Presented by Ross Knight for Auckland District Law Society CPD Webinar - Death and Relationship Property, on 24 August 2023
Introduction
Part 8 of the Property (Relationships) Act (‘PRA’) became law on 1 February 2002, under the Property (Relationships) Amendment Act 2001, which substantially amended and repealed the Matrimonial Property Act 1976. In the period since it became operative the PRA, and more particularly Part 8, has been the subject of four substantive reviews by the Law Commission, culminating in the Commission’s review of succession law in its Issues Paper published on 15 of December 2021.[1] (‘the 2021 Succession Report’).
The Commission concluded that succession law needs reform, and recommended changes to the law to better reflect the diversity of family relationships in New Zealand.
On 15 June 2022, the Government issued its response to the 2021 Succession Report in which it said, among other things,
The Law Commission considers the current law on succession is old, out of date, and inaccessible. It concludes that reform is required to achieve simple and clear law and to reflect te ao Māori perspectives in succession.
More than 12 months on, legislation has yet to be introduced by Government to address its own assessment as to the stark findings and recommendations made in the 2021 Succession Report.
It is worthy of note that in late 2020, the University of Otago commissioned an independent survey of 1,350 respondents, about public attitudes and values to succession law in New Zealand, with the intent of presenting that evidence to the Commission for consideration as part of its work.
The University of Otago study found among other things that 80% of respondents agreed that a person should be allowed to leave family members out of their Will, however the majority also believed that surviving spouses/partners and children should be entitled to challenge a Will if they are excluded from it. Moreover, evidence was given that many surviving spouses and even professionals do not have knowledge of the PRA and its application on death.
This paper will analyse Part 8 of the PRA, the various claims that may be brought by a surviving spouse/partner, practical and legal pitfalls arising by reference to case law, together with a summary of key points from the 2021 Succession Report, and likely reforms to come.
Setting the scene
The PRA provides that a marriage[2], civil union[3] or de facto relationship[4] ends when one of the parties dies.
In the introduction to their scholarly and practical work – Relationship Property on Death – Peart, Briggs, Henaghan say this:
At first blush, the rules for the division of property when a marriage or de facto relationship ends after the death of one of the partners of the relationship appear to be identical to the rules that apply when a relationship ends by separation. However, the apparent symmetry is an allusion… [an] element of tension invariably arises because of the fundamentally different principles governing those two areas of the law. In many ways, they are reluctant bedfellows. The Act has taken on a task of Homeric proportions in its efforts to fuse the principles of relationship property law and succession law and does not fully succeed.
The right to share relationship property upon separation is based upon the idea that the relationship is a partnership, to which both partners have contributed equally, and the question of who of holds title to the property, becomes less relevant. But issues of title are more important in terms of succession law, which is concerned with testamentary freedom: if the testator does not wish to recognise the partner’s contribution to the marriage, succession law, generally subject to the Family Protection Act 1955, respects this right.[5]
Death provisions
Overview
See Appendix A attached.
Note: reference to partners in this paper means civil union and de facto,[6] unless expressed otherwise.
The basic scheme of the PRA for relationships ending on death is that surviving spouse or partners have a choice of 2 options:
Option A: to apply for a division of relationship property; or
Option B: not to apply for a division of relationship property[7]
If the survivor chooses option A, his/her entitlement under the PRA takes priority over the beneficial interests and claims of others under the Will, the rules of intestacy, the Family Protection Act 1955 (‘FPA 1955’) and the Law Reform (Testamentary Promises) Act 1949 (‘LRTPA’).[8]
However, the survivor will usually forfeit any entitlement to inherit from his/her deceased spouse or partner, and the estate will be distributed as if the survivor had died before the deceased.[9] This consequence of electing option A applies unless the Will expresses a contrary intention[10], or the Court is satisfied that the surviving spouse or partner should be permitted to inherit all or some of what they would have inherited under the Will or the rules of intestacy, to avoid an injustice.[11]
Electing option A does not preclude the surviving spouse or partner from making an application under the FPA 1955, the Family Proceedings Act 1980 (‘FPA 1980’), the LRTPA or bringing claims in equity.
If the surviving spouse or partner elects option B, he or she chooses not to apply for a division of relationship property. In that case, the survivor elects to abide by existing property arrangements and to accept such provision as may be available from the estate under the Will or rules of intestacy, or pursuant to an award under the FPA 1955 and/or the FPA 1980 and/or the LRTPA and/or in equity.
Option B is also the default option if the surviving spouse or partner fails to elect option A, in the manner or time frame prescribed by the PRA.[12]
Making an election – the process
See Appendix B attached.
Section 62 the PRA, provides that a surviving spouse or partner who wishes to choose option A or option B must make that choice within 6 months of death or the granting of letters of administration – whichever is the later, unless the estate is small.[13]
The Court[14] may extend the time for making a choice after the time for doing so has expired. However, the Court has no power to grant an extension of time after a final distribution of the estate has been made.[15]
The choice of option must be in writing and in the prescribed form,[16] together with a certificate from a lawyer certifying that he/she has explained to the survivor, the effects and implications of his/her choice of option.[17]
Setting aside an election – the process
Section 67 the PRA provides that, subject only to order of Court, a choice once made is irrevocable.[18]
Section 69 the PRA gives the Court limited power to set aside a chosen option, if satisfied, as to any of the following:
(a) The choice is not freely made;
(b) The surviving spouse or partner did not fully understand the effects and implications of the choice;
(c) Since making the choice, the surviving spouse or partner has become aware of new and relevant information relating to the choice;
(d) Since making the choice, someone other than the surviving spouse or partner has brought proceedings against the deceased’s estate under the FPA 1955 or LRTPA.
Discussion
There is a distinction to be made between spouses and de facto partners in relation to choice of options. Whereas spouses have the right to choose option A, irrespective of the duration of their marriage,[19] de facto partners have that right, only if their relationship lasted for 3 or more years. Section 85(3) prohibits the Court from making an order for the division of relationship property, if the de facto relationship was of less than 3 years’ duration, unless the Court is satisfied:
(a) There was a child of the relationship; or
(b) The surviving de facto partner has made a substantial contribution to the de facto relationship; or
(c) On an application by the deceased’s de facto partner’s personal representative, the deceased de facto partner has made a substantial contribution to the de facto relationship.
- and the Court is satisfied that a serious injustice would result if no order was made.
Absent a finding of serious injustice, option B will govern the property rights of a surviving partner on the death of their partner.
In 2001, both the Administration Act 1969 and the FPA 1955 were amended to give de facto partners the same rights as surviving spouses, with the qualification, in each case, that they (de facto partners) must have been living with the deceased in a de facto relationship at the time the deceased died, otherwise, they are not “surviving” de facto partners.
Part 8 is commonly characterised as an extension of the equal sharing provisions applicable upon separation, but that is not an accurate reflection of the death provisions.[20] Unlike the provisions that apply on separation, Part 8 does not treat parties to a relationship equally after one of them has died. Arguably, Part 8 is designed to favour the surviving spouse or partner at the expense of the estate of the deceased’s spouse or partner.[21]
Only the surviving spouse or partner may, as of right, apply for a division of relationship property.[22] In contrast, the personal representatives of a deceased spouse or partner require leave to apply for a division of relationship property and that will not be granted unless refusing to do so, would cause a serious injustice.[23]
This distinction, between the rights and entitlements of the surviving spouse on the one hand, and personal representatives on the other, is inexplicable, creating something of a lacuna in the PRA. See [21] Public Trust v Whyman.[24]
So, pausing at this point, the Public Trust, if appointed as the administrator of the estate of the late Mr Russell, could make applications under s 25(1)(a) and (b) and under s 25(3), but could only apply under s 25(1)(a) with the leave of the Court under s 88(2). The purpose and effect of this restriction are not clear to us. [Emphasis added]
There are other provisions in Part 8 that differ from those that apply on separation, which favour the surviving spouse or partner. For example, on death, the Court has a discretion to reclassify the status of joint assets (as relationship or separate property) which pass to the surviving spouse or partner, by survivorship or otherwise under section 83(1) the PRA. The same does not apply on separation.
Under section 87 the PRA, only the surviving spouse or partner may challenge a section 21 agreement, as of right. The representatives of the deceased’s estate do not have an unfettered right to do so.[25]
The time for bringing an application in relation to de facto partners is open, but in relation to spouses or civil union partners who are not living together and are divorced, proceedings must be brought within 12 months of the date of a final order dissolving the marriage or civil union.[26]
The Court has wide discretion to extend the time for making an application.[27]
Applications for division of relationship property, take priority over other claims against an estate.[28] Specifically:
(a) Any beneficial interest under the Will of a deceased spouse or partner;[29]
(b) Any beneficial interest on the intestacy or partial intestacy of a deceased spouse or partner;[30]
(c) Any order made in respect of the estate of a deceased spouse or partner under the FPA 1955, or the LRTPA;[31]
(d) All duties and fees payable in respect of a deceased spouse or partner.[32]
Notwithstanding s 78(1), other matters have priority over claims by a surviving spouse or partner under the PRA, namely:
(a) All debts properly incurred by the personal representative of a deceased spouse or partner in the ordinary course of administration of an estate;[33]
(b) The reasonable funeral expenses of a deceased spouse or partner.[34]
In respect of any other claims however, the position is not so clear as to the ranking of each. In Hamilton v Hamilton[35] - a case concerning multiple claims brought by the deceased’s children and grandchildren under the FPA 1955, and the LRTPA – the Court held that neither a testamentary promises claim, nor a family protection claim, nor a provision in a will, had automatic preference over either of the others. The Court said:
The essential consideration, where there are competing claims… is to resolve the conflict in such manner as will best meet the justice of the particular case and produce a just result as [among] all the parties.[36]
Recent case law – some practical and legal pitfalls arising
Does section 15 the PRA apply on death?
Section 15 has been a controversial provision since its inception in 2001. In the time since, and to the best of my knowledge, it has not been applied on death to award compensation, although in one case, the terminal illness of a spouse was held to be a significant factor in limiting the duration over which compensation for economic disparity should be assessed.[37]
Certainly, there is nothing in the PRA to preclude the bringing of a claim on death, but evidentially, such a claim would have its challenges, having regard to the need to show a disparity between income and living standards, directly related to the division of functions within the relationship.
It is noteworthy, that Professor Nicola Peart, opines to the contrary.[38] She says that a focus on future economic disparity is precluded [under the PRA] on death; that a comparison in living standards cannot be made when one of the parties is dead, but that, an application under the FPA 1955 can take into account matters such as income, capital, earning capacity, living standards, and the like.
Claims arising out of a de facto relationship when the status of that relationship is in dispute
Clear v Sutton [2017] NZFLR 567
Following the death of his wife of many years, the deceased (Mr Clear) formed a new relationship. Ultimately, this became a committed relationship, but in circumstances where despite maintaining separate finances and residences, the parties did not cohabit permanently, until 6 months before the deceased died.
The deceased made no provision for his partner, Ms Sutton, leaving his entire estate to his 5 children. Ms Sutton issued proceedings in the Family Court under the PRA, FPA 1955 and the LRTPA.
The Family Court concluded that there was a “de facto relationship” in existence at the date of the deceased’s death but declined to grant relief under the PRA. The deceased’s children had indicated that if the Court got to this point, they would concede that he (the deceased) had breached his moral duty to make provision for Ms Sutton, and on that basis an award of $400,000 was made in respect of the claim under the FPA 1955. No award was made under the LRTPA. The deceased’s children appealed and Ms Sutton cross appealed against the Family Court’s refusal to grant her relief under the LRTPA.
The judgment is noteworthy in part to its analysis of s 2D PRA, and what constitutes a de facto relationship at law.
The appellants claimed that Ms Sutton’s relationship with their late father was one of friendship or companionship, but nothing more.
The High Court upheld the finding of the Family Court that this was a de facto relationship, (albeit that the parties were not living together permanently throughout) and as such the deceased had breached his moral duty to Ms Sutton by making no provision for her out of his estate. The Court also upheld the award that had been made and rejected her cross appeal.
See also Sutton v Bell [2023] NZSC 65, and the discussion regarding what constitutes a de facto relationship for the purposes of the PRA.[39]
Consequences of failure to exercise choice of option – application to set aside
IER v GJD [Relationship Property] [2009] NZFLR 607
The property in this case was modest, comprising a home subject to a mortgage.
The applicant was left a life interest in her husband’s estate, and on his death, the property was to be divided into 5 equal parts – 3 parts to the deceased’s children and 2 parts to hers.
Following the death of her husband, the applicant entered into an agreement, both in her capacity as life tenant and executor of the estate, formalising her right to occupy the home for the remainder of her life. This, she believed, would obviate the need to sell the property. To that end, the mortgage was refinanced (presumably on more favourable terms) and she agreed to pay it along with other of the fixed and recurring outgoings in consideration of her use of the home.
The applicant was not advised of her right to make an election under s 61 PRA, until some years after her husband died. As a result, and by default, she was deemed to have accepted option B. She applied under s70 PRA for an order to set aside her default election and to replace it with an election under option A.
This case provides a helpful analysis of relevant provisions under Part 8 of the PRA, in particular, when an estate is considered to have been finally distributed at law.
The Court held that for the purposes of s70 PRA, it needed to be satisfied that the estate had not been finally distributed. S 70 provides that:
The Court may not set aside a choice of option under s 69, unless the application under that section is made before the final distribution of the estate of the deceased spouse or partner.
The Court observed that there is no definition of “final distribution” under the PRA. But noted that under s2(4) of the FPA 1955, assets retained by the trustee after completion or following completion of estate administration are not considered to have been distributed and therefore have not ceased to be part of the estate.
The Court observed that there was no case law as to the meaning of “final distribution” in the context of the PRA.
The Court was assisted by a decision of the Privy Council in Lilley v Public Trustee [1981] 1 NZLR 41, where it held that the “final distribution of the estate” refers to the point in time when the executor of the deceased person, having completed the administration of the estate, becomes the trustee. It does not require an actual transfer of assets.
In determining whether there has been a final distribution, the Court went on to consider the distinct roles of executor and trustee. In so doing, it referred to Re Stewart [2003] 1 NZLR 809, where the relationship between executor and beneficiary was described as follows:
[24] An executor is the person appointed by a testator or testatrix to administer his or her property and carry out the provisions of the will. To this end, the executor has certain specific statutory and common law duties and powers, namely to:
- Bury the deceased;
- Make an inventory of assets
- Pay all duties, testamentary expenses and debts;
- Pay legacies;
- Distribute the residue to the persons entitled; and
- Keep accounts
[25] the obligation to perform these duties arises within the special fiduciary relationship which exists between a trustee and a fiduciary to whom property is entrusted, and the beneficiaries entitled to that property. The most obvious element of that relationship is the requirement imposed on equity that the trustee will deal with those assets with the utmost probity, which, in turn, requires that the trustee will not on any account, allow him or her to have or acquire any person interest in those assets without the express and informed consent of the beneficiary.
Competing applications by surviving partner and personal representative – status of each for the purposes of the PRA
Public Trust v Whyman [2005] 2 NZLR 696
Mr Russell, the deceased, died intestate. He was separated from his wife who had custody over their 2 children. At the time of his death, Mr Russell was living in a de facto relationship with Ms Whyman.
Mr Russell and Ms Whyman were joint tenants of 3 properties, which passed to Ms Whyman by way of survivorship.
Ms Whyman applied for Letters of Administration. A competing application was made by the Public Trust.
The High Court dismissed the application by the Public Trust and granted administration to Ms Whyman on grounds that she had a prior right by virtue of her status as a surviving de facto partner, who was entitled to succeed on the intestacy.
The Public Trust appealed.
The Public Trust argued that Mr Russell’s children had a claim against his estate under the FPA 1955, but for that claim to be augmented, there would first need to be a successful claim under the PRA. If Ms Whyman was administrator of the deceased’s estate, she would be unlikely to bring such a claim because of her own personal position and she was therefore conflicted. This, said the Public Trustee, created a special circumstance that disentitled Ms Whyman to be appointed administrator.
The Court analysed the legislative scheme under the PRA for the bringing of claims under Part 8. See reference at footnote 23 above.
Importantly, the Court held that if a surviving spouse of a de facto partner, did not elect to make an application for the division of relationship property under s 88(1)(a) PRA (which can be done as of right), s95 PRA, did not prevent a personal representative of the deceased, seeking leave of the Court for the distribution of the property under a will or Part 3 of the Administration Act.
Moreover, it was likely that there would be special circumstances, warranting the grant of leave (if required) under s 88(2) PRA to a personal representative of the deceased spouse or to a de facto partner to apply for an order under s 25(1)(a), only if the Court was satisfied that refusing leave, would cause serious injustice. The level of injustice to warrant leave was one of seriousness and not intolerable injustice. Mr Russell’s affairs had been structured to avoid fulfilling his moral duty which was a serious injustice.
Horne v Public Trust[40] (unreported)
The children of the deceased sought leave of the Family Court under s88(2) and s25(1)(a) PRA, to bring an application under that Act and for further provision under s4 FPA 1955. Their application was declined and they appealed to the High Court.
The deceased had 3 children from his first marriage and 2 from his second marriage to Ms Webster. Each had come to the relationship with property, although it was evident from the Judgment that Ms Webster had more assets than did Mr Webster. Even so, property acquired during the relationship was bought equally.
In the last 9 months of his life, Mr Webster was in a retirement village, the cost of which largely dissipated his savings.
The Court considered the relative circumstances of Ms Webster and Mr Webster’s adult children. This was a case where Mr Webster’s children needed to augment their late father’s estate by bringing a successful claim under the PRA.
In considering the Public Trust’s application for leave, under s 88(1) PRA, the Court referred to and relied upon Public Trust v Whyman. In the circumstances it concluded that, any family protection claim by Mr Webster’s children would likely have little or no chance of success and therefore, it would not be a serious injustice to refuse leave for them to apply for an order under s25(1)(a) PRA. The Court determined that the deceased’s primary obligation was to Ms Webster, (especially given her somewhat extensive contribution to their shared assets) and that the deceased’s children were not in “necessitous circumstances”.
The Court found that the occupation agreement between the applicant and the executor was the final step in the administration of the deceased’s estate, and with that, the role of the applicant and her co-executor changed to that of trustee.
While the Judge expressed sympathy for the applicant’s position, he said:
[t]he inescapable logic of the situation is that by concluding the agreement, the applicant [and her co-executor] were no longer acting in the capacity as executors, but rather they had become trustees… The applicants claim must therefore fail
The case for derivative actions in family law
Nawisielski v Nawisielski [2014] NZFLR 973
The deceased had 2 children of his first marriage, one of whom was the applicant in this case. The respondent was the deceased’s second wife. They had no children. The deceased had substantial property holdings which he owned with the respondent as joint tenants. In his will he appointed her his executor and left to her his entire estate.
The applicant lodged notices of claim under s42 PRA, against various of the jointly owned properties and at the same time applied to have the respondent removed as executor, on grounds that she was conflicted.
The respondent gave notice requiring the applicant to sustain the caveats, but in the interim, an order was made, removing her as executor and appointing an independent person in her stead. With that, the applicant agreed to withdraw his notices of claim. The respondent sought costs on an increased or indemnity basis.
The case was therefore intended to be about the costs claim, but during the proceedings, the Court received comprehensive submissions from both parties on the merits of their respective positions.
Rule 15.23 of the High Court Rules provides that a plaintiff who discontinues a proceeding against a defendant must pay costs, unless otherwise agreed or the Court so orders. In the circumstances of this case, the Court did not consider an award of costs appropriate and declined to do so. It accepted that for the applicant to overcome his disinheritance, he would need to successfully:
(a) secure the removal of the respondent as executor;
(b) obtain the appointment of a new executor in her stead;
(c) secure through the new executor under s88(2) PRA, leave to bring proceedings under that Act; and
(d) lodge an application under the FPA 1955.
The Court recognised that in circumstances where the personal representative of a deceased estate fails or refuses to act in an even-handed fashion, other rights may emerge. Specifically, the right by a beneficiary to bring a derivative proceeding on behalf of an estate. Such an action, if properly grounded, would not require leave of the Court. However, the trustee and/or executor would need to be joined as a defendant.
In a minute issued before the substantive hearing, the presiding Judge sets out his provisional views for counsel to consider. He said among other things:
[9] …An executor of an estate had standing to apply under s88(2). Cases such as Public Trust v Whyman, indicate that in the circumstances of this case, the executor is likely to obtain leave because of serious injustice. An executor also has standing to lodge a notice of claim: Yeoh v Xu HC Auckland CIV-2003-404-2394, 3 December 2003.
[10] An executor has a duty of even-handedness to beneficiaries and to statutory claimants: Irvine v Public Trustee [1989] 1 NZLR 67 (CA) and Sadler v Public Trustee [2009] NZCA 364. As the executor was aware of the applicant and of his interest in claiming under the Family Protection Act, she was arguably in breach of her duty as an executor to get in the estate if she failed to bring a claim under s88(2) against the survivor, namely, herself.
[11] The applicant is not confined to remedies of requiring the executor to administer the estate properly and applying for her removal. In special circumstances he may also bring a proceeding against a third party on behalf of the estate. This derivative proceeding has a long history. Equity recognises that while the general rule was that the management of the estate belongs to the executor, in special cases, the beneficiary, was entitled to sue derivatively for the estate. In Hayim v Citibank [1987] AC 730; 748 Lord Templeman said:
These authorities demonstrate that a beneficiary has no cause of action against a third party, save and special circumstances which embrace a failure, excusable or inexcusable, by the trustees in the performance of the duty owed by the trustees to the beneficiary to protect the trust estate or to protect the interests of the beneficiary in the trust estate.
Against this background, the Court rejected the respondent’s claim that the applicant did not have standing under the PRA. She claimed that only a surviving spouse or personal representative in a deceased estate had standing to lodge a notice of claim or bring an application substantively.
The Court held that the respondent had a duty to gather in assets of the estate to meet the statutory and arguable claims of the applicant; that she has preferred her own interests instead and was therefore in breach of her duties as executor. Moreover, there was nothing in s88(2), or anywhere else in the PRA for that matter, which would preclude the availability of a derivative proceeding, if special circumstances requiring it, were made out.
In the event, because a new executor had been appointed, the Court was willing to exercise its power to allow the lodging of fresh notices of claim, but in so doing, observed that it would have permitted someone in the applicant’s position to lodge a claim, as a derivative claimant, in any event had that been necessary.
Nawisielski was subsequently referred to and relied upon in Tod v Tod[41] and Chambers v Tohill Chambers.[42]
Tod v Tod [2017] 2 NZLR 145 (CA)
This was an application for leave to appeal to the Court of Appeal against a decision of the High Court, declining an application for an order under s21 the Administration Act 1969 removing the applicant’s late father’s former wife (the respondent) as executor of his estate and appointing the Public Trustee in her stead. The applicant’s objective was for the Public Trustee to bring an application under the PRA to set aside a s21 agreement, between the deceased and the respondent, thereby augmenting an additional claim under the FPA 1955.
The novel question arising for the Court of Appeal, was whether a personal representative could challenge a s21 agreement. The Court accepted that the question was arguable but declined to grant leave on other grounds.
Chambers v Tohill Chambers [2016] NZHC 583
A similar issue arose in this case, although the Court did not need to go on to decide it. At [72] the Court said:
All that can be taken from the Court of Appeal decision [in Tod] is that the appeal on the issue of whether a personal representative can challenge a s21 agreement was not regarded as hopeless. It was reasonably arguable that a personal representative could challenge a s21 agreement. It is not known what the Court of Appeal would have made of that argument at a substantive hearing.
The case is also worthy of note as another instance where the possibility of a derivative proceeding was advanced on behalf of the plaintiff, in reliance upon Nawisielski. This was presented as an alternative to an application under s88(2) PRA, in circumstances where the plaintiff could proceed, as of right, to bring a substantive claim under the PRA for division of relationship property, and the setting aside of agreements under s21 between his late father and Lady Chambers, so as to augment an additional claim under the FPA.[43] For this to succeed, the plaintiff would have needed to satisfy the Court that the executors were failing to discharge their duties in much the same way as was alleged in Public Trust v Whyman. For reasons following, this became unnecessary.
The plaintiff was the eldest son of the deceased, the late Sir Robert Chambers. Lady Deborah Chambers KC was one of two of Sir Robert’s executors and the primary beneficiary of his estate, subject to “certain entitlements”, that were to be distributed to his children at the discretion of Lady Chambers, or on her death. The plaintiff claimed that the executors held the entitlements as fiduciaries and on constructive trust. He sought:
(a) a declaration that the executors held relationship property immediately before Sir Robert’s death, as a constructive trustee for him to the value of $2.5 million dollars (inflation adjusted); and
(b) an order that the executors transfer the entitlement to him.
Having well-reasoned that the plaintiff had an arguable case the Court stopped short of making any declaratory orders. Rather, the Judge concluded her judgment by saying:
I consider this judgment provided sufficient direction for all those involved.[44]
I understand that this matter subsequently settled.
The application of Lankow v Rose principles in claims arising on death
Blumenthal v Stewart [2017] NZLFR 307
The first respondent was both the trustee of a trust settled by Mr Mathieson and the executor and trustee of his Will. The principal asset of the trust was a rural property. The appellant was neither a beneficiary of the trust or the Will. He was the child of the former partner of the deceased who had predeceased him.
The appellant alleged a constructive trust in relation to the rural property. His claims were premised on the basis that he had assisted the deceased in and around the property and had assisted him personally when he was hospitalized with a leg injury. He claimed, in addition, that the deceased had made promises of inheritances.
Claims were brought under the FPA 1955, the LRTPA and under Lankow v Rose principles. All claims were dismissed in the High Court and the appellant appealed.
The appeal was also dismissed.
The Court of Appeal found that the claimant’s contributions to the property in question did not manifestly exceed the benefits he obtained (applying the criteria of Hardie-Boys J in Lankow v Rose). The Court was encouraged to adopt an approach similar to that which was adopted in Murrell,[45] namely that the independent trustee in this case had abdicated his functions as trustee. On this, the Court said:[46]
… As was discussed in Vervoort, difficulties can arise in these circumstances for a claimant because of the rules that trustee functions cannot be delegated, and trustees must act unanimously. It was not suggested here that Mr Stewart was a knowing party to creating any expectation on Mr Blumenthal’s part to an interest in the property. Accordingly, it could be argued that it would not be reasonable to require him as the legal owner to yield an interest to Mr Blumenthal.
The Court in Vervoort overcame this difficulty by ruling the normal trustee principles “…must bend to the practical realities when one trustee is in absolute control of all trust activities and the other trustees have effectively abdicated their responsibilities.”
The Court was invited to accept that such was the position here. Namely, that Mr Stewart had abdicated his responsibilities as trustee. However, it rejected that submission, mostly on grounds that the substantive issue had already been determined and it did not consider it necessary to explore the abdication issue further.
Standing of a personal representative to bring a claim under s 182 FPA 1980
Thakurdas v Wadsworth [2018] NZFLR 835
The question in this case was whether the personal representative of a deceased spouse could bring an application under s182 FPA 1980. The Family Court and High Court both held that they could. The Court of Appeal agreed.
No contracting out of the FPA 1955 – void for reasons of public policy
Matthews v Phocai [2020] NZHC 3455
This was an appeal against a decision of the Family Court, where the Judge had awarded the respondent the sum of $1 million dollars under the FPA 1955.
The respondent was the surviving de facto partner of the deceased, Mr Matthews, who had made no provision for her under his will. The primary beneficiary was the deceased’s son, who appealed the Family Court judgment.
During the Family Court hearing, the appellant conceded that his father had breached his moral duty to make appropriate provision for the respondent. His appeal therefore was in respect of quantum.
The respondent and the deceased had entered into an s 21 agreement at the commencement of their relationship. That agreement largely preserved as separate, all property owned by the deceased, including any salary or wages that he earned during the relationship. The agreement purported to be in full and final settlement of all claims under any circumstances, including on death, under the FPA 1955.
The case is noteworthy for the observations of the Court at [38] the judgment that there is long standing authority for the proposition that an agreement which purports to contact out of the FPA 1955, will be void for reasons of public policy.
Observation
These cases represent some recent and emerging developments in the application of Part 8. Most notably, is the application of the Lankow v Rose doctrine and the hitherto civil claim by way of derivative action.
The need for legislative reform
It is perhaps the worst kept secret amongst academics and practitioners working in this area of law, that substantial reform is long overdue. This reality is underpinned by successive Law Commission reviews,[47] culminating in an Issues Paper published on 15 December 2021, in which the Commission concluded that succession law was in need of reform to better reflect the diversity of family relationships in New Zealand.[48]
In its response to the 2021 Succession Report, the Government said:
The succession report is nearly 400 pages long, contains 15 chapters, and like the earlier review of the Property (Relationships) Act makes 140 recommendations and proposes new legislation. The Law Commission considers the current law on succession law is old, out of date, and inaccessible. It concludes that reform is required to achieve simple and clear law, and to reflect te ao Māori perspectives in succession.[49]
The 2021 Succession Report recommends the enactment of new law to replace Part 8, the FPA 1955 and LRTPA, tentatively named, the Inheritance (Claims Against Estates) Act. The report also recommends that provisions relating to intestacy should be reformed but remain as part of the Administration Act 1969.
In summary, the Government’s response is supportive of the recommendations made by the Law Commission, recognising however, that further work is required before new legislation can be promulgated. It recognises, too, that there is significant overlap between matters arising in relationships ending on separation and those ending on death. It concluded its response by saying:
Given the scope of the Law Commission’s recommendations, the complexity of these areas of law, and the engagement required with a broad range of stakeholders, the Ministry’s [of Justice] work to achieve these reforms will take a period of years and will need to be balanced against other Government priorities.[50]
It follows that while there is an appetite for reform at the highest level, best indications are that nothing substantive will happen in the short term. This vacuum will undoubtedly put pressure on our Senior Courts to find novel ways of applying old and outdated law to meet the expectations and needs of modern New Zealand society.
[1] Review of Succession Law: Rights to a person’s property on death.
[2] PRA 1976, section 2A(2).
[3] S 2B(2).
[4] S 2D(4).
[5] Peart, Briggs, Henaghan (eds) Relationship Property on Death (Thompson and Brookers, 2004) 1-2.
[6] PRA 1976, s 2.
[7] S 61.
[8] S 78.
[9] S 76.
[10] S 76(1).
[11] S 77.
[12] S 68.
[13] S 2 defines small estate as “an estate of a deceased person that can lawfully be distributed without the administration of the estate to be obtained.”
[14] S 2 defines Court as a Family Court, or if another Court has jurisdiction in the proceedings, that Court.
[15] S 62(4).
[16] Property (Relationships) Forms Regulations 2001.
[17] PRA 1976, s 65.
[18] S 67.
[19] S 85(1).
[20] Nicola Peart (ed) Family Law - Family Property (online ed, Thomson Reuters) Intro.03.
[21] Ibid footnote 19.
[22] PRA 1976, s 88(1)(a).
[23] S 88(2).
[24] Public Trust v Whyman [2005] 2 NZLR 696; 700.
[25] Tod v Tod [2015] NZHC 528, [2015] 3 NZLR 397, (2015) 30 FRNZ 401. See also Chambers v Chambers [2016] NZHC 583.
[26] PRA 1976, s 90.
[27] S 24(2).
[28] S 78.
[29] S 78(1)(a).
[30] S 78(1)(b).
[31] S 78(1)(c).
[32] S 78(1)(d).
[33] S 78(2)(a).
[34] S 78(2)(b).
[35] Hamilton v Hamilton [2003] NZFLR 883.
[36] Ibid at page 899 [60].
[37] Blake v Blake [2021] NZHC 756 at [45].
[38] Peart, Briggs, Henaghan (eds) Relationship Property on Death (Thompson and Brookers, 2004).
[39] Sutton v Bell [2023] NZSC 65 at [67]-[69].
[40] Ronald Young J, HC Nelson CIV-2010-442-444, May 2010.
[41] [2017] 2 NZLR 145 (CA).
[42] [2016] NZHC 583.
[43] Ibid at [119].
[44] Chambers v Tohill Chambers [2016] NZHC 583 at [147].
[45] Murrell v Hamilton [2014] NZCA 377.
[46] At [55] and [56].
[47] Law Commission, Dividing relationship property – time for change? (October 2017); Law Commission, Review of the Property (Relationships) Act 1976 (June 2019); Law Commission, Review of succession law: rights to a person’s property on death (December 2021); Law Commission, Review of Succession Law: Rights to a person’s property on death (April 2021).
[48] Government Response, Government Response to LawCom Report Review of Succession Law – Rights to a person’s property on death (June 2022).
[49] Ibid.
[50] Ibid.