Swenson v Lawton

[2022] NZHC 3544

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2021-454-10

[2022] NZHC 3544

IN THE MATTER

of the Estate of TRUDY ANNE LAWTON

UNDER

the enforcement of a section 21A Property (Relationships) Act 1976 agreement

BETWEEN

KAREN IVY SWENSON AND ANTHONY HARVEY SWENSON

Plaintiffs

AND

GRANT MATTHEW LAWTON

Defendant

CIV-2021-454-35

IN THE MATTER

of the Estate of TRUDY ANNE LAWTON

UNDER

the Family Protection Act 1955

BETWEEN

GRANT MATTHEW LAWTON

Plaintiff

AND

KAREN IVY SWENSON AND ANTHONY HARVEY SWENSON

Defendants

CIV-2021-454-42

IN THE MATTER

of the Estate of TRUDY ANNE LAWTON

UNDER

the Property (Relationships) Act 1976

BETWEEN

GRANT MATTHEW LAWTON

Plaintiff

AND

KAREN IVY SWENSON AND ANTHONY HARVEY SWENSON

Defendants

SWENSON & SWENSON v LAWTON & ORS [2022] NZHC 3544 [19 December 2022]

Hearing:

5-6 July 2022

Counsel:

G A Paine for Mr Grant Lawton

G P Mason for the Executors of the Estate of Trudy Lawton

Judgment:

19 December 2022

JUDGMENT OF ISAC J

Introduction

[1]    In late 2002, Ms Trudy Lawton suffered a serious stroke and was diagnosed with Moyamoya disease, a rare condition affecting blood vessels in the brain. She was told that she would not live long. For the next 15 years Trudy was supported, cared for and loved by her husband, Mr Grant Lawton, until they agreed to separate. In 2018, Trudy and Grant entered into an agreement under s 21A of the Property (Relationships) Act 1976 in which they divided their relationship property (the agreement). Among other things, the agreement provided that if Trudy died within 10 years, Grant would pay half of the proceeds of Trudy’s life insurance policy to her estate.

[2]    Trudy passed away less than two years later and Grant received $431,250 under the life insurance policy. He subsequently refused demands by the executors of Trudy’s estate—her sister and brother-in-law—for half of the proceeds. In these related proceedings, Grant now seeks to have the agreement set aside under s 21J of the Property (Relationships) Act. He also seeks maintenance from Trudy’s estate under the Family Protection Act 1955. In response, the executors seek to enforce the agreement. Alternatively, if the agreement is set aside, they seek a fresh division of the relationship property taking into account capital gains Grant has made since the relationship property was divided.

[3]Two broad issues require determination:

(a)First, whether the agreement should be set aside under s 21J of the Property (Relationships) Act on the basis that giving effect to it would

cause serious injustice. If not, the executors are entitled to judgment against Grant for half of Trudy’s life insurance proceeds.

(b)Second, whether any provision for Mr Lawton ought to be made from Trudy’s estate under the Family Protection Act.

Background

[4]    Grant and Trudy met in 1994 and soon began a relationship. They were married in 2000, and lived together with Grant’s three children from a previous relationship.

[5]    In mid-2000, Trudy took out an insurance policy over her life. That was fortuitous because in November 2002 she suffered a serious brain bleed and was then diagnosed with Moyamoya disease. Trudy was told that she would not live to an old age.

[6]    From then on, Trudy was unable to work and required high levels of support and care. She suffered chronic pain as a result of her condition, which also affected her movement, speech, cognition and personality. Grant became the sole breadwinner as well as Trudy’s principal caregiver. Undoubtedly that was a challenging and at times very difficult role. Equally, however, I have no doubt that Grant gladly cared for Trudy for many years because of the genuine love and affection he held for her.

[7]    Despite Trudy’s bleak prognosis, Grant and Trudy remained optimistic and determined to fight her illness. They engaged the services of a neurosurgeon in 2006, and Trudy underwent two surgeries in 2008. In 2009, Grant took Trudy—who loved music and Bob Marley—on a holiday to Jamaica. However, Trudy’s disease caught up with her again in 2013. She suffered another serious brain bleed and Grant took nine months off work as a police officer to care for her. Shortly after, Grant learned of breakthrough surgery being used on stroke patients by a doctor in Florida. He organised a hugely successful community fundraiser in Feilding, and used the proceeds to fly Trudy to the United States so that she could undergo treatment. The treatment was successful and Trudy’s health and independence dramatically improved, but only for a time.

[8]    Eventually, Trudy’s condition began to deteriorate again, straining the relationship. At the same time, Grant was involved in a protracted employment issue with his employer. His evidence was that he could no longer cope with these compounding stresses, and decided that it would be best if he and Trudy separated.

[9]    The couple separated on 10 October 2017, although they never formally divorced. Grant remained in the joint family home they owned in Derby Street, Feilding, while Trudy began renting a unit on a property owned by her sister, before moving into a flat by herself on Ranfurly Road. Shortly after their separation, at the request of Trudy’s sister, Karen, Grant began making fortnightly “maintenance” payments of $300 to Trudy.1

[10]   Seven months after their separation, on 1 May 2018, a roundtable meeting was held to discuss the division of Grant and Trudy’s relationship property. In attendance was Grant, his solicitor, Mr Terry Urquhart, Karen and Tony Swenson, and Trudy’s solicitor, Ms Joan Key. Trudy did not attend the meeting; it appears she did not wish to. As a result of the broad agreements reached at the meeting, a draft agreement was prepared.

[11]   Although correspondence between the parties’ lawyers ensued, matters did not really progress further until 22 November 2018, when Ms Key wrote to Mr Urquhart advising that the matter needed to be settled before Christmas. Ms Key requested a reply “as a matter of priority as we will be recommending that the Derby Street property should be re-valued”. The agreement was then completed and executed on 30 November 2018.

1      While there was some disagreement at trial as to whether those payments were intended to be reimbursed, the point ultimately was not taken anywhere.

[12]   The relationship property, as it was valued for the purposes of the agreement, was as follows:2

Derby Street property (Less mortgage)

Grant’s police superannuation
Two motor vehicles
Trudy’s KiwiSaver

Total

$310,000

-$30,000
$233,185
$35,000
$8,523

$556,708

[13]   The agreement provided that Grant would retain ownership of the family home (as well as responsibility for the mortgage), his superannuation and the vehicles, while Trudy would keep her KiwiSaver. Grant was to pay Trudy a “settlement sum” of

$160,000 immediately. In addition, Trudy (or her estate) would receive a fixed sum of

$116,592.50 from Grant’s superannuation when he eventually became eligible for it, being 50 per cent of the fund’s value as at 25 November 2017. There was no provision for an inflation adjustment or interest due on that sum.

[14]   The agreement provided for Grant to have an interest in Trudy’s life insurance policy. Clause 2.13 provided:

2.13     Grant and Trudy agree:

a)that Grant shall maintain his ownership of the life policy which Trudy is the life assured by paying all premiums as they fall due for payment for a ten year period from the date of this Agreement or until Trudy’s death, whichever is the sooner event;

b)that in the event that Trudy receives a diagnosis of a terminal illness (to the extent that such a diagnosis provides the qualification of an earlier distribution under the terms of the life policy) or that Trudy predeceases Grant before the tenth anniversary of the date of this Agreement, Grant shall pay to Trudy or to the Executors of Trudy’s Estate (as the case may be) the sum equal to half the insurance payment he has received arising from his ownership of the said life policy.

2      Grant and Trudy had already closed their shared bank accounts and split the funds between them.

[15]   On the same day that the agreement was executed, and unknown to Grant, Trudy made a new will. She appointed Karen and Anthony Swenson as her executors and bequeathed her entire estate to her sisters, Karen and Gaye Openshaw-Clark. Trudy’s will made no provision for Grant at all.

[16]   In July 2020, Trudy suffered a brain haemorrhage and died in hospital five days later. Shortly after, Grant approached Karen and said he would not pay the superannuation or insurance under the agreement. Correspondence ensued between the parties’ lawyers, and Ms Key advised that her clients intended to enforce the agreement if it was not honoured. On 29 September 2020, Grant received $431,250 under the life insurance policy. Trudy’s share was not paid to the executors.

[17]   On 5 February 2021, Ms Key sent  a  letter of  demand to  Grant’s  lawyer,  Mr Paine. The same day, Grant sold the Derby Street property for $575,000. As no payment was forthcoming, the executors filed proceedings on 23 February 2021 seeking to enforce Grant’s obligation to pay half of the  insurance proceeds under    cl 2.13 of the agreement. The next day, Grant purchased a property on Te Ngaio Road, Bunnythorpe for $800,000.

[18]   Grant subsequently brought his own proceedings seeking to have the agreement set aside on the basis that giving effect to it would cause serious injustice, as well as seeking provision from Trudy’s estate under the Family Protection Act.

First issue: should the agreement be set aside?

[19]   Section 21J of the Property (Relationships) Act allows the Court to set aside an agreement if satisfied that giving effect to the agreement would cause serious injustice. In determining whether serious injustice would arise, the Court must have regard to:3

(a)the provisions of the agreement;

(b)the length of time since the agreement was made;

3      Property (Relationships) Act 1976, s 21J(4).

(c)whether the agreement was unfair or unreasonable in the light of all the circumstances at the time it was made;

(d)whether the agreement has become unfair or unreasonable in the light of any changes in circumstances since it was made (whether or not those changes were foreseen by the parties);

(e)the fact that the parties wished to achieve certainty as to the status, ownership, and division of property by entering into the agreement; and

(f)any other matters that the court considers relevant.

[20]   The onus of showing serious injustice rests with the party seeking to have the agreement set aside.4 The threshold is high. In Gemmell v Harlow, Keane J said:5

… the test, “serious injustice” a test deliberately heightened recently, stands higher than those posed at law or in equity where a contract is said to be vitiated by coercion and unfairness.

[21]In Clark v Sims, Paterson J observed:6

Not every injustice will entitle a Court to set aside an agreement. There must have been at the time of entering the agreement, or subsequently because of a change of circumstances, unfairness or lack of equity of a substantial kind. … A Judge, in my view, should not set aside an agreement unless there has been a substantial injustice of sufficient gravity for the Judge to determine that in conscience the Court should intervene. That one party can establish that he or she did not receive what she may have received under the provisions of the Act, will not in itself be a sufficient ground to set aside an agreement, although gross inequality may well be a factor which weighs heavily in the determinative process of the Courts.

[22]   In Wells v Wells, Simon France J summarised the following principles relating to the assessment of serious injustice:7

a)serious injustice is a broad discretion which must be exercised in light of the policy underlying the legislation;

4      Wood v Wood [1998] 3 NZLR 234 at 242.

5      Gemmell v Harlow (2006) 25 FRNZ 887 (HC) at [66].

6      Clark v Sims [2004] 2 NZLR 501 (HC) at [36].

7      Wells v Wells HC Auckland CIV 2004-404-5901, 5 May 2005 at [37].

b)an important component of the statutory scheme is the capacity of parties to contract out of its provisions so long as certain procedural requirements are met;

c)resultant disparity of outcome at the time of separation is relevant, but is not generally as important a factor in contracting out cases as it might be in compromise cases.8 In any particular case it might of course require considerable weight, but generally it is not to be seen as a determinative or necessarily dominant consideration;

d)consistent with c), a comparison to the outcomes that would be ordered if the Act were applied is relevant but not as significant as it might be in compromise cases;

e)contracting out will usually occur in circumstances where one party has the assets and is pushing for an agreement. The circumstances will often involve pressure, and may involve an issue of whether the relationship will continue in the absence of an agreement. Accordingly, the presence of such circumstances is not generally relevant to the issue of serious injustice;

f)more than disparity of outcome per se will often be present before serious injustice arises. Concerns with the procedure will often provide that extra factor. Case law will no doubt develop on the issue of what procedural concerns the Court is referring to. I assume that they are something other than a breach of the s 21F requirement;

g)a discretion exercised in accordance with these considerations will be difficult to disturb on appeal.

[23]   In essence, Mr Lawton’s case is that the agreement was unfair or unreasonable at the time it was made, and has since become further unfair or unreasonable, for the following reasons:

(a)Although Grant thought the agreement was unfair at the time he entered into it, he signed it because of pressure borne of three things: the emotional stress he was under arising from the separation; the lengthy personal grievance process he was involved in; and his strong wish to avoid subjecting Trudy to legal proceedings in her fragile condition.

(b)The purpose of the agreement was to ensure that Trudy would be cared for in the event that Grant predeceased her. However, Trudy died earlier

8      Contracting out agreements being agreements entered prior to or at the outset of a marriage, and compromise agreements being agreements (like the present) entered into following separation.

than expected, “so as to alienate from [Grant] the majority of the relationship property”.

(c)It is unfair that Trudy’s sisters, who had no part in building up the relationship property pool, will obtain a “windfall”.

[24] I now turn to consider these arguments against each of the statutory factors in s 21J(4) (noted at [19] above).

Provisions of agreement

[25]   Mr Paine for Mr Lawton accepted that there was nothing in the provisions of the agreement itself that would sound in serious injustice. That concession was properly made. Settlement agreements should broadly reflect each party’s entitlement under the PRA.9 Against that yardstick Mr Lawton received a very favourable outcome. While the assets were divided almost exactly in half according to the valuations adopted in the agreement (approximately $271,000 to Grant and $285,000 to Trudy), several aspects of the agreement resulted in Grant in fact receiving a considerably more favourable outcome than a 50/50 split.

[26]   First, the value used to calculate the parties’ respective shares for the Derby Street home appears to have been significantly below market value. The agreement valued the property at $310,000 based on a valuation obtained in November 2017, a full year before the agreement was signed, despite a significant market rise in the interim. Grant was able to sell the property in early 2021 for $575,000, which amounted to a capital gain for him alone of $265,000.

[27]   Second, Trudy’s approach to her interest in Grant’s police superannuation ensured he would not have to sell the family home to pay her. Rather than requiring immediate payment of her interest on separation, Trudy’s entitlement to payment would only crystalise when Grant became eligible for the superannuation fund (either on his retirement or on ceasing to work for the Police). Realistically, that was always likely to be some considerable time after Trudy had passed away. And as I have noted,

9      DWG v JCF [2013] NZHC 650 at [34], Harrison v Harrison [2005] 2 NZLR 349 at [81]; and

Boyd v van Houten [2009] NZFLR 459 [52].

Trudy’s entitlement to half of Grant’s superannuation was fixed in value at the time they separated and made no provision for interest or capital growth. He therefore shared disproportionately on the increase in value of the fund after separation.

[28]   Third, Grant retained a half-share in Trudy’s life insurance policy even after they had separated. Ms Key’s evidence was that this arrangement was highly unusual, and that upon separation life insurance policies typically remain the sole property of the insured. The exception, she said, is generally where children are involved. Given Trudy had no means of meeting the insurance premiums, the deal struck was both practical and fair. In return for meeting the insurance premiums, Grant would receive half of the insurance proceeds which, in the scheme of the relationship property pool, would represent slightly less than half of the total capital the couple had accumulated during their relationship.10 I agree with Ms Key’s characterisation of the division of the insurance as a “win”. Moreover, given Trudy’s illness and prognosis, neither party could have envisaged that Grant would not benefit from maintaining the policy.

[29]   Nothing in the provisions of the agreement support a finding of serious injustice. On the contrary, I find they were substantially more favourable to Mr Lawton than he could have expected under a 50/50 clean break split. He received significantly greater than 50 per cent of the relationship property pool, and the favourable terms relating to his superannuation appear to have been a considerable concession by Trudy to enable him to remain in the family home, and enjoy the significant capital gains that were occurring at the time.

Length of time since agreement was made

[30]   The agreement was entered into on 30 November 2018. Trudy died on 6 July 2020, and Grant’s application to set aside the agreement was made on 5 May 2021. In my view, this is not a factor going toward serious injustice. Mr Paine did not suggest otherwise.

10     The precise proportion of the combined relationship property—using the agreement’s value for the Derby Street property—is 44 per cent of the total asset pool.

Whether agreement was unfair or unreasonable at the time it was made

[31]   Mr Paine submitted that the agreement was unfair or unreasonable at the time it was made because Grant effectively signed under “duress” as a result of stress he was experiencing at the time, and due to his desire to avoid tarnishing the final years of Trudy’s life with legal proceedings.

[32]   I readily accept Mr Lawton may have felt pressure to reach an honourable resolution with Trudy, and one that would avoid the stress for them both of Family Court proceedings. I also accept that he was under significant pressure as a result of the separation and employment-related issues at the time. However, I am not satisfied that Mr Lawton has established he suffered any form of impairment or that he was either incapable of understanding the nature and quality of the relationship property division he effected, or the implications for him in the future.

[33]   Mr Lawton struck me in giving evidence as a careful, considered and intelligent witness who was undoubtedly honest and credible throughout. But he was also, perhaps unsurprisingly as an experienced police officer, able to acquit himself well when being cross-examined on difficult personal matters. The manner in which he gave his evidence did not suggest for a moment that he was incapable of properly understanding the nature of the complex matters being put to him. The evidence also indicates that Grant actively participated in the 2018 roundtable discussion. It also appears that he struck out a clause in the agreement relating to an obligation to continue paying into Trudy’s Kiwisaver scheme. The fact that he was able to exercise fine judgments in relation to particular terms contained in the agreement strongly sounds against any form of impairment. It certainly does not support a finding of serious injustice.

[34]   And as Mr Mason pointed out, while Mr Lawton does not seek to invalidate the agreement on the basis of noncompliance with the requirements in s 21F, or a lack of contractual capacity, his evidence touches on the quality of the advice he received from his solicitor at the time, Mr Urquhart. Despite that, Grant did not call his lawyer to give evidence, and refused to waive privilege over his files. Mr Lawton’s decision to do so is significant, given that Mr Urquhart could be expected to shed light on the

advice he gave, and his impression of Grant’s state of mind at the time of entering into the agreement. When the failure to call Mr Urquhart was put to Mr Paine, he was unable to provide an explanation. In those circumstances, I draw an inference that the reason Mr Urquhart was not called is because his evidence would have undermined Mr Lawton’s case that he did not fully understand the effect of the agreement or signed under undue pressure.11

[35]   Instead, I place greater weight on Mr Urquhart’s certification of the agreement. That certification confirms that he explained the effects and implications of the agreement to Grant before he signed it.12 I also accept the evidence of Ms Key, who attended the roundtable meeting, that she “had no sense of Grant Lawton being under any form of duress”, and that he appeared to be “acting voluntarily and without any discernible reluctance”. She described the atmosphere at the meeting as “collaborative”.

[36]   At the hearing, Mr Paine developed a new argument that the agreement was unfair and unreasonable at the time it was made because Trudy had been highly dependent on Grant as her primary caregiver since her first serious stroke in late 2002. Grant became the sole earner and source of support to Trudy, both physical and moral, for the almost two decades that followed. All of this took a toll on his mental health, well-being, and career. Moreover, as she was unable to work after 2003, Trudy did not contribute to the relationship assets. In essence, as a result of Grant’s contributions to the relationship, and the sacrifices he made to care for Trudy, Mr Paine argued that at the date the agreement was signed, Grant was entitled to unequal division of the relationship property under s 13 of the Act on the basis that equal division would be repugnant to justice. In Mr Paine’s submission, the appropriate level of unequal sharing would have been for Grant to receive Trudy’s half-share of the life insurance policy.13

11     Ithaca (Custodians) Ltd v Perry Corporation [2004] 1 NZLR 731 (CA) at [153]–[154]. See also

Remnant v Mills [2020] NZHC 3414 at [68]–[71].

12     Ward-Smith v Ward-Smith HC Christchurch CIV 2008-409-1784, 5 February 2009 at [40].

13     On that approach, assuming a combined asset pool of     $987,958, Trudy’s share would be 28.9 per cent ($285,115.50) while Grant’s would be 71.1 per cent ($702,842.50).

[37]   Nothing has really been provided in the evidence to permit the Court to make a thorough assessment of the relative contributions. Undoubtedly Trudy was unable to work from 2003. But it is unclear whether this meant she was unable to make any contributions of the sort acknowledged by the Act as “homemaking”. More fundamentally, however, is the fact that Trudy’s foresight in taking out a substantial insurance policy over her life meant that almost half of the relationship property pool was made up of capital which she brought to the relationship. So it would be wrong to think that her inability to work meant she made no financial contribution.

[38]   Notionally, a Family Court Judge faced with the parties in 2019 would have been confronted by the fact that Trudy did not own her own home, was on a benefit, had high needs, and might require capital for expensive surgery or treatment. While Trudy would be unable to  generate  any  real  income  for  herself  in  the  future,  Mr Lawton would be able to. In those circumstances, there might be an argument that Trudy was entitled to a greater share of the relationship property. But on any view, Trudy’s inability to work from 2003, and her reliance on Grant for support and care, does not sound in serious injustice or, to apply the test applicable to unequal division, amount to extraordinary circumstances making equal sharing repugnant to justice.

Whether agreement has subsequently become unfair or unreasonable

[39]   Mr Paine submitted that the agreement has become unfair or unreasonable since it was made because Trudy’s death occurred earlier than expected and, as a result, all of her estate, including the insurance proceeds, would pass under her will to her sisters. Given the almost two decades of love and support that Mr Lawton provided Trudy, it is unfair that Trudy’s sisters receive a windfall while he gets nothing.

[40]   It seems clear that following Trudy’s death Mr Lawton had second thoughts about the overall balance of the relationship property split and its fairness. I believe he genuinely considers, rightly or wrongly, that he is owed something by Trudy for the sacrifices he had to make, and that an even split of the relationship property was an injustice to him. I have considerable sympathy for Mr Lawton given the difficulties he has had to battle with Trudy. The problem is that the law contains a strong presumption in favour of equal sharing, and it also respects Trudy’s autonomy and property rights.

This includes her right to leave her estate, following separation, to her sisters and their families. And, as I have noted, the agreement appears to have resulted in a considerably more favourable outcome for Mr Lawton than he could expect had the relationship property been divided under a 50/50 clean break settlement.

[41]   While Mr Lawton may have felt some measure of unfairness in Trudy’s decision not to make any provision for him in her will, that must be weighed against the fact that they had separated, and he had entered into a new relationship before her death. It is not surprising then, that Trudy might favour her own immediate family ahead of Mr Lawton, his children from a former marriage, and Mr Lawton’s new partner.

[42]   Trudy’s death occurred less than two years after the agreement was signed. In my view, nothing occurred following the making of the agreement that could support a finding of serious injustice or that it had become unfair or unreasonable.

The fact that the parties wished to achieve certainty

[43]   Both parties to the agreement acknowledged that they wished to achieve certainty as to the status, ownership, and division of their property by entering into the agreement. I accept Mr Mason’s submission that the parties’ subsequent conduct was a confirmation of the agreement and an illustration of their intention to be bound by it. For example, in January 2019, Mr Lawton paid to Trudy the $160,000 settlement sum under the agreement. And in April 2019, Grant and Trudy obtained a consent order in the Family Court to give effect to the division of Grant’s superannuation. That was within six-months of the agreement and, as Mr Mason put to Mr Lawton, is inconsistent with his claim in this proceeding that he considered the agreement gave rise to a serious injustice at the time he made it. This factor also points away from serious injustice.

Any other relevant matters

[44]Mr Paine did not raise any further matters that might point to serious injustice.

Conclusion on first issue

[45]   I accept that the circumstances surrounding the separation were difficult for Mr Lawton. And I can understand why, after many years of commitment to Trudy, and the sacrifices he made for their relationship, Mr Lawton might feel a sense of unfairness in the way Trudy organised her will. Ultimately, however, following independent legal advice he made an informed decision to proceed with a full, final and binding division of the relationship property. That division was in my view already very favourable to him.

[46]   Overall, in what were sad and difficult circumstances, the agreement struck a practical and very fair division of relationship property in a way that would best meet the parties’ particular needs. Grant was able to keep the physical assets from the relationship, which would be of less use to Trudy. And she structured the division in a way that assisted Grant to retain those assets and reap the rewards of property ownership in a rapidly rising market.

[47]   For the foregoing reasons, I am not satisfied that giving effect to the agreement would cause serious injustice. I decline to set it aside. It follows that Mr Lawton is liable to comply with the terms of the agreement, including the obligation in cl 2.13 to pay to the executors half of the insurance proceeds. Judgment is therefore entered against Mr Lawton in favour of the executors in the sum of $216,625.

[48]   As a result, it is unnecessary to undertake a fresh division of relationship property. However, I observe that had I done so, Grant would have found himself in a considerably worse position than he currently enjoys. That is because any division today would need to take into account the capital gains over the Derby Road and Bunnythorpe properties, as well as Mr Lawton’s superannuation fund, which all appear to have benefited from significant market increases in recent years.14

[49]   A further question arises as to whether Mr Lawton must also pay interest. While the executors’ statement of claim sought interest “pursuant to s 10 of the Interest

14 The hypothetical exercise of undertaking a fresh division of property solidifies my view that the agreement was, if anything, favourable to Mr Lawton, and reinforces my conclusion that there would be no serious justice arising if it were given effect.

on Money Claims Act 2016”, it did not specify a commencement date as required by s 25(1) of that Act. Unless the statement of claim is amended to include a start date, interest is not payable.15 Accordingly, the executors sought, by interlocutory application, to amend their pleadings to include interest on their claim for the period from 29 September 2020—the date Mr Lawton received the life insurance proceeds— until the date of payment. Mr Lawton opposes the application.

[50]   Given the statement of claim always sought interest, I consider there would be no prejudice to Mr Lawton in allowing the proposed amendment. As Mr Mason pointed out, s 25(4) of Interest on Money Claims Act apparently contemplates the Court accepting amended pleadings so that they comply with the Act’s technical requirements:

Nothing in this section prevents a court from making an award of interest where the court has at any time made or accepted an amendment to a statement or notice of claim or counterclaim in accordance with the rules of court and where that statement or notice of claim or counterclaim, as amended, complies with the requirements in subsections (1) and (2).

[51]   I am satisfied that allowing the proposed amendment is appropriate in the circumstances, and I grant the application accordingly. I also award interest to the executors under s 10 of the Interest on Money Claims Act 2016 from 29 September 2020. For the avoidance of doubt, the initial amount in terms of s 11(1) of the Act is

$215,625.

Second issue: provision under the Family Protection Act 1955?

[52]   I turn now to Mr Lawton’s claim under the Family Protection Act. Under s 4(1) of the Act, the Court has a discretion to order provision from Trudy’s estate if satisfied that she did not make adequate provision for Mr Lawton’s proper maintenance, as he sought. Mr Lawton must show that Trudy breached a moral obligation. The question is whether a wise and just testator would consider that further provision was required to meet that obligation.

15     Remnant v Mills [2020] NZHC 3414 [90].

[53]   In Vincent v Lewis, Randerson J summarised the relevant principles as follows:16

(a)The test is whether, objectively considered, there has been a breach of moral duty by [the testatrix] judged by the standards of a wise and just testatrix.

(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 the deceased’s bounty 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 that it is unfair.

The submissions

[54]   Mr Paine argued that Trudy had a duty to provide for Grant’s proper maintenance on her death. He relied largely on the same arguments advanced under his challenge to the agreement to support a claim of a breach of moral obligation. In short, given the almost two decades of physical, emotional and financial support that Grant provided to Trudy, and the toll that took both on him and their relationship, Trudy really ought to have recognised Grant’s commitment to her above and beyond what might ordinarily be expected between husband and wife. Even after their separation, Mr Lawton said he continued to play a role in Trudy’s life, including the provision of assistance with basic needs. It was a breach of a moral duty not to leave any of her half-share of the relationship property to Mr Lawton or her step-children.

16     Vincent v Lewis (2006) 25 FRNZ 714, [2006] NZFLR 812 (HC) at [81], cited with approval by the Court of Appeal in O’Neill v O’Neill [2021] NZCA 585 at [16].

Mr Paine also submitted that Trudy would not have wanted her sisters to benefit from her death.

[55]   Mr Lawton can be thankful for the responsible way in which Mr Mason advanced the case for the respondents, it being counsel for the respondents who brought to my attention case law clearly relevant to Mr Lawton’s claim. In particular, Mr Mason referred to decisions of this Court in both Re Hilton and Farquharson v Farquharson.17 In essence, both judgments recognise that there may be a remaining moral obligation owed by a deceased spouse to their former spouse which might be left unaddressed by a relationship property division. In Re Hilton, Anderson J observed:18

A moral obligation as a testator cannot be automatically satisfied by having previously met an irresistible legal obligation as a spouse. Upon a property division spouses take not by dint of charity or bounty but by right, and moral obligations are not in issue. Some moral obligations or entitlements capable of being met by monetary compensation can remain unsatisfied even though the Matrimonial Property Act 1976 regime may have been punctiliously applied because the benefit or value of the obligation or entitlement, whether economic or moral, does not fall into or cannot be adequately satisfied by the pool of matrimonial property available for division.

[56]   Looking closely at the underlying facts and outcomes in those cases, Mr Mason submitted that the present case is distinguishable in that Trudy went above and beyond irresistible legal obligations. Mr Lawton was generously left with a half-share of Trudy’s insurance policy, a mortgage free home, two vehicles, a complete interest in his own superannuation for retirement, and a comfortable income. He did not need maintenance or support. Moreover, Mr Lawton had moved on and started a new relationship by the time of Trudy’s death. All of that must sound in the wise and just testator being satisfied that there was no further obligation on Trudy to provide for him.

[57]   Mr Mason also drew the Court’s attention to an odd twist of statutory crafting in the Family Protection Act. While separated de facto partners cease to be able to maintain a claim, separated spouses who have not formalised their separation through a creed of divorce remain eligible claimants under the Act. So, the present case is an

17     Re Hilton [1997] 2 NZLR 734; and Farquharson v Farquharson [2020] NZHC 222.

18     At 349.

illustration of an odd and seemingly unfair discrepancy in treatment between de facto and married partners.

[58]   More fundamentally, in Mr Mason’s submission, where separating spouses have seen fit to divide their relationship property, it would be inappropriate for the Court to undermine the certainty achieved by exercising a broad discretion under the Family Protection Act.

Consideration

[59]   This is the aspect of the claim which has caused me the greatest difficulty. On balance, however, I am not persuaded that there was a continuing moral obligation on Trudy to provide for Mr Lawton.

[60]   Mr Mason’s submission that the drafting of the Act creates an arbitrary and unfair distinction between de facto and married couples was well made. There is merit in the concern that preserving the ability of separated (but still legally married) spouses to claim under the Family Protection Act may operate unfairly and undermine the certainty of the relationship property regime. However, the Act preserves the right of spouses as claimants, and the courts have proceeded on that basis, so it is perhaps a question better answered in another case. For my part, it is unclear why Parliament would have meant to treat de facto partners—who cease to have any claim to an ongoing moral obligation on separation—differently from spouses or civil union partners—who remain subject to an enforceable moral obligation for as long as they remain legally married, regardless of the length of their separation.19

[61]   In my view, the better approach is to treat any relationship property agreement, and the terms and circumstances of separation, as relevant considerations when determining the existence and extent of any further moral duty. That appears to have been the approach in Farquharson, where the Court held that the deceased’s moral duty to make testamentary provision for his former wife following their separation and

19 If as in the present case it is more than two years after separation, so a dissolution of the marriage could have been sought by either party at any stage, it seems an odd legal outcome that those who do not regularise their marital status remain subject to a moral obligation (or at least an enforceable one), but those who do, do not.

division of property “had been effectively extinguished”.20 Similarly, the courts have treated elections to apply for division under the Property (Relationships) Act as a relevant factor in assessing family protection claims.21

[62]   The courts have often found a moral obligation arising as a result of assistance or support provided to a spouse during periods of ill health. Such duties have also been found necessary to recognise more general aspects of relationships such as love and support provided in the course of a long relationship.22 The assessment of whether there is a continuing moral obligation to a separated spouse is a fact-specific inquiry. Relevant factors in that assessment might include the size of the estate, the duration of the marriage, contributions or sacrifices by the surviving spouse to the deceased’s assets or to the relationship, competing moral claims, estrangement, changing circumstances after death, the degree of ongoing contact and support, and the surviving spouse’s circumstances, including financial needs.23

[63]   Following separation, Mr Lawton was left in a relatively comfortable position. He moved on with his life, started a new relationship, and continued in a high- functioning and relatively well-paid professional role with the Police. In short, he was not in need of maintenance or support. And, at least before he purchased the Bunnythorpe property, Mr Lawton held the family home debt free, with every reason to look forward to a long and happy retirement.

20   Farquharson v Farquharson, above n 17, at [56]. Albeit, that case concerned an application by the deceased’s son, and the observation about the deceased’s moral duty (or lack thereof) to his former wife was relevant in the sense of comparing competing moral obligations.

21 Nicola Peart and others Family Protection “Claims against estate of deceased person for maintenance” (online looseleaf ed, Westlaw NZ) at [FP4.07(3)(d)], citing Wylie v Wylie (2003) 23 FRNZ 156 (CA); Re Flathaug (2002) 22 FRNZ 430 (HC); Holland v Knapp [2004] NZFLR 1135 (FC); EM v SL [2005] NZFLR 281 (FC); Crotty v Williams FC Hamilton FAM-2002-19-1082, 29 August 2005; Williams v Crotty HC Hamilton CIV-2005-419-1292, 2 December 2005; B v Adams (2005) 25 FRNZ 778 (FC); and VS v LJS FC Invercargill FAM-2007-025-749, 7 March 2008.

22 Re Good; Barry v Corbett FC Christchurch FP009/005/00, 29 July 2000; Re Wilson [1973] 2 NZLR 359 (CA) at 361; Dymond v Upritchard [2020] NZHC 3274; More v More [2019] NZHC 2889; Re Colville FC Whakatane FP087/199/02, 9 June 2004; Re Blank HC Christchurch M585/91, 4 March 1993; Moon v Public Trust (as trustee and executor of Estate of Doyle) [2018] NZHC 1169, [2018] NZFLR 491; and Rendle v Ford [2004] NZFLR 66, (2003) 23 FRNZ 256 (FC).

23 Family Protection “Claims against estate of deceased person for maintenance”, above n 21; and  Bill Patterson Law of Family Protection and Testamentary Promises (5th ed, 2021) at [8.8].

[64]   I consider the wise and just testator would be satisfied that Trudy had discharged any moral obligation to Mr Lawton through the terms of their agreement. This is illustrated by the disparity in their relative financial positions at the time of her death:

Grant

Derby Street property

(Less mortgage and $160,000 to Trudy)

Police superannuation24 (Less Trudy’s entitlement) Two motor vehicles

Half-share insurance

Total capital for Grant

$575,000

-$190,000

$300,000

-$116,593

$35,000

$215,000

$818,407

Trudy

Settlement sum
Entitlement to police superannuation
KiwiSaver
Half-share insurance

Total capital for Trudy

25$160,000

$116,593
$12,818
$215,000

$504,411

[65]   These calculations cannot be scientific based on the available evidence, but they suggest that within two years of separation Grant had received, due to the favourable provisions of the agreement, capital over and above Trudy’s share of more than $300,000. In my view the inescapable conclusion is that the disparity that existed both at the date of the agreement and on Trudy’s death was her acknowledgment of Grant’s support for her, and represented her contribution to his financial security in the future.

[66]   And while Mr Paine suggested that Trudy would not want her sisters to benefit from her death, that is simply not borne out by the facts, which show that Trudy settled her new will leaving her estate to her sisters on the same day the agreement was signed. There can be no doubt as to her intention.

24  Trudy died in July 2020. Grant’s superannuation was valued at $380,000 as at 7 May 2022. For   the purpose of this calculation I have made a notional discount of $80,000 to reflect capital appreciation in the intervening time.

25  The evidence suggests that by Trudy’s death she had had considerable recourse to the $160,000   she received under the agreement, so the adopted figure in this calculation is favourable to Mr Lawton.

[67]   I am reinforced in my conclusion because, in substance if not form, Mr Paine is really advancing a testamentary promises claim under guise of the Family Protection Act. Mr Lawton provided decades of love and support to Trudy not because she promised to make financial provision for him on her death, but because he was a loving and committed husband. He provided her with support for as long as he could. Ultimately, he and Trudy decided that they needed to move on and separate financially and as a household in 2017. Mr Lawton should be recognised for the support and commitment he made to Trudy over all those years in what were no doubt very trying circumstances. But I cannot conclude that is a sound basis on which to engage the carefully defined statutory powers under the Family Protection Act. As Mr Mason noted, mere unfairness is not sufficient to establish a breach of moral obligation. A duty is required. Given the division of relationship wealth under the agreement, and the way that division favoured Mr Lawton’s interests ahead of Trudy’s, I am not satisfied she had any continuing moral obligation to Grant that remained unfulfilled.

[68]   In any case, had I considered it appropriate to make an accommodation for Grant from Trudy’s estate, the amount would have been very modest. I have found he was not entitled to claim an obligation to be maintained. At best his would have been a “belonging” claim, or one acknowledging their long relationship.26 The courts have generally taken a conservative approach when determining belonging claims under the Family Protection Act. Although the appropriate methodology and figure will always depend on the circumstances, decisions of the Court of Appeal and this Court suggest that awards will often be in the realm of 10 per cent of the value of an estate.27

Conclusion and result

[69]   Mr Lawton’s claim to set aside the agreement is dismissed. So too is his claim under the Family Protection Act.

26 Williams v Aucutt [2000] 2 NZLR 479; (2000) 19 FRNZ 260 (CA) at [52].

27 Family Protection “Claims against estate of deceased person for maintenance”, above n 21, at [FP4.04(1)(a)], although 10 per cent must not be treated as the starting point: Scott v Garnham [2021] NZHC592 at [35]–[39].

[70]   Judgment is entered against Mr Lawton in the sum of $215,625. Interest is awarded on that sum in accordance with [51] above from 29 September 2020 until the date of payment.

[71]   In addition, Mr Lawton would also appear to be liable for the executors’ reasonable solicitor-client costs pursuant to cl 2.15 of the agreement. If costs cannot be settled between the parties, memoranda may be filed and I will determine the issue on the papers.

[72]Leave to apply is reserved.

Isac J

Solicitors

Paul Lyall, Palmerston North for the Plaintiff