Midgley v Brumby
[2022] NZHC 3158
•29 November 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-001698
[2022] NZHC 3158
UNDER the Family Protection Act 1955, the Administration Act 1969, and the High Court Rules 2016 BETWEEN
IAN BERTRAM MIDGLEY
Plaintiff
AND
WARREN GRAHAM BRUMBY and JEAN
ISOBEL HARDING as executors of the Estate of Isobel Elizabeth Midgley Defendants
Hearing: 21 November 2022 Appearances:
S Ambler for the Plaintiff / Respondent
P W G Ahern for the Second Defendant / Applicant First Defendant excused
Judgment:
29 November 2022
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 29 November 2022 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Morrison Kent, Auckland Tompkins Wake, Auckland
MIDGLEY v BRUMBY & Anor [2022] NZHC 3158 [29 November 2022]
Introduction
[1] Isobel Elizabeth Midgley died in Auckland on or about 18 June 2020. She is survived by three children: the plaintiff, Ian Bertram Midgley; the second defendant, Jean Isobel Harding; and Graham Andrew Midgley.
[2] The first defendant, Warren Graham Brumby, is executor and representative of Mrs Midgley’s estate under the terms of a will executed by her on 17 December 2014. Under that will, Mrs Midgley gave $10,000 to each of her grandchildren and left the residue of her estate on trust to her daughter Mrs Harding.
[3] In this proceeding Mr Midgley applies to the Court under r 27.34 of the High Court Rules 2016 to recall grant of probate of the 2014 will, and for an order that he is entitled to apply for probate in common form of his mother’s earlier will executed in 1998. He claims that Mrs Midgley lacked testamentary capacity when she made the 2014 will, and that she was unduly influenced by Mrs Harding to make the will.
[4] Alternatively, if the Court considers the 2014 will was validly made, Mr Midgley applies under s 4(1) of the Family Protection Act 1955 for proper maintenance and support.
[5] In this interlocutory application, Mrs Harding applies for an order that Mr Midgley be directed to file an affidavit of documents “disclosing his full and complete financial position, including assets, liabilities and income, including in his personal capacity and in relation to the financial position of any trusts or which he is a trustee, and/or beneficiary, and/or in relation to any other sources of income.”
[6] Mr Midgley opposes the application, contending that the documents sought are not relevant because his claim under the Family Protection Act is based on a lack of “family recognition” by his mother, not financial need. Furthermore, even if relevant, the discovery is disproportionate and unnecessarily intrusive.
[7] The essential issue to determine is whether the information sought by Mrs Harding is relevant to an issue in dispute in the proceeding, and whether an order for its discovery would be proportionate and reasonable.
Background facts
[8] As noted, Mrs Harding and Mr Midgley are the two youngest children of the late Mrs Midgley and the late Bertram George Midgley (Mr Midgley Snr). The eldest child is Graham Midgley, who has chosen not to participate in the proceeding.
[9] Mr Midgley Snr owned land at 17 State Highway 16, West Auckland, and operated a dairy farm on the land for the benefit of his family.
[10] In approximately 1972, land comprising the family farm was sold off and the dairy operation was wound down. Mr Midgley Snr retained approximately 14.9734 hectares of land, including the family home.
[11] From the late 1970s, Mr Midgley and Graham Midgley were involved in converting the remaining farm into a Kiwifruit orchard. On or about February 1984, Mr Midgley Snr and Mrs Midgley entered into an agreement with Mr Midgley and Graham Midgley to sell 14.6303 hectares of the family land (Westgate land) to Mr Midgley and Graham Midgley. The purchase price of $200,000 was financed by a loan from Mr Midgley Snr, and the loan was secured by a mortgage over the Westgate land. The loan was repayable on demand.
[12] After sale of the Westgate land, Mr Midgley Snr retained the 3.487 square metre section of land containing the family home (Midgley land).
[13] Mr Midgley Snr died on or about 22 August 1995. Under his will, Mr Midgley Snr’s estate passed to Mrs Midgley, including the Midgley land and all rights in relation to the Westgate loan and Westgate mortgage.
[14] On or about 19 January 1998, Mrs Midgley made a will (the 1998 will). The 1998 will was signed by Mrs Midgley and witnessed by two witnesses. Under the 1998 will, Mrs Midgley:
(a)appointed Mr Midgley, the first and second defendants, and Graham Midgley and Wayne Ross Stollery as trustees and executors of the 1998 will;
(b)left all of her jewellery to Mrs Harding;
(c)left her house at 17 State Highway 16 to Mrs Harding; and
(d)left the residue of her estate to be divided equally between her surviving children.
[15]On or about 6 December 2007, Mr Midgley and Graham Midgley repaid the
$200,000 loan to Mrs Midgley.
[16] In 2012, Mrs Midgley sold her land to the National Trading Company of New Zealand for $3,050,000.
[17] On 17 December 2014, Mrs Midgley purported to create a new will, revoking the 1998 will (the 2014 will).
[18]The 2014 will:
(a)appointed the first defendant, Mr Brumby, as sole executor and trustee of the 2014 will;
(b)gave $10,000 to each of Mrs Midgley’s grandchildren; and
(c)left the residue of the estate on trust to Mrs Harding.
[19]The 2014 will made no provision for Mr Midgley or Graham Midgley.
[20] On or about 15 July 2020, Mr Brumby applied for probate in common form of the 2014 will. The Wellington High Court granted probate of the 2014 will in common form to Mr Brumby on 24 August 2020.
[21] The net value of Mrs Midgley’s estate (following liabilities and the $10,000 bequests to the seven grandchildren) is $4,256,133.30, comprising:
(a)$2,626,132.35 cash paid to Mrs Harding on 6 May 2021;
(b)a $1,240,000 loan owed by Mrs Harding under a loan agreement dated 12 February 2020, forgiven by deed dated 6 May 2021; and
(c)a $390,000 loan owed by Mr Midgley and Mrs Harding, assigned to Mrs Harding on 6 May 2021.1
Legal principles
[22] The interlocutory application did not state the discovery rule under which it was made. Ms Ambler, for the plaintiff, had assumed that it was an application for particular discovery under r 8.19 of the High Court Rules and framed her submissions accordingly.
[23] When considering applications under r 8.19, the Court usually follows a four-stage test:2
(a)First, are the documents relevant to issues before the Court, and if so, how important would they be?
(b)Secondly, are there grounds for believing that the documents exist? This will often be a matter of inference.
(c)Thirdly, would the time and cost of discovery be proportionate to its potential value?
(d)Fourthly, weighing and balancing these matters, and in the Court’s discretion, is an order appropriate?
[24] At the hearing, Mr Ahern defined Mrs Harding’s application as an application for tailored discovery because Mr Midgley had not previously been ordered to file an affidavit of documents. Rule 8.19 deals with the situation where a party has filed an affidavit of documents, and the applicant considers that the affidavit is incomplete.
1 Affidavit of Warren Graham Brumby affirmed 20 January 2022 at [11].
2 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760 at [14]; and Robert Osborne McGechan on Procedure (online ed, Thomson Reuters) at [HR8.19.03].
[25] I consider that this application is properly considered an application for tailored discovery under r 8.12. However, the principles of relevance and proportionality are equally relevant to orders for tailored discovery. Discovery categories will reflect the issues and will only be ordered for discovery of documents that are relevant to those issues.3 Typically, the issues will be discernible from the pleadings.4 Further, discovery orders that are essentially of a “fishing” nature are not part of tailored discovery.5
[26] The concept of proportionality is central to tailored discovery.6 It is relevant in deciding whether tailored discovery is appropriate, whether the categories of tailored discovery are reasonable and proportionate, what constitutes a reasonable search, and the methods and strategies for locating documents.7
[27] Inherent in the question of whether the documents sought are relevant is the question of how important they will be.8 This has also been framed as “the degree of relevance” which is to be weighed against the cost of carrying out discovery and determining whether it is proportionate.9
The parties’ respective positions
[28] Mr Ahern submits that the law is settled that, regardless of whether the application for relief under the Family Protection Act is based on financial need or not, the applicant must provide evidence of their financial position.10 This is because it is expected that the parent will have had some understanding of this financial position when preparing their will. Therefore, the Court cannot assess whether the parent has breached their moral duty unless the Court has the same level of knowledge as the parent. He poses the question: in an estate with a value of $3 million, will the Court
3 Commerce Commission v Cathay Pacific Airways [2012] NZHC 726 at [13].
4 At [13].
5 At [13].
6 Commerce Commission v Cathay Pacific Airways [2012] NZHC 726 at [12].
7 Cathay Pacific Airways, above, n 3, at [12]; High Court Rules 2016, rr 8.9(a) and 8.14(2)(e) and sch 9, cl 1 and 2(b) and 3(2)(a)(ii). See also Commons v Commons [2019] NZHC 557 at [11].
8 Assa Abloy, above n 2, at [14].
9 Cathay Pacific Airways, above n 3, at [18].
10 Referring to Williams v Aucutt [2000] 2 NZLR 479 (CA); Brown v Brown [2022] NZCA 476 at [60]; McKenzie v Thomas CA120/2, 14 November 2002 at [14]; Chin v Payne [2022] NZHC 1162; and Commons v Commons [2019] NZHC 557.
consider a claim from an adult child without any regard to whether the adult child has a net worth of $1 million or $10 million?
[29] Mr Midgley does not dispute that his financial position at the date of Mrs Midgley’s death is relevant to whether there has been a breach of moral duty. But he disputes the relevance, and proportionality, of the information sought.
[30] Mr Midgley acknowledges that he is not in financial need of a distribution from his mother’s estate.11 His application for relief is not based on financial need, but rather that he should have been provided for under his mother’s will in recognition that he belonged in the family and was an important part of his mother’s life. Ms Ambler submits that in these circumstances, Mr Midgley should not be required to provide the level of detail of his financial circumstances sought by Mrs Harding.
[31] Ms Ambler submits that it is established by the evidence already provided through Mr Midgley’s affidavit in support of his proceeding, and Mrs Harding’s affidavit in response, that Mr Midgley’s assets exceed the estate.
[32] Ms Ambler further submits that the discovery sought is unnecessarily intrusive, a fishing expedition, and may result in the financial circumstances of third parties being disclosed. She refers to the written submissions of Mr Ahern where he suggests that Mr Midgley may have squandered or given away profits that he might otherwise have received, and that his personal position might be net assets of $1 million.
[33] Ms Ambler submits that, based on previous decisions concerning adult children without financial need, Mr Midgley might receive an award in the order of 10 per cent of the estate if he is successful. She submits that in that context, and where it is clear that Mr Midgley’s net worth exceeds the value of the estate, the information sought concerning Mr Midgley’s financial position is irrelevant and disproportionate.
11 Affidavit of Ian Bertram Midgley dated 20 August 2021 at [103].
Discussion
[34] In my assessment, the financial position of the applicant at the date of death of the testator is highly relevant to the Court’s assessment of whether there has been a breach of moral duty, irrespective of whether the applicant seeks relief based on financial need or some other need such as family recognition.
[35] In Williams v Aucutt, the applicant, whose wealth exceeded that of the estate, did not claim any present or future economic need for maintenance or support. Rather, the application was based on a need for family recognition. The Court of Appeal said:12
It is well settled that whether there has been a breach of duty to make adequate provision under s 4 is customarily decided as at the date of death, and in deciding how any established breach should be remedied, regard is had to later events and thus including changes in asset values and financial and personal circumstances up to the date of hearing.
The first inquiry, whether there has been a breach of duty, obviously requires details of the estate and of the financial positions of the claimants and beneficiaries under the will, all as at the date of death.
[36]The Court of Appeal cited Gresson P in Re Harrison:13
The ‘need’ of an applicant, or whether his or her needs – the plural form is I think preferable – cannot be considered in vacuo. What has to be assessed are the merits of the claim having regard to the applicant’s circumstances as at the date of the death of the testator; relations between the testator and the applicant in the past; and the extent of his estate and the strength of other claims.
[37]In McKenzie v Thomas, the Court of Appeal held:14
Although this is a modest estate, it is necessary to determine it on the “support” provision in s 4 of the Act. This is because neither the appellants nor the respondents provided the High Court with sufficient financial details to enable financial considerations to be taken into account. A party’s income and asset position, whether that party be an appellant or a beneficiary in the position of a respondent, should be provided in all family protection cases. These factors are relevant to whether or not the deceased has breached a moral duty.
12 Williams , above n 10, at [7]–[8].
13 At [39], citing Re Harrison [1962] NZLR 6 (CA) at 13.
14 McKenzie, above n 10, at [14].
[38] Associate Judge Sargisson cited these statements of the Court of Appeal in Commons v Commons, concluding that “the question of breach requires a contextual assessment and … the financial circumstances of the other moral claimants (not just those of the plaintiff) are relevant.”15 However, the Judge found that the contextual assessment did not justify the wide-ranging discovery sought by the applicant in that case. She concluded that affidavit evidence from each of the principal beneficiaries providing a proper statement of their financial positions as at the date of the testator’s death, including any contingent invested interests they acquired on his death, would sufficiently enable the Court to take financial considerations into account when deciding the extent of any breach. The Judge considered that this affidavit evidence should also enable the Court to determine what provision, if any, ought to be made from the estate.16
[39] Applying these principles to the present case, Mr Midgley is required to provide information that discloses his financial position as at the date of the death of his mother. This information is relevant to the Court’s assessment of whether there has been a moral breach of duty, irrespective of the fact that his application is not based on financial need. That is because his mother can be assumed to have had his financial position in mind when she made her will. Indeed, Mrs Midgley stated in the 2014 will that:
I have not provided for my sons Graham Midgley or Ian Midgley as they have received significantly from my late husband and I. They are aware of the terms of my Will and my intention to balance things up by making my daughter Jean the sole beneficiary of my estate.
[40] The next question is whether the discovery sought goes beyond what is necessary to provide Mrs Harding and the Court with an accurate picture of Mr Midgley’s financial position. Ms Ambler submits that it does, and that there is adequate information in the affidavits already filed to establish that Mr Midgley has considerable wealth that exceeds the value of the estate. She refers to the following information.
15 Commons, above n 10, at [26].
16 At [28].
[41] In his affidavit in support of his claim, Mr Midgley deposes that he and his brother sold part of the Westgate land and all the Midgley land in 2012 for around
$12,500,000 (after borrowing more than $2 million to finance the sale).17 He deposes
that the further 2.8 hectares of the Westgate land was sold to Bunnings in 2015 for
$19,621,361.67.
[42] Mrs Harding provides details of remaining land held by Mr Midgley and Graham Midgley at 15 and 29 Fred Taylor Drive, with capital values at 2017 of
$7,250,000 and $22,050,000.18 Mrs Harding also deposes that Mr Midgley owns a
commercial building at Great South Road (value unspecified),19 and 12 acres of land at Riverhead (value unspecified).
[43] This evidence does not provide the Court with a full and accurate assessment of Mr Midgley’s financial position in June 2020 when Mrs Midgley died. The land sales occurred in 2012 and 2015. The capital values of the 29 Fred Taylor Drive property are not current and the values of the other land described are unknown. The picture is incomplete and there may be other assets not described. The Court should not have to pick through the evidence to try to piece together Mr Midgley’s financial position.
[44] In this respect, I reject the submission that it is enough for the Court to know that Mr Midgley’s wealth exceeds that of the estate. The Court may well consider the extent of Mr Midgley’s wealth to be relevant to its assessment of whether there has been a breach of moral duty and if so the appropriate level of relief.
[45] However, I consider that the discovery sought by Mrs Harding extends beyond what is required to enable the Court to undertake this assessment. Like Associate Judge Sargisson in Commons v Commons, I consider that in the first instance Mr Midgley should be required to file and serve an affidavit providing a proper statement of his financial position. Consistent with the authorities referred to above,
17 Affidavit of Ian Bertram Midgley dated 20 August 2021 at [52].
18 Affidavit of Jean Isobel Harding sworn 14 October 2021 at [41].
19 At [50].
this statement should set out Mr Midgley’s income and asset position at the date of Mrs Midgley’s death.
[46] Mrs Harding should also provide an affidavit setting out her financial position at the date of her mother’s death. As the authorities discussed above state, the financial positions of the claimants and beneficiaries under the will are relevant to the Court’s assessment of whether there has been a breach of duty and any potential relief.
[47] Further tailored discovery of documents relevant to Mr Midgley’s financial position may well be appropriate once Mr Midgley has provided this affidavit. The affidavit will enable that discovery, if any, to be focused on relevant issues and therefore reasonable and proportionate.
[48] I consider that the Court will be better placed to assess the relevance of any trusts of which Mr Midgley is a trustee and/or beneficiary, and whether discovery of documents in relation to any such trusts is necessary, once Mr Midgley has provided a comprehensive statement of his assets and income.
Result
[49] I order that Mr Midgley and Mrs Harding are to file and serve affidavit evidence setting out a proper statement of their respective financial positions at the date of Mrs Midgley’s death, including their net asset positions and sources of income. The affidavits are to be filed and served by 28 January 2023 or an earlier date if agreed between counsel.
[50] As to costs, neither party has been entirely successful. Mrs Harding has secured an order, but it is considerably scaled back from the order she sought. Therefore, I order under r 14.7 that costs on the application are to lie where they fall.
Associate Judge Gardiner
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