O'Neill v O'Neill
[2021] NZCA 585
•8 November 2021 at 9.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA716/2020 [2021] NZCA 585 |
| BETWEEN | MARTIN TIMOTHY O’NEILL |
| AND | JUDITH ANNE O’NEILL |
| Hearing: | 7 October 2021 |
Court: | Courtney, Woolford, Mander JJ |
Counsel: | P V Cornegé for Appellant |
Judgment: | 8 November 2021 at 9.30 am |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BCosts are awarded to the respondent for a standard appeal on a band A basis and reasonable disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Mander J)
Martin O’Neill (Martin) is one of three children from the first marriage of his father, Larry O’Neill (Larry). After Larry separated from his first wife in 1979, he commenced a relationship with Judith O’Neill (Judith) that lasted for some 37 years until Larry’s death in August 2016, aged 84. The couple married in 1999.
The major asset of Larry’s estate was his half share in the couple’s Hamilton home which they owned as tenants in common. In his last will, dated June 2012, Larry left his half share to Judith. All three adult children challenged the will, claiming that Larry lacked testamentary capacity and that this will was the product of Judith’s undue influence. Those claims were dismissed in the High Court by Downs J, as was a claim by the children under the Family Protection Act 1955 (the Act) that Larry breached his moral duty to provide for them.[1]
[1]O’Neill v O’Neill [2020] NZHC 2988 [High Court judgment].
Martin does not challenge the Judge’s finding that the will was valid. However, unlike his siblings, he appeals the decision to decline his family protection claim. Martin maintains that Downs J erred by failing properly to distinguish his financial position from that of his siblings and that he did not correctly apply the applicable principles under the Act.
Background
Larry was a retired solicitor whose estate was modest. It included his half share in the Hamilton home which he and Judith had built in 2000. Both had contributed financially to the purchase of the section and the cost of its construction. Judith still lives in the home and Larry’s half share is the only major asset of his estate.
In Larry’s final 2012 will, he left what was described as the Fairfield Investments Share Portfolio in equal shares to his children. As at the date of the 2012 will, this represented the value of Larry’s holdings in a share club which was believed to be worth some $7,200 at that time. Larry subsequently sold the shares and, by the time of his death, the portfolio was worth nothing. However, there remained a separate share portfolio held with Forsyth Barr that in February 2017 was valued at some $22,000. That formed part of Larry’s residuary estate that passed to Judith after payment of debts and funeral and administration expenses.
Larry had been a partner in a firm of solicitors until they merged with another firm in 2000 and he became an employee at the age of 68. Between 2004 and his retirement in 2008, Larry continued to work on a part-time basis for a sole practice in Hamilton. Before her retirement, Judith was a teacher who worked part-time until at least 2012, when she was aged 76. Judith is now 85.
Larry suffered a minor stroke in 1999, when he was 67. This affected his peripheral vision and he was no longer able to drive. As a result, he became increasingly reliant on Judith for transport. In 2004, Larry was diagnosed with prostate cancer. The medical prognosis was that he may only have a life expectancy of around five years depending on medication. This development together with Larry’s growing dependence on Judith appears to have influenced his decision to change his will in December 2007 so as to provide for Judith by leaving his half share in the house to her. Judith’s evidence was that Larry had repeatedly said she would outlive him and his “mantra” was that he would provide for her. Larry made a final will in 2012 (the subject of this appeal) but the bequest of his half share did not change.
In the later years of their marriage Judith also suffered a number of health setbacks. In 2008, she broke her arm in a fall and later had shingles and recurring respiratory infections. Larry’s health deteriorated in 2008. He required a pacemaker and he stopped work completely. Larry had no private superannuation and money appears to have become tight. At the same time, Larry’s dependence on Judith was growing. He was reliant on her to attend medical appointments, which she would also attend, and Judith took on responsibility for maintaining their home and its extensive gardens on a steep site. She also organised the couple’s social engagements which, notwithstanding their respective health difficulties, they sought to maintain, and took responsibility for the daily administration of the household.
There was evidence that Larry and Judith believed they had not received support from Larry’s children. In February 2014, a handwritten document signed by Larry in December 2012 was provided to their solicitor. It reads:
Statement of Larry O’Neill on present and future care arising out of medical conditions.
1. Since 1999 Judi has been my sole caregiver organising ongoing consultations with doctors and specialists. See attached list from Dr Charleson.
2. Judi has been responsible for organising all matters relating to our home and extensive gardens.
3. Social activities centred around the home are organised solely by Judi.
4. Since my retirement Judi has maintained an essential teaching income as an on-call teacher.
5. In the last six years Judi has had to deal with her own significant health problems. These include facial shingles, fractured arm and a debilitating digestive condition.
6. I now require care on a daily basis. For this Judi will require support and practical assistance from my children.
The solicitor’s evidence was that Larry and Judith had told her this support had not been forthcoming. She made a file note in which, under the heading “Larry”, she recorded the pacemaker was to cost $26,000; “none of the children would contribute”; and Larry had “no sense of obligation” to his children.
In Larry’s 2012 will, he explained his rationale for effectively not including his children. He stated:
6. IN MAKING this Will, I am mindful of the fact that my children are all currently in their 50s, are financially well off, have established careers and significant assets of their own, and that in the circumstances they will have no need to look to my estate for any maintenance and support upon my death.
Larry’s other son, David, and his daughter, Philippa, did not dispute the accuracy of Larry’s assessment of their respective situations at the time he died in 2016 as “financially well off” with “established careers and significant assets of their own”.[2] However, Martin, despite being a qualified engineer, maintained his financial position was different to that of his siblings and that, as a result, he should have received a proportion of Larry’s estate. His circumstances are dealt with in greater detail later in this judgment.
The appeal
[2]At the time of the High Court hearing David was aged 62, Martin 60, and Philippa 59.
Martin brings his appeal against the finding that Larry did not breach his duty to provide him with proper maintenance and support on the following three grounds:
(a)The Judge erred by not distinguishing between Martin’s appreciably worse financial position and that of his siblings having regard to the uncontested evidence to that effect.
(b)If the Judge was correct not to distinguish Martin’s position from that of his siblings, a recognition award should have at least been made.
(c)In either case, the Judge’s assessment of the effect on Judith, in particular that it would result in her having to sell her home, overstated the position.
Because of the related considerations to which each of these grounds give rise, their analysis tends to overlap. They essentially distil to whether the Judge was correct to conclude that, insofar as Martin is concerned, Larry did not breach his moral duty to his son. We address each ground when examining this wider question and make our own assessment of that question.
Relevant principles
Persons entitled to claim under the Act, including children of the deceased, may apply to have provision made for them from the will-maker’s estate for their “proper maintenance and support”.[3] Whether there has been any breach of a will‑maker’s moral duty to provide for a particular individual is to be assessed on the basis of the situation as it existed at the time of the will-maker’s death.[4]
[3]Family Protection Act 1955, s 4(1).
[4]Bill Patterson Law of Family Protection and Testamentary Promises (5th ed, LexisNexis, Wellington, 2021) at 49.
It is not suggested that Downs J did not correctly identify the principles to be applied when assessing a family protection claim. For the purposes of this appeal it is not therefore necessary to go beyond the list of considerations set out by Randerson J in Vincent v Lewis, which were adopted by the Judge. Neither party demurred from this succinct summary:[5]
[5]High Court judgment, above n 1, at [67], citing Vincent v Lewis [2006] NZFLR 812 (HC) at [81].
a)The test is whether, objectively considered, there has been a breach of moral duty by [the deceased] judged by the standards of a wise and just [will-maker].
b)Moral duty is a composite expression which is not restricted to mere financial need but includes moral and ethical considerations.
c)Whether there has been such a breach is to be assessed in all the circumstances of the case including changing social attitudes.
d)The size of the estate and any other moral claims on [it] are relevant considerations.
e)It is not sufficient merely to show unfairness. It must be shown in a broad sense that the applicant has need of maintenance and support.
f)Mere disparity in the treatment of beneficiaries is not sufficient to establish a claim.
g)If a breach of moral duty is established, it is not for the court to be generous with the testator’s property beyond ordering such provision as is sufficient to repair the breach.
h)The court’s power does not extend to rewriting a will because of a perception it is unfair.
i)Although the relationship of parent and child is important and carries with it a moral obligation reflected in the Family Protection Act, it is nevertheless an obligation largely defined by the relationship which actually exists between parent and child during their joint lives.
Whether or not there has been a breach of the moral duty to provide maintenance and support is a threshold issue, which turns on an assessment that involves matters of law, fact and degree. It follows that on appeal that assessment falls to be considered afresh in accordance with the principles discussed in Austin, Nichols & Co Inc v Stichting Lodestar.[6] However, if a breach of moral duty is found the appropriate remedy will be a matter of discretion.[7]
The alleged failure to distinguish between Martin’s financial position and that of his siblings
[6]Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
[7]Talbot v Talbot [2017] NZCA 507, [2018] NZFLR 128 at [37].
Much of Martin’s evidence regarding his financial position at the time of his father’s death centred on a failed property development in Queenstown which he described as having left him “destitute, insolvent and unemployed”. The development involved the construction of a number of townhouses but during the initial building phase it fell victim to the global financial crisis. The project collapsed in 2010 and the bank took over the project. Martin stated “[e]verything [he] owned … had been poured into the development” and he was “left with nothing”. He described being “wiped … out financially” after the project failed and the bank took the land.
A number of friends and family had also invested funds in the development, including Larry who provided $50,000. The status of these funds was the subject of ongoing debate between father and son, with Larry taking the position that it was a loan rather than capital. Martin denied that was the case and gave evidence he repeatedly informed his father of the true position. The actual status of the $50,000 is not particularly material but Larry’s belief may have informed his thinking at the time he prepared his will.
Martin’s evidence was that, although he obtained employment between 2011 and 2018 after returning to Bali with his wife, he was not able to acquire significant assets or savings, unlike his siblings. Martin and his wife and family rent their home in Indonesia, where they have lived since 1987. In 2010 Martin secured a position described as Country Director of AECOM in Jakarta. Martin acknowledges this was well-paid but cites pressures from educating his family in different countries around the world and having to commute to Jakarta as placing demands on his finances which prevented him from acquiring substantial savings or assets. Martin left AECOM to work for a New Zealand company that was subsequently sold and then for a renewable energy company, both in Indonesia. Since 2018 he has relied on consultancy work which he describes as “patchy” but sufficient to pay his rent. Martin says he has been unable to return to New Zealand because he has insufficient funds to place a deposit on a house and that, since the advent of COVID-19, projects in Indonesia have stopped and he has been without an income.
Martin’s claim was to a certain extent hamstrung by a lack of detailed information about his finances since 2011, particularly regarding his income and expenses and the financial difficulties he has incurred despite being a qualified engineer who has acquired a number of executive positions. Nor is it clear how the Queenstown property development failure over a decade ago has prevented him from being able to enjoy the rewards of an apparently good standard of living as an expatriate in Bali. Despite purportedly being the sole guarantor for the project’s debts it is not clear that he was ever made bankrupt or whether he had to personally support and manage debt arising from the property collapse on an ongoing basis over subsequent years. No evidence was tendered about this beyond general statements to the effect that in 2011 Martin was “insolvent” and “owed so much money”.
It is not contested that Martin was afforded the opportunity to provide further detailed information regarding his financial history and circumstances prior to the hearing of this matter but none was forthcoming. As noted by Downs J, the lack of detailed evidence about Martin’s finances and the imprecision of his actual position significantly detracts from his claim that Larry breached his moral duty to him by not providing proper maintenance and support. His lack of assets and the fact he suffered in the global financial crisis were acknowledged but we agree with the Judge’s observation that the absence of financial information about the effects over the longer term on his financial position means his claim remains opaque.
Mr Cornegé, on behalf of Martin, argued that the Judge placed undue weight on his reference to Martin not being “destitute” and his observation that the cost of living in Indonesia would be cheaper than New Zealand — there being no evidence regarding that topic.[8] However, we consider the Judge’s reference to Martin not being destitute must be placed in context. It was an observation made about Martin’s financial position in comparison to that of his siblings when the Judge acknowledged that Martin’s position is appreciably weaker. We do not consider Downs J was labouring under any misapprehension that a threshold of destitution was required to establish a successful claim. Similarly, the reference to the cost of living in Indonesia may have been an unwarranted assumption on the part of the Judge but we do not consider it detracts from his preceding observation that Martin is a qualified professional with an income, or that it was particularly material to the Judge’s reasoning.
[8]High Court judgment, above n 1, at [84].
In assessing the respective positions of the siblings, Downs J acknowledged Martin’s financial position was weaker than his siblings. The Judge also accepted that Larry had not made this distinction between his children. David and Philippa have both been professionally successful and have achieved financial independence, whereas Larry appears to have misapprehended that Martin had significant assets of his own. To the extent that Martin’s argument relied on demonstrating he was in a different financial position from his siblings, we do not consider the Judge erred in his assessment of what was largely uncontested evidence. Downs J was also clearly cognisant of the fact that Larry may have been labouring under the apparent misconception (both when he made his 2012 will and at the time of his death in 2016) that Martin was in a comparable position to his siblings.
It was submitted that, because of this established difference between Martin and his siblings, Martin’s evidence was sufficient to establish that he was in need of maintenance and support. However, Martin does not meet that test simply by comparing his financial circumstances with those of his siblings. Any obligation Larry had towards Martin had to be gauged against the competing interests of Judith, the size of the available estate, and the clear moral duty to provide for her which Larry wished to discharge as his pre-eminent obligation.
The assessment of Judith’s position and Martin’s recognition claim
Martin accepts that his father’s pre-eminent moral duty was to Judith but he argues the provision Larry should have made for him in his will would not have breached the moral duty he owed to Judith. Martin submitted that Downs J overstated the impact on Judith that would result from properly recognising his father’s moral duty to him. This contest centred on the half share in the Hamilton house. It was not the subject of any formal valuation. However, all parties appear to have been content to proceed on the basis that its approximate value was likely to be $1 million and that Larry’s share of the asset was some $500,000.[9] Mr Cornegé submitted that Martin’s claim on his father’s estate was relatively modest and would not have significantly reduced Judith’s share.
[9]The home has a rateable value of $780,000, however this figure is likely out of date.
Martin’s claim was not limited to one based upon his pleaded impecuniosity. He, like his siblings, sought an award on the more fundamental basis that he was Larry’s child. It is not disputed that Larry owed a moral duty to his children and Downs J recognised that each of the siblings had a long, loving relationship with their father and were hurt by Larry’s testamentary decisions. This Court has recognised that the statutory concept of support, as that term is used in the Act, can extend to the provision of “comfort” to a would-be recipient and that a recognition award can be made to acknowledge the wider considerations that are to be taken into account in determining the scope of a will-maker’s duty.[10] These considerations include the need to recognise belonging to the family, and the part played by an individual in the overall life of the deceased despite there being no apparent economic need.[11]
[10]Williams v Aucutt [2000] 2 NZLR 479 (CA) at [52].
[11]At [52], [69] and [75].
Martin argued that the Judge was wrongly influenced by two factors in declining to make an award in recognition of his status as Larry’s son: first, the costs of a retirement home and, second, Judith’s alleged inability to meet an award unless the home was sold.
Martin is correct to identify there was no evidence as to the cost of a retirement home. However, we consider the Judge’s comment that retirement homes can be costly, which was made in the context of acknowledging Judith’s financial interests, was an entirely sensible and understandable observation to make when assessing the future financial pressures that Judith is likely to face as an 85-year-old widow who is entirely dependent on government superannuation for her income.[12] We consider the statement is beyond contest.
[12]High Court judgment, above n 1, at [81].
We also consider the Judge was entitled to have regard to how an award relating to Larry’s share of the house may necessarily impinge on Judith’s ownership of her home in order for her to meet any such obligation. It was argued that the Judge erred because an award in favour of the siblings would not necessarily have required Judith to immediately sell the house and that a life interest in Larry’s share of the home could have been granted to Judith until such time as the asset was sold.
We are of the view that Downs J was aware such a course was possible, given his earlier observation that a recognition award could be made, albeit one that was contingent upon the home being sold.[13] However, we, like the Judge, consider there are good reasons why such an order would not be satisfactory. These include, as we understand is the position, that the parties are estranged and relations between them are fractious. A clean break is preferable in that situation. Moreover, we accept that not only would such an arrangement undermine Judith’s sense of security, which Larry was clearly anxious to preserve for his wife at her late stage of life, but that her financial circumstances are such that she will likely need to borrow against the property in order to meet its ongoing maintenance, insurance, rates and other costs. This and any other reliance on the asset to meet financial needs will inevitably erode a resource that would otherwise be available to Judith to pay retirement home and care costs when she finally comes to sell the house.
[13]At [69]–[70].
We consider that the Judge’s approach to Martin’s claim is likely to have been understandably influenced by the fact that there realistically appears no other means to meet an award against the estate other than by encumbering Judith’s home. There is the share portfolio held with Forsyth Barr which is capable of being liquidated as a possible means of meeting an award without jeopardising the security provided to Judith from her acquisition of Larry’s share of the house. However, the Judge may have discounted this part of the estate after referring to the review in Chambers v Chambers of awards made on a purely “support” basis where it was observed that adult children who are not in financial need sometimes receive up to 10 per cent of an estate.[14] In the present case that would translate to an award of some $50,000 per child. Given the Judge was dealing with claims by all three siblings that in combination would have well exceeded such a sum, he may have viewed the share portfolio valued in 2017 at some $22,000 as immaterial.
[14]Chambers v Chambers [2016] NZHC 583 at [114].
Downs J found himself unpersuaded that Larry had breached his moral duty to the children. In reaching that conclusion, he considered Larry’s primary duty to Judith; her needs and the modesty of the estate were decisive. Having assessed the matter for ourselves, we consider the Judge correctly identified these matters as the pivotal considerations. We initially had a residual concern that the Judge may have limited himself to a binary choice between the moral duty Larry owed to his wife and that which he owed to his children, or at least to Martin, as a result of the apparent sole focus on Larry’s half share in the house maintained in the belief this was the only available asset of the estate from which any award could be met and that the Judge had ignored the share portfolio. However, the value of the shares has reduced to $17,000 and some $9,000 will need to be applied from that asset to meet probate and administration fees that have been paid by Judith.
Our assessment
For ourselves, we consider, as the Judge himself found, that Martin’s overall financial position does place him apart from his siblings. However, the poor quality and superficiality of much of Martin’s evidence was insufficient to establish a proper basis upon which to sustain a claim based on the proposition that Larry had an obligation remotely comparable to his duty to Judith to provide proper maintenance and support. Nonetheless, we have given careful consideration as to whether the combination of Martin’s broader financial situation and Larry’s misapprehension of his son’s position may have justified a limited award in recognition of Martin’s status as Larry’s son on the basis of the availability of the Forsyth Barr shares.
Martin argued that when the Judge held that to make an award to the siblings would be “to dramatically rewrite Larry’s will”, he misapplied the general principle that a Court should not rewrite a will because of a perception of unfairness.[15] Martin argued it was self-evident from the making of any award under the Act that a deceased’s will is to some degree being rewritten and that this should not be a basis upon which to refuse to make any award at all. He submitted that such an approach may have fettered the Judge’s willingness to consider an award in favour of Martin and his siblings, subject to a life interest in favour of Judith. However, we consider such a submission is speculative. Moreover, we believe the Judge’s point was clear. Taken together, the siblings’ claims would have effectively returned the testamentary position to Larry’s original will of 2002, despite the will-maker having twice repudiated the effect of that will during the 14-year period before his death. Accepting the siblings’ claims would have severely abridged Larry’s testamentary intentions and, we agree, effectively abrogated his testamentary freedom.
[15]High Court judgment, above n 1, at [82].
It is these considerations that we have in mind in declining to make any award in favour of Martin. Larry’s priority was his wife and we consider he was entitled to structure his will in a way that would provide at least some measure of security for Judith as his elderly widow. The estate was simply too modest to both provide for Judith and recognise Martin by way of some albeit small legacy. We do not consider, in the circumstances, that Larry breached any moral duty to his son by not doing so.
As mentioned, we have closely considered the merit of making a small award from the shares held by Forsyth Barr but, on balance, we do not consider that is appropriate or would realistically achieve much. An award to a claimant should be no more than is necessary to make adequate provision from the estate and remedy the failure to do so.[16] In making such an assessment the Court must be mindful of testamentary freedom and that what may represent a proper award is a matter of judgment in the individual circumstances of the particular case.[17]
[16]Henry v Henry [2007] NZCA 42, [2007] NZFLR 640 at [54].
[17]Williams v Aucutt, above n 10, at [52]; and Henry v Henry, above n 16, at [55].
In this case, those considerations would point to only a nominal award but one that would also deprive Judith of a small but valuable source of cash that would allow her to maintain the property and meet other expenses, if only for a relatively short period. Putting to one side any relationship property considerations relating to the shares, after taking into account administrative costs, it appears only some $8,000 worth of shares would likely remain. In those circumstances we consider Downs J was correct to decline Martin’s claim under the Act.
Result
The appeal is dismissed.
Costs
Costs are awarded to the respondent for a standard appeal on a band A basis and reasonable disbursements.
Solicitors:
Nielsen Law, Hamilton for Appellant
Neilsons Lawyers Ltd, Auckland for Respondent
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