan’s response. He was working in the United Kingdom as a school teacher. He agreed to provide the money. He did not have the money himself. He went to his bank and borrowed it. He advanced it to the Svendsens without any documentation, without security and free of interest. He did that because of his relationship with them. It was an open-ended advance because they told him they would use the money to renovate their Waiheke Island house, and they promised him they would leave the house to him in their wills.
(d)I do not accept the promise was conditional on Mr McMillan providing further money. I am satisfied the Svendsens knew the full renovations would cost more than the amount they asked for. Mr McMillan was, after all, a school teacher. They used his money to renovate the top flat of the house, which is where they lived.
(e)I am also satisfied that, as time passed, Mr and Mrs Svendsen’s position towards their promise became modified. That is within human nature. They asked Mr McMillan for more money – $150,000 – to put towards renovating the bottom flat of the house. Mr McMillan was prepared to do that but was concerned enough to want some legal comfort. Mr Peters’s involvement illustrates the way matters were moving.
(f)Mr McMillan continued his close relationship with Mr and Mrs Svendsen. He visited from the United Kingdom every year and he otherwise maintained contact. He came when Mr Svendsen was
terminally ill, and he supported them through this period. He was a pallbearer at Mr Svendsen’s funeral and delivered a eulogy.
(g)Afterwards, Mr McMillan continued to support the widowed Mrs Svendsen. I consider the fact Mr McMillan paid for Mrs Svendsen and a companion to visit Europe, with him as a guide, to be an unselfish and caring gesture.
(h)I accept also that as she aged Mrs Svendsen became changeable about Mr McMillan inheriting the house. Ms McCarthy became a presence in her life. The correspondence between lawyers in 2015 shows how the situation was changing. But nothing came of it. Mr McMillan did not press his claim. He made no threats. Through his lawyer he expressed support for his aunt and dismay at her reported allegations.
(i)I accept Mr McMillan’s evidence that from the 2015 correspondence to Mrs Svendsen’s death he continued to support her. As families do, unpleasantness was put aside and not referred to.
(j)Mr McMillan’s support was tangible. He paid for the grounds of the house to be maintained. He did this while he was still living in the United Kingdom and after his return to New Zealand. He visited Mrs Svendsen regularly and he supported her with transport and provisions. When Mrs Svendsen died, Mr McMillan arranged her funeral, gave the eulogy and was a pallbearer.
[82] I am significantly influenced in my acceptance of Mr McMillan’s evidence by the affidavits of the seven friends of Mr and Mrs Svendsen which he filed in support of his case. None were required for cross-examination.
[83] I found Ms McCarthy’s evidence difficult to place much weight on. Her attack on Mr McMillan’s account of his closeness to the Svendsens’ was fierce, yet she spent most of her life in the United States, returning to New Zealand in 2008. From then
until 2012 she lived in Wellington and on her own evidence was in contact with the Svendsens “just a few times”.
[84] Ms McCarthy’s evidence is that in 2012 Mrs Svendsen invited her to come to Waiheke Island to work in a shop Mrs Svendsen operated. Ms McCarthy spent three months living with them before moving to Auckland. Ms McCarthy, who is Mrs Svendsen’s niece, did not attend Mr Svendsen’s funeral.
[85] Further, it was not until 2017 when Ms McCarthy turned 65 and was able to use the Gold Card to get free travel between Auckland and Waiheke Island that she began to see Mrs Svendsen weekly.
[86] Most of Ms McCarthy’s evidence consisted of relating conversations she said she had with Mrs Svendsen in which Mrs Svendsen said adverse things about Mr McMillan or things inconsistent with Mr McMillan’s account of the promise. This evidence was hearsay. However, no objection was taken to it and I considered that because of the allegations made in Mrs Svendsen’s lawyer’s letter in 2015 there was reasonable assurance Ms McCarthy was reliably reporting what Mrs Svendsen told her.30 But, that does not mean the statements were true.
[87] I am satisfied on the balance of probabilities that Mrs Svendsen said things to Ms McCarthy and to her lawyer which justified in her mind changing her position on leaving the house to Mr McMillan. At the same time, she continued to enjoy Mr McMillan’s support.
What is now reasonable?
[88] The promise having been made and not kept, I now have to assess what is reasonable relief in all the circumstances.
[89]I will take the approximate value of the Waiheke Island house as $1,400,000.31
30 Evidence Act 2006, s 18.
31 This figure is drawn from a Gulf Valuations Ltd Valuation Report dated 23 April 2019, admitted by consent.
[90] I know almost nothing of the personal circumstances of Ms McCarthy other than she turned 65 years of age in May 2017 and that possession of the Gold Card made it financially viable for her to visit Mrs Svendsen regularly. So, I should take it that Ms McCarthy is of modest means and that a share in Mrs Svendsen’s estate would be of real value of her.
[91] I take account also that Ms McCarthy is Mrs Svendsen’s niece by blood and that Mrs Svendsen cared enough for her to leave her half of the residue of her estate.
[92] It would be unreasonable to decide that because a half share of the house is worth approximately $700,000, and because Mr McMillan’s financial contribution as analysed by Mr Kemp, at its highest, is worth approximately $376,000 plus interest, the half share in the house is an adequate response to the promise. That would ignore the circumstances in which the promise was made. Mr McMillan put himself at financial risk to make the advance. It would ignore also the nature of his relationship with Mr and Mrs Svendsen which caused him to take the risk and the extent to which this support increased their enjoyment of their lives. This is not a mathematical exercise.
[93] I make the point, however, that this case does not turn on personal services as in Le Couteur v Norris. The promise of the house was made in return for Mr McMillan advancing the money. It was not made as a reward for him providing personal support far exceeding that which might be expected. I do not accept the submissions of Mr McMillan’s counsel in that regard. I take the evidence of Mr McMillan’s other support as both going to the likelihood of the promise being made in the first place and the nature of his relationship with Mr and Mrs Svendsen.
[94] I have decided it would be reasonable to respond to the promise by awarding Mr McMillan three-quarters of the value of the Waiheke Island house. That, in my view, recognises the promise was made, adds to the half share in the house which Mrs Svendsen wanted him to have a further proportion to recognise the fact Mr McMillan advanced money under the circumstances I have described, and also recognises Mrs Svendsen’s wish to benefit Ms McCarthy. To be clear, when the house
is sold Mr McMillan will receive three-quarters of the net sale proceeds and Ms McCarthy will receive the remaining quarter.
[95] The rest of the will I leave undisturbed. That means Mr McMillan and Ms McCarthy will share equally in the remainder of the residue.
[96] Mr McMillan’s counsel asked me to provide a right of first refusal for Mr McMillan in relation to the house in the event I awarded him only a share in it. I doubt if I have the jurisdiction to do that and, in any event, I think it better if Mr McMillan wants the house that he competes for it on the open market at arm’s length.
Result
[97] I award Mr McMillan three-quarters of the net sale price of the Waiheke Island house. Ms McCarthy will receive the remaining quarter. Mr Pretty, as executor, will market the house, sell it, and distribute the net proceeds accordingly.
[98] The rest of the will is unchanged. The remainder of the residue will be divided equally between Mr McMillan and Ms McCarthy.
Costs
[99] The parties seek the opportunity to make submissions regarding costs. Memoranda are to be filed no later than 28 June 2019.
Brewer J
Solicitors:
Vlatkovich & McGowan (Whangaparaoa) for Plaintiff Hauraki Gulf Law (Waiheke Island) for Defendant
Ogles Podwin & Associates (Auckland) for Ms McCarthy
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