Talbot v Talbot
[2017] NZCA 507
•10 November 2017
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA557/2016 [2017] NZCA 507 |
| BETWEEN | JILLIAN KATE TALBOT |
| AND | GRAHAM EDWIN LAWRENCE TALBOT (AS EXECUTOR FOR THE WILL OF EDWIN KELLAND TALBOT) GRAHAM EDWIN LAWRENCE TALBOT (AS EXECUTOR FOR THE WILL OF PAMELA LISBETH TALBOT) |
| CA278/2017 | |
| BETWEEN | JILLIAN KATE TALBOT |
| AND | RACHEL LOUISE CASHIN |
| Hearing: | 11 October 2017 |
Court: | Gilbert, Venning and Wylie JJ |
Counsel: | P A Cowey and H C Carey for Appellant |
Judgment: | 10 November 2017 at 12.30 pm |
JUDGMENT OF THE COURT
AThe appeal in CA557/2016 is dismissed.
BThe appeal in CA278/2017 is dismissed.
CThe appellant must pay Graham Talbot costs on a band A basis and usual disbursements in CA557/2016.
DThe appellant must pay the respondent costs on a band A basis and usual disbursements in CA278/2017.
EThere is no award of costs in favour of the first and second respondents in either appeal.
____________________________________________________________________
REASONS OF THE COURT
(Given by Wylie J)
Introduction
The primary appeal (CA557/2016) is brought under the Family Protection Act 1955 (the Act). The appellant, Jillian Talbot (Jillian), seeks further provision from the estates of her late parents, Edwin Talbot (Edwin) and Pamela Talbot (Pamela).
Jillian’s application initially came before Gendall J in the High Court in Timaru. He was not persuaded that there had been any breach of moral duty by Edwin and Pamela and he dismissed the application.[1] Jillian now appeals this decision contending that it was wrong. She asserts that Gendall J adopted too narrow an approach and that he failed to consider various matters said to be relevant. She asks this Court to determine whether adequate provision was made for her proper maintenance and support and to remedy any inadequacy we find has been made out.
[1]Talbot v Talbot [2016] NZHC 2382, [2016] NZFLR 1019 [Substantive Judgment].
Graham Talbot (Graham) is Edwin and Pamela’s only son and Jillian’s older brother. He is the executor of Edwin’s and Pamela’s estates. In that capacity, he abides the decision of the Court. As a beneficiary of both estates, he is affected by Jillian’s application. In his personal capacity he opposes Jillian’s application for further provision from the estates.
Rachel Cashin (née Talbot) (Rachel) is the oldest child. She makes no claim under the Act. She has made it clear that, if Graham is ordered to repay moneys that he (and entities associated with him) owed to his parents and which were forgiven in their wills, she is not seeking any share of that repayment. She abides the decision of this Court.
The secondary appeal (CA278/2017) relates to costs. Gendall J reserved costs in the primary proceedings. The parties could not agree and Gendall J issued two separate judgments in this regard:
(a)In the first judgment, Jillian was ordered to pay the reasonable indemnity costs of the estates,[2] and costs on a 2B basis to Graham, with a 50 per cent uplift for some matters, and a 100 per cent uplift on one matter.[3] The Judge also awarded indemnity costs in favour of Rachel.[4]
(b)In the second judgment, Gendall J fixed the quantum of costs awarded.[5] There is no challenge to the quantum fixed in favour of the estates and Graham. Rachel was awarded $70,267, plus $892 in relation to the costs application, GST exclusive.[6] In a subsequent minute the Judge required Jillian to pay Rachel an additional $10,540.05 being GST on the costs Rachel had incurred.[7]
[2]Talbot v Talbot [2017] NZHC 257 [First Costs Judgment] at [23].
[3]At [43].
[4]At [53].
[5]Talbot v Talbot [2017] NZHC 832 [Second Costs Judgment].
[6]At [25].
[7]The minute is recorded in an email from the Registrar to counsel dated 8 June 2017. It does not appear to have been otherwise recorded.
Jillian appeals against the judgments insofar as they concern the award of costs to Rachel and Rachel appears to support the judgments. Graham had no interest in this appeal, and his counsel were granted leave to withdraw when we heard argument in relation to it.
Factual background
The Talbot family has been farming in the Claremont area in South Canterbury for a number of generations. The principal farm property is located in Taiko Road, Claremont. It is known as Kingsborough Farm (Kingsborough). It was purchased initially by Rachel, Graham and Jillian’s grandfather in 1915.
The grandparents had four children, two sons, Doug and Edwin, and two daughters, Margaret and Jean. In 1955 the grandfather died. He left his residuary estate, including Kingsborough, equally to Doug and Edwin, but subject to a life interest in favour of his wife. Margaret and Jean did not take any interest in the farm. Rather, they were left minor legacies.
Doug and Edwin farmed Kingsborough together. Both married. Doug and his wife, Louie, had no children. Edwin and Pamela had three children, Rachel was born in January 1972, Graham in April 1974, and Jillian in October 1976.
In 1972 Doug died. He left his residuary estate to Edwin but subject to a life interest in favour of Louie. Louie is still alive. She is in her late 90s and lives in a rest home.
The grandmother died in 1985, and the residue of the grandfather’s estate then vested equally in Doug’s estate and in Edwin.
Edwin initially settled a family trust — the EK Talbot Family Settlement Trust — and then he and Pamela completed a matrimonial property agreement allocating all assets, including land, reversionary interests, stock and plant equally between them. They then began farming in partnership. In July 1990, they also executed wills.
It is common ground that Rachel, Graham and Jillian had a happy childhood and that Edwin and Pamela were loving and supportive parents who gave all of their children the benefits of a happy upbringing and good educations.
Rachel left the family home to study in 1990. In 1992, Graham, aged 17, left school and began working on Kingsborough. Graham also undertook some farming ventures on his own account leasing land from third parties to farm ewes. In 1994 Graham joined Edwin and Pamela in partnership (the EK and PL Talbot & Son Partnership) and the three of them continued to farm Kingsborough. In 1995 Jillian left the family home, initially to travel, and then to study.
In 1998 Graham took over livestock management on Kingsborough. In the same year, he settled a family trust for the benefit of his family. The trustees of that trust, Graham and the family accountant, Brian Maxwell, purchased a separate block of land from the EK Talbot Family Settlement Trust for $265,000. The Trust loaned Graham’s trust the purchase price in full.
In July 1999 Edwin and Pamela executed new wills.
In 2002 Graham merged his individual farming interests (leased land and stock) with the EK and PL Talbot & Son Partnership’s farming business. There was no consideration paid by the partnership to Graham.
Edwin and Pamela and the children had a family discussion regarding the ultimate disposition of Kingsborough on Christmas Day in 2005. Edwin and Pamela made clear their intention to leave Kingsborough to Graham. Thereafter they had various discussions confirming and refining their intention, principally with Mr Maxwell but also with their solicitor, Richard Walton.
Valuations were obtained and in September 2006 Graham purchased the EK and PL Talbot & Son Partnership’s assets at valuation for $544,950 plus GST.[8] Graham paid part of this money from his own resources. He borrowed approximately $160,000, either from the partnership or from his parents. Also in September 2006:
(a)Graham entered into an agreement for sale and purchase with Edwin and Pamela. He agreed to purchase their half share in Kingsborough, plus a separate block of land, for a total price of $1,551,000. The purchase proceeded, and Edwin and Pamela each loaned Graham the sum of $775,500 ($1,551,000 in total).
(b)Graham repaid the EK Talbot Family Settlement Trust the sum of $265,000, being the amount paid for the land noted in [15] above. This sum was then distributed by the Trust equally between Rachel, Graham and Jillian.
(c)The EK and PL Talbot & Son Partnership was dissolved. Graham assumed full responsibility for the management of Kingsborough, with Edwin performing more minor tasks, such as tractor work, feeding lambs and helping to move stock.
(d)Edwin and Pamela executed further wills. We will refer to Pamela’s 2006 will shortly.
[8]This and subsequent purchases were completed either by a company formed by Graham and his wife, or by the trust which had been settled. Moneys loaned or gifted were loaned or gifted to the relevant associated entity. It is not necessary to complicate this judgment by detailing these entities. They were all associated with Graham and we use his name for simplicity.
Gendall J found that from about 2006 Graham and his associated interests, who were farming Kingsborough farm and nearby land, progressively repaid to Edwin and Pamela $229,125, and that Edwin and Pamela made various gifts to Graham and his associated interests to reduce the indebtedness owing to them. The gifts were made in 2007, 2008, 2009 and 2012. They amounted in total to approximately $412,000.[9] No counsel took issue with these findings before us.
[9]Substantive Judgment, above 1, at [12].
Edwin died on 16 November 2014. Probate of his estate was granted to Pamela and to Graham. Pamela died on 11 May 2015 and probate of her estate was granted to Graham.
Edwin’s and Pamela’s wills
As noted, both Edwin and Pamela made wills in 1990, 1999, 2006, as well as in 2012. Pamela’s 1990, 1999 and 2006 wills and both Edwin’s and Pamela’s 2012 wills are before this Court.
The circumstances in 1990 were very different from those which applied as at the dates of death and there is nothing relevant to be gleaned from Pamela’s 1990 will.
By 1999 Edwin, Pamela and Graham were farming in partnership. Both Rachel and Jillian had left home. Relevantly, Pamela bequeathed her share in the partnership business to Edwin, if he survived her, but if not, then to Graham. She left the residue of her estate on trust, with the income to Edwin, her children and grandchildren. On Edwin’s death, she left her interest in Kingsborough (including her interest in the remainder under Doug’s estate, which was then and still is subject to the life interest in favour of Louie) to Graham. The remainder of the residuary estate was to go to Rachel and Jillian as tenants in common in equal shares.
The next wills were executed in September 2006. By this stage, Graham owned all the assets of the partnership and half the farm. He was indebted to his parents and to the partnership. Pamela left the residue of her estate on trust, with the income to Edwin, her children and her grandchildren. On Edwin’s death, she left her interest in Kingsborough (including her interest in the remainder under Doug’s estate) to Graham. She further directed that Graham was to be credited all moneys owed by him (or his associated entities) to her, less $200,000. Graham was to have three years to repay the $200,000 to her estate and it was to be interest-free during this period. The remainder of her residuary estate (including the $200,000 to be repaid by Graham) she left to Rachel and Jillian as tenants in common in equal shares.
The operative wills, which are challenged by Jillian, were signed on 5 November 2012. They are mirror wills. Both Pamela and Edwin left specific assets to each other. The residue of their respective estates was left on trust, with the income to provide for the maintenance of the survivor, their children and their grandchildren, during the survivor’s lifetime. On the survivor’s death, they directed their trustees to hold their residuary estates on trust. Graham was to get their interest in Kingsborough (derived through Doug’s estate). Graham was also to be credited the aggregate amount of all moneys owing by him (or his associated entities) less $400,000. He was given three years to repay the $400,000 to the estate of the survivor, and that amount was to be interest-free during that period. The remainder of the residuary estates (including the $400,000 to be repaid by Graham) was left to Rachel and Jillian as tenants in common in equal shares.
We agree with Gendall J that Edwin and Pamela’s testamentary intentions were clear from an early stage.[10] It was their intention from at least 1999, and probably earlier, that Graham, as the only child who had shown any interest in farming Kingsborough, should receive the family farm, and that Rachel and Jillian should share equally in the remainder of their estates. The remainder, from 2006 onwards, was to include a cash contribution from Graham by way of partial repayment of the debt he owed.
[10]Substantive Judgment, above n 1, at [62].
Gendall J was also satisfied that the evidence showed clearly that Edwin and Pamela made proactive choices to grow their off-farm assets for the benefit of Rachel and Jillian, and that they did so with the benefit of professional advice.[11] He found that over the years considerable thought was given by Edwin and Pamela as to how they could provide appropriately for their daughters, while ensuring their paramount intention to secure the family farm for Graham.[12]
[11]At [64].
[12]At [63].
No party took issue with these findings, and again we accept them.
Value of the estates
The combined estates of Edwin and Pamela as at the date of death comprised:
(a)a one half share in Kingsborough, derived through Doug’s estate and subject to the life interest in favour of Louie;
(b)a leasehold bach;
(c)various investments;
(d)household chattels; and
(e)the balance of the debt owing by Graham and various entities associated with him — agreed to be $886,875 — less the sum gifted to Graham by his parents’ wills — $486,875 — leaving a net balance of $400,000.
Both Graham and Jillian obtained valuations of the farm. There was a difference of some $600,000 between the respective valuations and counsel filed an agreed statement of facts setting out the bases for that difference. Gendall J adopted a midway point, and counsel took the same approach in their respective submissions before us. Adopting that midway point, Graham receives approximately $4.4 million, or 67 per cent share of his parents’ estates. Jillian and Rachel each receive approximately $1,056,000, or a 16.5 per cent share of the estates.[13]
[13]At [24].
A partial distribution has been made. To date both Rachel and Jillian have received $621,338.99. Jillian has taken the family bach at an agreed value. There are a number of assets forming part of the residuary estates still to be distributed. The final value of some of those assets is yet to be determined, and this will impact on the final distribution. Mr Cowey, appearing for Jillian, submitted that the final payment to Jillian under the wills is likely to be approximately $1,013,000. We do not consider that this relatively minor difference from the figure used by Gendall J impacts on the matters we are required to consider.
The primary appeal — CA557/2016
The issues
The agreed issues for determination by the Court in appeal CA557/2016 are as follows:
(a)Is the question of whether adequate provision has been made for the proper maintenance and support of Jillian an exercise of a discretion, or an evaluative judgement involving issues of fact and degree?
(b)Was Gendall J correct when he determined that adequate provision had been made for Jillian’s proper maintenance and support?
(c)In the event the appeal is allowed, what ought to be the appropriate quantum and timing of any additional payment(s) to Jillian?
Approach to this appeal
Ms Ritchie, appearing with Mr Ormsby for Graham, contended that the proper approach to this appeal was to treat Gendall J’s judgment as being a decision made in the exercise of a discretion, requiring Jillian to establish an error of law or principle, the taking into account of an irrelevant consideration, a failure to take into account a relevant consideration, or that the decision was plainly wrong.
Mr Cowey for Jillian argued that whether or not there was a breach of moral duty involves an issue of fact and degree, which falls to be considered afresh on appeal, pursuant to the principles discussed by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar but that the appropriate remedy, in the event that a breach is found, involves the exercise of a discretion.[14]
[14]Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
Various authorities were cited to us, and it was submitted that there was some conflict in the decisions. We accept that Judges have, on occasion, suggested that decisions under the Act are essentially discretionary, but our reading of these authorities suggests that this comment has primarily been made where issues of quantum have been in issue on appeal.[15] Other judges, particularly in the High Court, have taken the view that the issue of whether or not there has been a breach of moral duty falls to be determined as a general appeal, pursuant to Austin, Nichols.[16]
[15]Fisher v Kirby [2012] NZCA 310, [2013] NZFLR 463 at [120] and [124]; Little v Angus [1981] 1 NZLR 126 (CA) at 127.
[16]JEW v TAB [2012] NZFLR 193 (HC) at [36]; Bones v Wright [2013] NZHC 1922 at [39]–[40]; Brain v Harwood [2014] NZHC 1092 at [22]–[23].
In our judgment the position is straightforward. Whether or not there has been a breach of the moral duty set out in s 4 of the Act is a threshold issue, turning on matters of law, fact and degree. Appeals involving this threshold issue fall to be determined by reference to the approach set out in Austin, Nichols. If there is a breach of moral duty found, then what remedy should be granted by the court below is an issue involving the exercise of a discretion, and an appellate court will only intervene if there has been an error of law or principle, if the Judge below took into account an irrelevant consideration or failed to take into account a relevant consideration, or if the decision below is plainly wrong.[17]
Adequate provision for proper maintenance and support of Jillian?
[17]Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].
Section 4 of the Act permits a claimant to make an application to the court for it to exercise its discretion to intervene in relation to a deceased’s estate if “adequate provision” is not available for the “proper maintenance and support” of the claimant. An application under s 4 can be made by any of the various persons listed in s 3(1) of the Act, including by the children of the deceased.
The onus is on the claimant to prove that the deceased was in breach of his or her moral duty, as at the date of death, by failing to make adequate provision for the claimant’s proper maintenance and support.[18]
[18]Williams v Aucutt [2000] 2 NZLR 479 (CA) at [68].
This Court in Little v Angus noted that 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 testator or testatrix.[19] “Moral duty” is a composite expression which is not restricted to mere financial need but includes moral and ethical considerations.[20] “Proper” also means something different to “adequate”, and the amount to be provided is not to be measured solely by the need for maintenance which would be the case if the Court were concerned solely with adequacy.[21]
[19]Little v Angus, above n 15, at 127.
[20]Vincent v Lewis [2006] NZFLR 812 (HC) at [81(b)].
[21]Bosch v Perpetual Trustee Co Ltd [1938] AC 463 (PC) at 476 and 478.
There are three leading decisions of this Court in relation to whether a testator or testatrix has breached a moral duty to his or her adult children. They are Williams v Aucutt,[22] Auckland City Mission v Brown,[23] and Henry v Henry.[24] The latter two decisions affirmed the approach set out in Williams v Aucutt.
[22]Williams v Aucutt, above n 18.
[23]Auckland City Mission v Brown [2002] 2 NZLR 650 (CA).
[24]Henry v Henry [2007] NZCA 42, [2007] NZFLR 640.
In Williams v Aucutt this Court said:
[52] … The test is whether adequate provision has been made for the proper maintenance and support of the claimant. “Support” is an additional and wider term than “maintenance”. In using the composite expression, and requiring “proper” maintenance and support, the legislation recognises that a broader approach is required and the authorities referred to establish that moral and ethical considerations are to be taken into account in determining the scope of the duty. “Support” is used in its wider dictionary sense of “sustaining, providing comfort”. A child’s path through life is supported not simply by financial provision to meet economic needs and contingencies but also by recognition of belonging to the family and of having been an important part of the overall life of the deceased. Just what provision will constitute proper support in this latter respect is a matter of judgment in all the circumstances of the particular case. It may take the form of lifetime gifts or a bequest of family possessions precious to its members and often part of the family history. And where there is no economic need it may also be met by a legacy of a moderate amount. On the other hand, where the estate comprises the accumulation of the family assets and is more than sufficient to meet other needs, provision so small as to leave a justifiable sense of exclusion from participation in the family estate might not amount to proper support for a family member.
(Emphasis added.)
The assessment required involves several interrelated factors, including the merits of the claim, the applicant’s circumstances as at the date of death, past relations between the testator and the applicant, the size of the estate, and the strength of other claims.[25] Mere unfairness is not sufficient to warrant disturbing a testamentary disposition[26] and there is no presumption of equality between the children of a deceased.[27]
[25]See In re Harrison (Deceased), Thomson v Harrison[1962] NZLR 6 (SC/CA) at 13; Williams v Aucutt, above n 18, at [39]; Ormsby v Van Selm [2015] NZHC 2822 at [30].
[26]Vincent v Lewis, above n 20, at [81(e)]; Williams v Aucutt, above n 18, at [70].
[27]Williams v Aucutt, above n 18, at [70]; Re Phelps CA277/93, 2 November 1994 at 5.
Where a breach of moral duty is established, the courts should do no more than is necessary to repair the breach by making adequate provision for the applicant’s proper maintenance and support.[28] Beyond that, the deceased’s testamentary intentions should be honoured, even if the individual judge dealing with the application might have seen the matters differently.[29]
[28]Fisher v Kirby, above n 15, at [119].
[29]Williams v Aucutt, above n 18, at [70].
Against this background, we turn to consider the submissions made on behalf of Jillian. We start by considering the errors Jillian suggests were made by Gendall J. We then turn to the core issue — did Edwin and Pamela breach the moral duty they owed to Jillian?
Did the trial Judge err in his approach to the matter?
First, Mr Cowey submitted that Gendall J failed to recognise that Edwin and Pamela’s combined estates were large.
We do not consider there is anything in this criticism. Gendall J addressed the assets in the combined estates, and noted the valuations that had been obtained. The Judge observed that these were “relatively large estates” and noted they were together worth approximately $6.5 million.[30]
[30]Substantive Judgment, above n 1, at [76].
Secondly, it was argued that the Judge failed to take into account what Mr Cowey referred to as the “accumulated family assets”. Mr Cowey argued that these accumulated assets totalled approximately $9.1 to $10.3 million, and that this value was a relevant circumstance to the court’s enquiry.
We do not accept this argument. The $9.1 to $10.3 million that Jillian suggests is the accumulated value of family assets is based on a valuation obtained a year after Pamela’s death and it ignores some but not all of the inter vivos transactions. The Act focuses on the estate of the deceased as at the date of death.[31] The key issue is whether or not adequate provision has been made from the estate for the proper maintenance and support of a person for whom or on whose behalf application is made. We do not consider that a valuation obtained a year after Edwin’s and Pamela’s deaths, of various assets some of which are no longer in their estates, has any relevance to the issue Gendall J or we are required to determine.
[31]Family Protection Act 1955, ss 3(1) and 4(1).
Thirdly, it was argued that Edwin and Pamela’s inter vivos support for Graham was a relevant circumstance.
Inter vivos support given to family members can be relevant in certain circumstances, for example, where the estate has been depleted by the making of inter vivos gifts to such an extent that the testator or testatrix cannot meet his or her moral duty.[32]
[32]See, for example, Ashworth v Lambie [2012] NZHC 1110 at [54]; Re Howse HC Auckland A1093/84, 26 September 1990.
It cannot, however, be said in the present case that Edwin and Pamela so depleted their estates that they could not meet their moral duty to Jillian. Rather the evidence at trial established that the gifts they made in partial reduction of Graham’s debts were seriously considered and that they took professional advice on the matter. On the evidence, the gifts made were carefully assessed in light of the need to retain sufficient funds for Edwin and Pamela to live on, to provide for Jillian and Rachel, and to protect Graham’s ability to run the farm and service a mortgage to fund the ultimate payment required to be made to help pay out Rachel and Jillian. An answer given by Mr Walton, Edwin and Pamela’s solicitor, to a question posed to him in cross-examination bears this out. The following exchange occurred:
Q. Are you satisfied that they understood the effect of what they were doing and the financial implications in that the girls weren’t treated equally?
A. They had three priorities in my assessment in view and the first was to make sure that they themselves did not cut themselves short, as we have all had experience is sometimes people go overboard with estate planning, succession planning and find that they themselves are in position where they are short. So the first step was to ensure that there were mechanisms in place to ensure they were adequately and effectively provided for for the rest of their lives. Subject to that, their absolute determination was to see the legacy, the Kingsborough legacy retained and held by Graham who had proved by that stage that he was a worthy successor for the Talbot farming property through his work and effort. In, in fact he’d even enhanced the, the farming operation and it was subject to that that provision was to be made for the two girls and that was to be made equally and it was their awareness of the vicissitudes of farming, the good seasons, the bad seasons, it was their awareness that farming was not necessarily highly income productive but capital-intensive that made them wanting to, to ensure that no excess debt had to be raised by Graham which would affect the viability of the farming operation.
Further, the evidence established that Graham made regular payments to his parents in reduction of the debt owing to them. This permitted Edwin and Pamela to put money aside for Jillian and Rachel. Pamela noted in an email sent to Mr Maxwell in October 2012 that Graham was not only paying the accounts but that he was also paying them $1,500 fortnightly. She commented that without these regular payments from Graham, they would not have been able to continue their saving programme in order to provide for their daughters.
Also relevant to this issue are Graham’s contributions to the value of the estates over the years. This factor would need to be weighed in the balance if the inter vivos gifts made in this case are to be taken into consideration. The evidence at trial established that Graham worked long hours on Kingsborough, that he took minimal drawings, and that it is likely that the farm would have had to have been sold if Graham had not left school to work on it. Graham also introduced into the partnership his personal farming interests at no cost to his parents. He took over the farm management and financial responsibility of Kingsborough from 2006 onwards. It was his estimate that he contributed approximately $1.4 million towards improvements on the farm, and Jillian accepted under cross-examination that Graham had made a significant investment into the farm. It was Rachel’s evidence that at the Christmas 2005 family meeting, Edwin and Pamela made it clear that they wanted to reward Graham’s hard work.
Gendall J was aware of and referred to all of these matters.[33] He did not, however, agree that in the circumstances of this case the inter vivos gifts to Graham were a critical factor in assessing Jillian’s application.[34] We agree. Inequality between siblings does not justify the Court’s intervention and it was not for Graham to defend his parents’ decision to compensate him for the sacrifices he made or, as a beneficiary, to justify the share in their estates which he has been given.[35]
[33]Substantive Judgment, above n 1, at [30], [36] and [47] — Graham’s contributions; at [12], [17] and [73] — inter vivos gifts; and at [78] — Graham’s fortnightly payments.
[34]At [82].
[35]Williams v Aucutt, above n 18, at [68]; Auckland City Mission v Brown, above n 23, at [39].
Mr Cowey next argued that Gendall J erred in his approach to the key issue of what constituted proper support for Jillian by focusing on her financial circumstances in isolation from other relevant considerations.
Again, we do not accept this criticism of the judgment.
Initially, Jillian’s case was premised on the submission that Edwin and Pamela set out to achieve equality between their three children. As the case moved to trial, it became clear that that had never been Edwin and Pamela’s intention, and Jillian then changed tack. She then proceeded on the basis of her alleged financial need. In that context, Gendall J did analyse, albeit relatively briefly, Jillian’s personal circumstances.
It was clear that Jillian has significant personal assets and income earning potential. She does not own her own home. Rather she, her partner, and their children, live in a rented villa. Her partner is, however, independently wealthy. In cross-examination, Jillian acknowledged that she and her family do have a comfortable lifestyle. The evidence clearly established that she was in a financially stable position, and that she had an established ability to support herself.[36]
[36]Substantive Judgment, above n 1, at [67].
At the time of the hearing in the High Court, Jillian’s financial position was relevant. She had put it in issue, and there is no basis for the assertion that Gendall J focussed on her personal circumstances to the exclusion of other relevant factors. A plain reading of the judgment makes it clear that he did not do so.
We now turn to consider the primary issue, namely whether or not Edwin and Pamela fulfilled their moral duty to provide proper maintenance and support for Jillian, by leaving her a legacy of just over $1 million in their wills.
The provision made for Jillian
We agree with Gendall J that it is hard to see how, in the circumstances prevailing in this case, an inheritance of just over $1 million is insufficient to adequately provide for Jillian’s proper maintenance and support.[37]
[37]At [69] and [72].
We note Jillian’s evidence, when cross-examined, that the sum she is to receive was “significantly more” than the sum she had estimated in her emails to her mother as to her likely inheritance. She acknowledged that the likely distribution to her was a significant sum of money, and that her mother would have thought that it would be “okay”.
This was a large estate, but Jillian was not in economic need. Proper maintenance and support could be provided for Jillian by a legacy of a moderate amount. In our judgment, a sum a little in excess of $1 million is, on any objective assessment, and at the least, a moderate amount. It is not provision so small as to leave a justifiable sense of exclusion from participation in the family estate.
Jillian is receiving approximately 16.5 per cent of her parents’ estate as at the date of death. This Court in Williams v Aucutt referred to a survey carried out by Nicola Peart, which considered 235 cases brought by children under the Act between 1985 and 1994.[38] That survey showed that in larger estates, where the testator is able to satisfy all moral claims owed, the courts have generally awarded between 12.5 and 20 per cent of the estate to a dutiful child not in financial need.[39] The provision of a 16.5 per cent share of the estates to Jillian falls well within the range of awards considered appropriate by the courts in such cases.
[38]Nicola S Peart “Awards for children under the Family Protection Act” (1995) 1 BFLJ 224.
[39]At 228.
In our judgment, the provision made for Jillian was adequate to provide for her proper maintenance and support, and there can be no realistic argument to the contrary.
Nor do we consider that Edwin and Pamela failed to recognise Jillian as belonging to the family.
The evidence at trial was that both Edwin and Pamela were aware of the claims of their daughters to participate in their estates. They discussed the issue with Mr Maxwell and Mr Walton. They made provision for their daughters in their earlier wills. They required Graham to partially repay the debt owing by him to help provide for the daughters. They were also aware of the need to maximise off-farm assets which they would pass onto their daughters. As Gendall J noted, Pamela was widely regarded as a canny and clever investor and she worked hard to increase the value of off-farm assets.[40]
[40]Substantive Judgment, above n 1, at [78].
As we noted above at [32], Jillian has taken the family bach by way of partial distribution. While there was no evidence relevant to the significance of that bach to the family, we suspect that an asset of that kind might well have a special place in the family’s life. Some support for this view can be found in the fact that Jillian took it as part of her share in the estates.
We consider that Jillian has not been excluded from the family, and that appropriate recognition has been given to her as a dutiful and loving daughter.
The wills
Mr Cowey emphasised that Jillian’s claim is not about inequality, and before us, Jillian was seeking only an order that Graham should be directed to pay the whole of the outstanding debt, by regular fortnightly instalments of $1,500. It was argued that such alteration to Edwin’s and Pamela’s wills, to require repayment of the total debt as at the date of death, would not impose an undue financial burden on Graham and would make adequate provision for Jillian’s proper maintenance and support, and would mean that she has not been excluded from participation in the family estate.
There is force in Mr Ormsby’s submission that Jillian’s appeal ultimately challenges the value of the debt forgiveness set out in Edwin’s and Pamela’s respective wills.
Were the Court to accede to Jillian’s request, it would be tinkering with the relevant provisions in the wills. This is not a case where the testamentary intentions of the deceased are in doubt. We have referred above to the earlier wills. It is clear that it was their primary intention from an early stage to ensure that the farm remained in the family, while providing for their daughters. To this end the wills from 2006 onwards made provision for the daughters. That provision increased as circumstances changed.
Both Edwin and Pamela considered that the provision they had made for Rachel and Jillian was appropriate. Mr Maxwell gave evidence that he spoke to Edwin and Pamela about the appropriate provision for Rachel and Jillian in the 2006 wills, and that they were “quite happy at that stage … on what values they had then that their girls were adequately provided for”. He also gave evidence that both Edwin and Pamela thought “pretty carefully” about the provision they were making for Rachel and Jillian under both the 2006 and 2012 wills. Similarly, Mr Walton gave evidence that Edwin and Pamela understood their circumstances, and were clear in their testamentary intentions. He said that at the time of making the 2006 wills, the details were gone into in considerable detail, and that the transfer of the farm assets and the half share in the farm and completion of the wills in 2006 evolved over a period of some 15 to 18 months after discussions.
Notwithstanding the professional advice received, it is also clear from file notes and draft wills produced in evidence that Edwin and Pamela made their own decisions as to the appropriate repayment required from Graham. They placed considerable importance on minimising the debt burden Graham would face, while at the same time acknowledging Rachel and Jillian’s respective claims against their bounty.
As this Court noted in Williams v Aucutt, the court’s power under the Act does not extend to rewriting a will, and testators remain at liberty to do what they like with their assets and to treat their children differently.[41]
[41]Williams v Aucutt, above n 18, at [70].
There is nothing in the circumstances of this case requiring us to depart from this well-settled approach.
Result — CA557/2016
For all of the above reasons, we have concluded that there has been no breach of duty by either Edwin or Pamela to Jillian, and that they made adequate provision for Jillian’s proper maintenance and support in their respective wills.
Jillian’s appeal in proceedings CA557/2016 is dismissed.
The costs appeal — CA278/2017
Jillian challenges the order requiring her to pay indemnity costs to Rachel and the quantum of those costs.
Agreed issues
The agreed issues are as follows:
(a)Did Gendall J apply the correct criteria in exercising his discretion to award costs on an indemnity basis?
(b)Did Gendall J wrongly focus on the position of Rachel, rather than the actions of Jillian?
(c)If an award of indemnity costs was appropriate, was the quantum reasonable?
(d)In the event that the costs appeal succeeds, should there be an uplift above 2B costs, and if so, in what percentage?
We consider that issues (a) and (b) can be considered together.
Indemnity costs
In his initial decision on liability for costs, Gendall J ordered indemnity costs under r 14.6(4)(f) of the High Court Rules 2016 — namely that some other reason existed that justified the Court in making an order for indemnity costs.[42] The Judge considered that there were two other reasons:
(a)Rachel had not made a claim under the Act, rather she did not wish to be prejudiced by the dispute between Graham and Jillian; and
(b)Rachel nevertheless needed to be involved in the proceeding to ensure that she was not prejudiced.
[42]First Costs Judgment, above n 2, at [49]–[50].
Mr Cowey argued that the Judge erred in law when he found that Rachel was entitled to indemnity costs under r 14.6(4)(f). He submitted that the Judge should have considered Jillian’s conduct in the proceedings, in particular whether she behaved either “badly or very unreasonably”,[43] and not on Rachel’s position.
[43]Referring to Bradbury v Westpac Banking Corp [2009] NZCA 234, [2009] 3 NZLR 400 at [27].
Ms Paul, for Rachel, referred to the relevant provisions in the High Court Rules, and noted that bad behaviour, or very unreasonable behaviour, is not a threshold requirement under r 14.6(4)(f).
We agree with Ms Paul. Rule 14.6(4) sets out the circumstances in which an award of indemnity costs can be made. Bad or very unreasonable behaviour is not directly referred to in the rule at all. Such matters may well be relevant to the circumstances outlined in r 14.6(4)(a) and (b). A party’s behaviour could also be a ground for an award of indemnity costs under r 14.6(4)(f), but it is not a specific requirement. Rather, r 14.6(4)(f) is a category “reserved for specific circumstances occurring in the particular proceedings”.[44]
[44]Tamihere v MediaWorks Radio Ltd [2015] NZHC 268 at [6].
As noted at [83], Gendall J awarded Rachel indemnity costs under r 14.6(4)(f) for two reasons. Both were appropriate in the circumstances of this case. Rachel was an unwilling but necessary party to Jillian’s unsuccessful application, and Gendall J took the view, with which we agree, that Jillian’s application was unmeritorious. This Court has previously held, in similar circumstances, that an unsuccessful applicant should be required to indemnify a sibling who cannot avoid being dragged into such proceedings as his or her own inheritance is potentially affected.[45] We can see no reason to depart from that approach in this case.
[45]Lewis v Cotton [2001] 2 NZLR 21 (CA) at [64] and [71]–[72].
The second ground of appeal is that Gendall J failed to assess whether Rachel’s actual costs were unreasonably high.
Gendall J, in his second judgment on costs, noted the submission made for Jillian that costs claimed were excessive. The Judge observed that Rachel’s costs did appear to be “reasonably high, given what might be said to be her subordinate role in opposing Jillian’s application”.[46] He went on, however, to observe that Rachel had incurred costs of $70,267 relating solely to the proceeding.[47] The Judge concluded that Rachel’s claim had to be “broadly seen as proper in all the circumstances”.[48]
[46]Second Costs Judgment, above n 5, at [20]–[21].
[47]At [21].
[48]At [23].
We are not persuaded that Gendall J’s assessment in this regard was plainly wrong. Jillian was seeking the redistribution of both Edwin’s and Pamela’s estates, and the provision of such further sum as the court saw fit to discharge their moral duty to provide for her proper maintenance and support. As Gendall J noted in the substantive decision, if Jillian’s claim had succeeded, and an order had been made that she was to be paid additional amounts from the residue of the estates, that might well have reduced Rachel’s entitlement.[49] Even if Jillian was unsuccessful, then the usual course would be that the costs incurred by the executor of the estates would be met from the residue of the estates, and again that would likely have reduced the amount available to Rachel as one of the residuary beneficiaries. In the circumstances, Rachel was clearly entitled to take appropriate and necessary steps to protect her position.
[49]Substantive Judgment, above n 1, at [38].
Mr Cowey next seeks to descend into the minutiae by referring to the relatively limited cross-examination undertaken by Rachel’s counsel, and by criticising the amount of time claimed in preparing for the hearing.
We do not consider that this is appropriate. Indemnity costs are determined by reference to actual costs, but they can be less if the court considers that the actual costs are unreasonably high. Costs will generally be accepted as being reasonably incurred, and therefore recoverable, if a reasonable observer would expect those costs for the litigation at issue.[50] Gendall J was in the best position to assess the steps taken by Rachel, and whether or not the costs claimed for those steps were unreasonable. We do not see any error of principle in the way in which he approached the matter. Nor did he take into account irrelevant considerations, or fail to take into account relevant considerations. His decision that Rachel’s costs were broadly proper is not plainly wrong.
[50]Bradbury v Westpac Banking Corp (2008) 18 PRNZ 859 (HC) at [204]–[205].
Finally, Mr Cowey submitted that Gendall J made an arithmetical error, when he said in his first costs judgment that the costs awarded to Rachel (exclusive of GST), amounted to $71,559.[51] This is not a proper ground for appeal, and in any event, the error was accepted at a very early stage by Rachel. She did not seek payment of the amount stated by the Judge, but rather the lesser sum of $71,159 which, it is common ground, is the aggregate of the amounts awarded, less GST. When the GST is added, the total award of costs is $71,159, plus GST of $10,540.05.
Result
[51]Second Costs Judgment, above n 5, at [25].
For the reasons we have set out, Jillian’s appeal in proceedings CA278/2017 is dismissed.
Costs on both appeals
Counsel were agreed that costs on both appeals should be fixed on a band A basis, with usual disbursements.
Jillian has failed on both appeals. She is to pay Graham’s costs on a band A basis and usual disbursements on appeal CA557/2016. She is to pay Rachel’s costs on a band A basis and usual disbursements on appeal CA278/2017. The estate was not represented and no costs are awarded in favour of either the first or second respondents.
Solicitors:
Parry Field, Christchurch for Appellant
Wynn Williams, Christchurch for Graham Talbot
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