Introduction
The topic for this session is Relationship Property Claims and the Impact on Estate Planning. But as I began to prepare, it seemed to me that a better title would have been, Implications for Estate Planners of Happening and Emerging Claims. I say this, because in reality while many claims do arise under the Property Relationships Act 1976 (“PRA”), there are also a raft of additional claims that can and do arise under other legislation and are equally important. To name a few; Spousal maintenance and trust claims under the Family Proceedings Act (“FPA 1980”), estate claims under the Family Protections Act (“FPA 1955”), claims in respect of promises given for services rendered under the Law Reform Testamentary Promises Act 1949, (“LRTPA”), administration and intestacy claims under the Administration Act 1969, claims against and as to the administration of express trusts under the Trustee Act 2019, constructive trust claims and derivative action claims in equity. In many cases these claims are brought together which in and of itself gives rise to questions of case management and priority, especially where claims are filed in different Courts.
Suffice to say, there is no “one size fits all” guidance that I can offer today. Unsurprisingly, estate planning is a challenging process, complicated by the human dynamic and the complexities of our laws. For that reason, I have planned this paper around a series of cases that will identify a range of issues and potential solutions that will provide some practical guidance to planners as they go about their work.
Setting the scene
From a simple will, to a complicated wealth management and succession plan, involving trusts and or other third party entities, estate planning can be a multifaceted and complex discipline. But at its very core, is the client - his or her circumstances, needs and expectations. All of these factors must be carefully considered with the simple question in mind – what could possibly go wrong?
Taking comprehensive instructions at the initial stage and undertaking such due diligence as is necessary – and always being open to more – will better inform the nature and extent of the plan and hopefully, minimize the risk of litigation at a later date, including claims in negligence.
Many of the cases I refer to could quite possibly have been avoided with better planning at the outset. Obviously, the human dynamic is such that notwithstanding the very best endeavors of professional advisors, conflict can still emerge. This is inevitable.
The principal responsibility of the planner is to provide reasoned recommendations that are as risk averse as is possible, but where risk is unavoidable (because of the nature of the instructions given) to clearly identify those risks, and provide alternative options and reasons therefor. Failure to do so, has the potential for claims in negligence, which in and of itself is a salutary reason to pause, consider and carefully plan, at the outset.
Common Family Claims
For the purposes of this paper I have focused primarily on what I shall refer to as “family claims” as opposed to civil actions, including negligence.
At a high level, these are likely to include:
1. By a surviving spouse or partner under the PRA, FPA 1955, FPA 1980, LRTPA, the Administration Act 1969, the Trustee Act 2019, and in equity under Lankow v Rose principles.
2. By personal representatives of a deceased spouse or partner as for 1 above;
3. By a child or children of a deceased spouse or partner under the FPA 1955, the Trustee Act 2019, the Administration Act 1969 and in equity under Lankow v Rose principles or by way of derivative action.1
4. By third parties such as creditors and or the official assignee in bankruptcy under s47 the PRA.
Legal Frame Work
Trite as it may seem, the PRA provides that a marriage2, civil union3 or de facto relationship4 ends, among other things, when one of the parties dies.
The basic scheme of the PRA for relationships ending on death is that surviving spouse or de facto partners have a choice of 2 options;
Option A: to apply for a division of relationship property; or
Option B: not to a apply for a division of relationship property5
If they choose option A, their entitlement under the PRA takes priority over the beneficial interests and claims of others under the will, the rules of intestacy, the FPA 1955, and the LRTPA.6 However, they will usually forfeit any entitlement to inherit from their deceased spouse or de facto partner, and the estate is distributed as if the survivor died before the deceased.7 This consequence of electing option A applies unless the will expresses a contrary intention8, 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.9
Electing option A does not preclude the surviving spouse or partner from making an application under the FPA 1955, the 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.
1 Nawisielski v Nawisielski [2014] NZFLR 973, see also, Chambers v Tohill Chambers [2016] NZHC 583
2 S2A (2) PRA
3 S2AB (2) PRA
4 S2D (4) PRA
5 Section 61 PRA
6 Section 78 PRA
7 Section 76 PRA
8 Section 76(1) PRA
9 Section 77 PRA
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 Act.10
There is an important 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 marriage11. 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 factor partner; 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.
If the Court is not so satisfied, the de facto partner has no choice. In those circumstances 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 accord de facto partners the same rights as surviving spouses, with the qualification, in each case, that they (de factor 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.
Only surviving spouses or partners may, as of right, apply for a division of relationship property.12 In contract, the personal representatives of a deceased spouse or partner requires 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.13
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.14
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 s25(1)(a) and (b) and under s25(3), but could only apply under s25(1)(a) with the leave of the Court under s88(2). The purpose and effect of this restriction are not clear to us. [Emphasis added]
A question arises as to whether or not a claim for compensation due to economic disparities is available on death. S15 of the PRA has been a controversial provision since its inception in 2001. During that time, and to the best of my knowledge, it has not been applied on death, although in the preparation of this paper, I have become aware of a case (presently before the High Court, on Appeal and subject to stringent embargo orders as to confidentiality) where the Family Court discounted an award in favour of the wife to take account of expert evidence that her ailing former
10 Section 68 PRA
11 Section 85(1) PRA
12 Section 88(1) PRA
13 Section 88(2) PRA
14 Public Trust v Whyman [2005] 2 NZLR 696; 700
husband, had less than 12 months to live. It seems likely that in this case, the High Court will be asked to consider whether or not a claim can be barred or tempered on death. 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.
Professor Nicola Peart, has opined to the contrary. She says that a focus on future economic disparity is precluded on death, but that,
…[A]ny disadvantage that the inapplicability of [s15] may create for surviving spouses or partners can be redressed by an award under the Family Protection Act 1955.15
Some of the provisions that apply to the inter vivos division of relationship property have been modified for relationships ending on death16. One of those modifications concerns the classification of relationship property. On death, all the property owned by the deceased or acquired by the estate is presumed to be relationship property17. The person challenging the presumption has the burden of rebutting it. On the other hand, any property passing to the surviving spouse or partner, other than by succession, is not automatically treated as their separate property. It has the status it would have had if the deceased had not died, unless the Court decides otherwise18. Jointly owned property that passes to the surviving spouse or partner can therefore be clawed back to the relationship property pool for purposes of division.
Applications for division of relationship property, take priority over other claims against an estate.19 Specifically:
a. Any beneficial interest under the will of a deceased spouse or partner;20
b. Any beneficial interest on the intestacy or partial intestacy of a deceased spouse or partner;21
c. Any order made in respect of the estate of a deceased spouse or partner under the FPA 1955, or the LRTPA;22
d. All duties and fees payable in respect of a deceased spouse or partner.23
Notwithstanding s78(1), certain other matters have priority over claims by a surviving spouse or partner under the Act, 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;24
15 Relationship Property on Death, Peart, Briggs, Henaghan
16 Sections 79 – 94 PRA
17 Sections 81 and 82 PRA
18 Section 83 PRA
19 Section 78 PRA
20 Section 78(1)(a) PRA
21 Section 78(1)(b) PRA
22 Section 78(1)(c) PRA
23 Section 78(1)(d) PRA
24 Section 78(2)(a) PRA
b. The reasonable funeral expenses of a deceased spouse or partner.25
In respect of any other claims however, the position is not so clear as to the ranking of each. In Hamilton v Hamilton,26 the Court was considering multiple claims against the deceased estate brought by his children and grandchildren under the FPA 1955, and the LRTPA. The estate was not large. 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 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.27
Happening and Emerging Claims
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 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 Mr 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 Mr Sutton cross appealed against the Family Court’s refusal to grant her relief under the LRTPA.
The judgment is noteworthy in part by its analysis of s2(d) PRA, as to what constitutes a de facto relationship at law. The appellants tried to persuade the Court 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.
IER v GJD [Relationship Property][2009] NZFLR 607
The property in this case was modest comprising a home subject to a mortgage.
25 Section 78(2)(b) PRA
26 [2003] NZLFR 883
27 Ibid at page 899 [60]
The applicant was to have a life interest in her husband’s estate, and on her death, the property was to be divided in 5 equal parts – 3 parts to the deceased’s children and 2 parts to hers.
Following his death, she 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.
Unfortunately, she was not advised of her right to make an election under s61 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 of option B and to replace it with an election under option A.
The case provides a helpful analysis of relevant provisions under part 8 of the PRA, and when an estate is considered to have been finally distributed at law.
The Court held that for the purposes of s70 PRA, is needed to be satisfied that the estate had not been finally distributed. Indeed, s70 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 it was 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 further observed that at that time there is no case law specifically relating to the meaning of “final distribution” in the context of the PRA. However, it was assisted by a decision of the Privy Counsel in Lilley v Public Trustee [1981] 1 NZLR 41, where the Court held that the “final distribution of the estate” refers to the point of time at which 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 or not there had been a final distribution, the Court then 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.
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 applicants 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.
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 Mr Whyman was administrator of the deceased 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 14 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 s88(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 s88(2) PRA to a personal representative of the deceased spouse or de facto partner to apply for an order under s25(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 structed to avoid fulfilling his moral duty which was a serious injustice.
Horne v Public Trust28 (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 his second wife, Ms Webster, 2. 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”.
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 in the course of that, 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:
28 Ronald Young J, HC Nelson CIV-2010-442-444, May 2010
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 proceedings 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 by the presiding Judge before the substantive hearing, he set 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 proceedings 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 get 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 so doing, made the observation that it would have permitted someone in the applicants 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 Tod29 and Chambers v Tohill Chambers30
Tod v Tod [2017] 2 NZLR 145 (CA)
Tod was application for leave to appeal to the Court of Appeal. The applicant sought to appeal a decision of the High Court, declining their application for an order under s21 the Administration Act 1969 removing their late father’s former wife (the respondent) as executor of his estate and appointing the Public Trustee in her stead. Their objective being, 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 or not 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:
Therefore all that can be taken from the Court of Appeal decision [in Tod] for present purpose 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.
But the case is also worthy of note as another instance where the possibility of a derivative proceedings 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 Act 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.31 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 QC 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.
29 [2017] 2 NZLR 145 (CA)
30 [2016] NZHC 583
31 See footnote 30, [119]
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.32
I am reliably informed that the case settled after the High Court Judgment.
Blumenthal v Stewart [2017] NZLFR 307
The first respondent was the trustee of a trust settled by Mr Mathieson and 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 of 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 Murrell33, namely that the independent trustee in this case had abdicated his functions as trustee. On this, the Court said: 34
… 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.
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.
32 Ibid [147]
33 Murrell v Hamilton [2014] NZCA 377
34 At [55] and [56]
Guzman v Estate of Osborn [2020] NZFC 14235
The deceased, Mr Osborn had made no provision for his de facto partner, Ms Guzman, in his will. Following his death, Ms Guzman sought past and future maintenance. The executor of Mr Osborn’s estate opposed the orders on the basis that she was estopped from claiming against his estate under a s21 agreement between her and the deceased, entered into during their relationship.
The agreement purported to contract out of all claims that might arise in the future including claims under part 8 of the PRA, the FPA 1955 and the LRTPA.
The argument before the Court was whether or not the agreement would act as a bar to a claim for maintenance against the deceased’s estate under the FPA 1980.
The Court held that the s21 agreement was entered into solely for protecting each party’s separate property interests from becoming relationship property. There was no specific provision contracting out of the FPA 1980, and or spousal maintenance. Moreover, it was unlikely that the parties contemplated contracting out of a spousal maintenance claim made against an estate. In any event, Ms Guzman had a statutory right to apply for spousal maintenance, which could include a claim against the estate. The s21 agreement, did not prevent her from doing so.
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 factor 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 s21 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.
In conclusion
The cases mentioned, while important in and of themselves, are really only the tip of the ice berg as illustrations of the many and varied issues that confront estate planners as they go about their work. They key take away is to know that this area of practice is evolving. New and emerging
35 See also Beric v Chaplain [Maintenance] [2018] NZFLR 1072
claims are arising all the time. For example, constructive trust claims against express trusts and estates under Lankow v Rose principles,36 derivative actions under the PRA by third parties.37
36 Blumenthal v Stewart – ibid.
37 Nawisielski v Nawisielski; Chambers v Tohill Chambers – ibid.