Platt v Taylor
[2020] NZHC 3186
•3 December 2020
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE
CIV-2019-442-85
[2020] NZHC 3186
UNDER The Family Protection Act 1955 IN THE MATTER OF
FAYE LESLIE TAYLOR
BETWEEN
JEANETTE ANNE PLATT
Applicant
AND
FREDERICK TAYLOR
Respondent
On the papers Counsel:
G Praat for the Applicant
A Olney for the Respondent
J Maslin-Caradus for the ChildJudgment:
3 December 2020
JUDGMENT OF CULL J
[1] This family protection proceeding has been referred to the High Court from the Family Court for a determination, as a preliminary issue, on the interpretation of clauses 5(iv) and (v) of the will of the deceased, Ms Faye Leslie Taylor.1
[2] Following the High Court direction, Counsel for the parties agreed that the determination of the preliminary issues can be decided on the papers.
1 Platt v Taylor FAM-2019-042-000150, 1 November 2019.
PLATT v TAYLOR [2020] NZHC 3186 [3 December 2020]
Background
[3] Ms Jeanette Platt (the applicant) and the deceased Ms Taylor commenced a relationship in December 2006. In August 2013, they purchased a property together in Motueka, where they lived together with a foster child until Ms Taylor’s death.
[4] The purchase of their property was funded by the proceeds of sale of a property owned by Ms Taylor of $123,000, an advance from Ms Taylor’s father’s estate of
$104,000, and a mortgage from the ANZ bank securing a loan of $250,000. Ms Platt and Ms Taylor entered into a s 21 agreement under the Property (Relationships) Act 1976 prior to purchasing the Motueka property. The agreement provided for recognition of Ms Taylor’s original contribution of $227,500 to the purchase of that property as her separate property.
[5] In 1986, Ms Taylor had obtained an insurance policy with AMP Life Insurance. By the time the property was purchased, the benefit value of the policy was $250,000. In the s 21 agreement, Ms Taylor’s life insurance policy was also identified as her separate property.
[6] In October 2016, Ms Taylor was diagnosed with terminal ovarian cancer. On 20 July 2017, she executed a will (the Will) appointing the respondent, Mr Frederick Taylor, as executor and trustee, along with Mr Ross Higgs. Mr Taylor is Ms Taylor’s brother. The relevant clauses of the Will are set out in this judgment at [14]. After the payment of expenses and two specific bequests, cl 5(iv) instructs the trustees to repay, out of the proceeds of the life insurance policy, one half share of the home loan that Ms Taylor and Ms Platt had secured by a registered mortgage over the Motueka property. To the extent that the proceeds of the life insurance policy exceed a one-half share of the home loan, cl 5(v) instructs that any surplus of the life insurance proceeds is to be divided between two named charities. In cl 5(viii), the residue of the estate is to be divided among eight named beneficiaries. It is the interpretation of cls 5(iv) and
(v) that is at the heart of these proceedings.
[7] On 18 April 2018, Ms Taylor submitted a claim form to AMP Life for early payment of her life insurance cover on the basis of her diagnosis of a terminal illness. On 16 May 2018, Ms Taylor’s claim was accepted and AMP, on Ms Taylor’s
instructions, paid the proceeds of the insurance payment, $251,129.52, to her account at NZCU Baywide. Immediately prior to the receipt of the insurance funds, the account had a balance of $3,263.74. From 1 June 2018, when the funds were placed in the account, it had a credit balance of $254,389.76 .
[8] Ms Taylor died on 15 August 2018, and on 8 February 2019, probate was granted in respect of the Will.
[9] After the insurance payment was received on 1 June 2018, no further funds were introduced into or withdrawn from Ms Taylor’s NZCU Baywide account. The net funds of $254,358.26, which remained after the deduction of nine monthly management fee amounts of $3.50, was then transferred to the trust account of the estate’s solicitors on 19 February 2019. The NZCU Baywide account was closed, but interest received and withholding tax paid on the “net funds” was credited to another linked NZCU Baywide account, which was also closed and the balance of the account of $4,797.16 was paid to the estate’s solicitor’s trust account also on 19 February 2019.
[10] Ms Platt commenced proceedings under the Family Protection Act 1955 seeking further provision from the estate. Those proceedings were issued in the Family Court and the preliminary question on the interpretation of cls 5(iv) and (v) of the Will has been referred to this Court for a determination.
[11] Ms Platt says that the $254,358.26 held in the trust account of the estate’s solicitors are “the proceeds of [Ms Taylor’s] life insurance policy” for the purposes of cls 5(iv) and (v) of the Will, and fall to be paid first to the one-half share of the home on the Motueka property, and any surplus to the charities described in cl 5(v).
[12] The respondent says that, either due to the doctrine of ademption or because of the “commingling” of the funds, the $254,358.26 forms part of the residue of the estate and falls to be distributed in eight equal shares to the persons named in cl 5(viii) of the Will.
Preliminary question
[13]The question which is required to be determined by the Court is:
Whether $251,129.32 of the $254,358.26 funds held in the NZCU Baywide account in the name of Faye Taylor at the time of her death should be applied in accordance with cls 5(iv) and (v) of the Will as the proceeds of Ms Taylor’s life insurance policy or form part of the residue of her estate under cl 5(vii)?
The Will
[14]The relevant clauses of the Will are as follows:
5.I GIVE the remainder of my estate to my Trustee UPON TRUST:
…
iv.to repay, out of the proceeds of my life insurance policy, one half share of the home loan which JEANETTE ANNE PLATT and I owe that is outstanding in respect of and secured by a registered mortgage over the property situated at
… Motueka or any property purchased in substitution; and
v.in the event that there is a surplus remaining after making such repayment set out in clause 6 (iv)[2] above, I direct my trustees to deal with the surplus in the following manner:
a.TO GIVE one half share to SECOND CHANCE GROUP for its general charitable purposes,
b.TO GIVE one half to the Nelson society for the Prevention of Cruelty to Animals Inc. for the general purposes of the Society and its work; …
[15] The starting point for the interpretation of a will is s 20 of the Wills Act 2007. It provides as follows:
20 Effect on will of will-maker dying
(1)A will's words disposing of property apply to circumstances as they are when the will-maker dies.
(2)Subsection (1) does not apply if the will makes it clear that the will-maker intended the words to apply to circumstances as they are at a different time.
[16] Thus, the will speaks from the date of death not from the date the will was made, unless the will makes it clear the will-maker had a contrary intention. The will
2 All parties agree that the reference to cl 6(iv) is incorrect and refers to cl 5(iv).
is presumed to apply and refer to the assets that the deceased owned at the date of death.3
[17] The factual question addressed by both parties is whether the life insurance policy needed to exist at the time of death and whether the “proceeds of my life insurance policy” was an identifiable asset at the date of death. I deal with each of these in turn.
Did the proceeds of the deceased’s life insurance policy exist at the time of death?
[18] Ms Platt contends that provided the proceeds of Ms Taylor’s insurance policy were sufficiently identifiable at the time of death, cls 5(iv) and (v) of the Will apply notwithstanding that the policy had been discharged prior to Ms Taylor’s death.
[19] The respondent says that read at the date of death, the phrase “proceeds of my life insurance policy” presumes the existence of a life insurance policy at the time of death from which there would be proceeds. On that reading, he submits the Court must consider whether the prior discharge of the policy and subsequent payment to Ms Taylor during her lifetime was a change in the existence or nature of the policy, sufficient to engage the doctrine of ademption.
[20]The common law doctrine of ademption applies to a testamentary gift when:4
(a)the will-maker has disposed of the subject matter of the gift before his or her death; or
(b)there has been a change in the properties ownership or nature.
[21] If the subject matter of a testamentary gift has been adeemed, it can no longer pass to the beneficiary under the will and in this instance would become part of the residue of the estate. As the High Court of Australia in Brown v Heffer said:5
3 Glass v Anthony HC Christchurch CIV-2008-409-455, 9 July 2008.
4 Lickford v Commissioner of Inland Revenue (1979) 4 NZTC 61,624 (SC).
5 Brown v Heffer [1967] HCA 40, (1967) 116 CLR 344 at 348-9 (footnotes omitted).
Ademption of a specific gift by will occurs where the property the subject of the gift is at the testator’s death no longer his to dispose of : Stanley v. Potter (1). An obvious case of ademption is that in which the testator has completely divested himself of the property in his lifetime so that at his death there is in his estate nothing which even substantially (see McBride v. Hudson (2)) answers the words of the gift. But ademption occurs also where the property has been so dealt with that by the rules of equity it must be considered at the death as having been converted into to other property, such as money, which the words of gift are not apt to comprehend : Watts v. Watts (3) ; McArthur’s Executors v. Guild (4) ; In re Edwards dec’d ; Macadam v. Wright (5). Thus, in the case of a simple devise of land, if it is found at the testator’s death that after making the will he become bound by a contract to convey or transfer the land to another, and the contract is still subsisting, so that when he died he was
… a trustee of the land for the purchaser and entitled only to the money in its place, there is no property in respect of which the words of devise are capable of taking effect : …
[22] It appears to be common ground that the insurance policy had been discharged and therefore did not exist at the time of Ms Taylor’s death. However, the wording of the Will is “the proceeds of my life insurance policy”. Applying the Brown v Heffer articulation, the question is whether the subject of the gift at Ms Taylor’s death is no longer hers to dispose of. Similarly, in Slater v Slater, Cozens-Hardy MR said:6
Where is the thing which is given? If you cannot find it at the testator’s death, it is no use trying to trace it unless you can trace it in this sense, that you find something which has been changed in name in form only, but which is substantially the same thing.
[23] An example of the Court “saving” a provision in a will that might otherwise have been addeemed is in Re Dorman, in which the Court held that a bequest for payment from the balance of a bank account included a payment from a subsequent account in the same bank into which the funds had been transferred on the same terms.
The original bank account was no longer in existence.7
[24] The gift here is described in cl 5(iv) of the Will as the “proceeds of my life insurance policy”. The funds (or “proceeds”) had not been expended by Ms Taylor but placed with her other monies in her NZCU Baywide bank account. I find that the gift had not been disposed of and nor had Ms Taylor completely divested herself of the property in her lifetime, such that there was nothing which substantially “answers
6 Slater v Slater [1907] 1 Ch 665 (CA) at 672.
7 Re Dorman [1994] 1 WLR 282 (Ch).
the words of the gift”. On the contrary, the proceeds of the life insurance policy had not been addeemed and were clearly in the NZCU Baywide bank account.
[25] The next question, however, is whether the proceeds were so commingled that their identity was lost in the body of the bank account funds.
Are the proceeds of the insurance policy sufficiently identifiable?
[26] The payment from AMP of the $251,129.52 was deposited into Ms Taylor’s NZCU Baywide everyday account. Ms Taylor had instructed the AMP to pay it into her bank account, by providing a bank statement endorsed with the words “I don’t mind what acc it goes in.” The other funds in that account amounted to $3,263.74.
[27] The respondent submits that when those funds were paid by AMP into the other funds in Ms Taylor’s bank account, they ceased to have a separate identity and thereafter, the proceeds of the insurance policy were not separately identifiable.
[28] I have some difficulty in upholding that submission. Although money is fungible and ceases to be separately identifiable when mixed with other money in a bank account derived from another source,8 these life insurance proceeds were intermingled with a minimal sum of $3,263. There were no other funds deposited into that account from the date of the insurance proceeds payment on 1 June 2018 until the date the funds were transferred to the estate’s solicitor’s trust account on 19 February 2019. The only debits to that account over the same period were the monthly bank account fee of $3.50.
[29] I accept Ms Platt’s submission that the funds paid into the NZCU Baywide account represented the proceeds from the policy, where they remained untouched until they were transferred to the estate’s solicitor’s account in February 2019. They are identifiable, constituting the bulk of the funds in that bank account, save for $3,263 approximately.
8 Equiticorp Industries Group Ltd (in statutory management) v Attorney General [1998] 2 NZLR 481 (HC) at 697.
[30] There is one further consideration that is relevant to the interpretation of Ms Taylor’s Will and that is her intention. In Re Jensen, Fisher J described that the overriding objective in will interpretation is to give effect to the intentions of the testator and where the testamentary language is unambiguous and discloses no obvious error, the Court must give effect to it as it stands.9
[31] I consider the testator’s intentions here are clear. Ms Taylor had taken out an insurance policy, and, when purchasing the Motueka property, had arranged a mortgage, together with Ms Platt, over the property. Her expressed intention in cl 5(iv) was to use the proceeds of the life insurance policy to pay her half share of the home loan. In this way, she was ensuring that her debt was paid on her death. Her further intention is expressed in cl 5(v), which provides that if there is any surplus of the insurance policy proceeds after debt repayment, then the surplus is to be applied to specified gifts. Again, Ms Taylor’s intention was clear that whatever her share of the mortgage debt was outstanding at the time of her death, the policy proceeds were to be applied to expunge the debt and whatever was left over would be applied to the two gifts specified in cl 5(v).
Result
[32]I therefore answer the preliminary question as follows:
(a) I conclude that the $251,129.32 of the $254,358.26 funds held in the NZCU Baywide account in the name of Faye Taylor at the time of her death are the proceeds of her life insurance policy and should be applied in accordance with cls 5(iv) and (v) of Ms Taylor’s Will.
9 Re Jensen [1992] 2 NZLR 506 (HC).
Costs
[33] If Counsel are unable to agree on costs, memoranda of no more than five pages are to be filed within 20 working days by the applicant and a further working 10 days by the respondent.
Cull J
Solicitors:
Knapps Lawyers, Nelson for the Applicant
WLC Brierley, Wellington for the Respondent Fletcher Vautier Moore, Nelson for the Child
0
2
0