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9 Contributors’ and promisees’ claims

Introduction

288 ACONTRIBUTOR is any person who, during a will-maker’s lifetime, contributes a benefit (eg, money, property, work or services) to the will-maker. Contributors may be part of the will-maker’s family, but need not be. Usually, however, they will have a close relationship with the will-maker. Otherwise they are unlikely to wait until the will-maker’s death before they are paid for their services. People who contribute in this way should have a specific statutory claim.

289 Such contributions are often made in circumstances where justice requires that the will-maker make some provision in return. (An example would be an adult child or sibling who provides care for the will-maker in the will-maker’s last years, saving the will-maker the considerable expense of entering a nursing home.) What is “just” in this context will be explored later in this chapter. The Commission’s proposals have two major objectives. First, the law should allow ample scope for courts to reward work and services where the will-maker should have done so. Second, the law should (and, as far as possible, consistently with the first objective) ensure that the principles for obliging will-makers to reward others’ services on death are reasonably close to those applying under the existing law as between the living. This would make the law clearer and more consistent.

290 From time to time, reference is made to children as contributors. It may be (in view of the discussion in chapter 7) that these children will also have an adult child’s claim. However, they will be dealt with here on the assumption that their contribution claim will be their primary and possibly their only claim. Contributors’ claims would take precedence over any other claim adult children would make.

Present law

291 GENERAL LAW CLAIMS – Under the general law contributors who want to be paid for the benefit must bring a claim under one of the following:¹⁴²

• CONTRACT¹⁴³ – Contributors may show that the will-maker agreed orally or in writing that they would be rewarded by will.
• ESTOPPEL¹⁴⁴ – Contributors may show that a will-maker encouraged them to believe or expect that they would receive an interest in the will-maker’s property, and they then provided a benefit to the will-maker in reliance on this expectation or belief.
• restitution (quantum meruit and quantum valebat) –

Contributors may show that the will-maker has been unjustly enriched because the will-maker
– requested the benefit which the contributors provided, and did not pay for it;¹⁴⁵ or
– knew (or should reasonably have known) that the contributors provided the benefit expecting to be paid, if the will-maker had a reasonable opportunity to reject the benefit and did not do so.¹⁴⁶

• • TRUSTS – Contributors may show that

– they meant to retain an interest in the property given as a benefit (under a resulting trust); or
– they and the will-maker acted in a way that shows that both meant to share property preserved or increased as a result of the benefit (under an implied or inferred trust);¹⁴⁷ or
– although there was no common intention, the will-maker remained silent in circumstances where it is reasonable that contributors share in the property they contributed to (under a constructive trust).¹⁴⁸

292 The general law applies both before and after the death of the person who has received the benefit. It is complex and not always certain in its operation. There are many claims with differing requirements. Moreover, as claimants in recent times have preferred to make testamentary promise claims, the general law is not often used as a basis for claims once will-makers have died.

293 STATUTORY CLAIM BASED ON TESTAMENTARY PROMISES – The general law mosaic of statute law, common law and equity is overlaid by special statutory rules which provide additional grounds for a contribution claim. Under the Law Reform (Testamentary Promises) Act 1949 a will-maker must pay the reasonable value of work or services to the person who provided them, if the will-maker has made a testamentary promise. To make a statutory claim a contributor must show that the will-maker has promised to reward them by will for providing work or services. The promise need not be an enforceable contract under the general law.

294 There are a number of problems with the present statutory claim.¹⁴⁹ Some of these problems go to basic policy.

295 It is a significant defect that the statutory claim can be made only by contributors who can show that they are “promisees”. This may well be too limiting for a statutory code (although under the present law a general law claim can be brought in the alternative). Moreover, the effect of a promise may vary. Nowadays courts may find that a promise gives rise to a contractual, an estoppel or a restitutionary claim. This classification makes a difference to the remedies available. The statute obscures this difference.

296 There are also technical problems. Even where a promise grossly undervalues the services provided, the court can award no more than the amount specifically promised.¹⁵⁰ Yet the converse does not apply – the court is not obliged to award the value of the promise, or to specifically enforce it, if an award of lesser value is “reasonable”. The principles on which the courts act in making this election are not made explicit in the statute. The present law also requires that a promise be to reward a contributor personally. The contributor may have asked instead that his or her own family be rewarded, and it could be said that “[t]here is a real sense in which provision for one’s dependants [or nominees] can be a reward for oneself.”¹⁵¹ The law does not permit the contributor to nominate who will get the benefit of the promise.¹⁵²

297 Another problem is that the Act allows the contributor to make a claim even where the contributor has provided a benefit unlawfully or under an illegal agreement or arrangement. The general law is less generous if a contractual or equitable claim involves illegality.¹⁵³

298 Despite these limitations and difficulties, contributors’ claims are frequently brought under the Law Reform (Testamentary Promises) Act 1949. This is due in part to the courts’ generous interpretation of the term “promise”. But the interplay between statute law and the general law is complex and artificial.

Proposal in outline

Example 15:

Contributor, now aged 64 and never married, had lived with her widowed mother, Will-maker, since her father’s death 34 years ago. Well before Will-maker’s health declined seriously 4 years ago, Contributor had (in addition to her full-time job as a nurse) increasingly run the household single-handed: cooking meals, shopping, cleaning and maintaining the house and grounds. When Will-maker’s health seriously declined in the last 4 years of her life, Contributor (now a superannuitant) devoted herself full-time to her mother’s personal care and comfort. Contributor’s care enabled Will-maker to stay happily in her own home in considerable comfort until she died at age 86. Contributor had, at least until she retired, paid weekly rent and board to her mother.
Will-maker’s will left Contributor $10 000 of her $250 000 estate. Contributor had believed that she would be better looked after in the will. At no time did Will-maker request the work or services, nor did she promise her daughter any reward in her will. But neither did she tell Contributor that she would not be able to remain in the house when Will-maker died.

299 Under the Commission’s proposals, Contributor would be entitled to an award (perhaps as much as the entire estate) for the reasonable unremunerated value of the work and services she performed for her mother over more than 20 years. For the estate to retain the benefit would, in the circumstances, be unjust (see para 312).

300 By comparison, under the present law, Contributor, being unable to show her mother had promised to reward her, could not bring a testamentary promise claim. She may well make a constructive trust claim, but her claim would be difficult to establish as she could not show contributions to specific property.

301 The proposed statutory provision for contributors will have no application to contributions between married couples or de facto partners. Their claims will be dealt with by resorting to the principles of equal sharing and support discussed in chapters 4 and 5.

Alternatives

302 The Commission considers the proposal to be preferable to the following alternatives:

• Amending the Law Reform (Testamentary Promises) Act 1949 to give greater clarity and consistency. This alternative might address some concerns (paras 294–297), for example:

– allowing the courts to make an award which is larger than the amount promised;
– allowing the contributor’s nominees to make claims (by analogy with the Contracts (Privity) Act 1982);
– applying the Illegal Contracts Act 1970 where services are rendered illegally.
But some deserving cases will still not be covered. Example 15 is one illustration as we have seen (para 298). Contributor in that case could not establish that there had been a promise. Further, the law of testamentary promises will still be inconsistent with the general law applying to will-makers before and after death. The confusion between contractual and restitutionary claims will remain.

• Restricting Law Reform (Testamentary Promises) Act 1949 claims to family members and leaving claims under the general law for others. This option recognises that formal legal arrangements between family members are unusual and may require special treatment. Family members especially will perform onerous duties under informal arrangements. This may be because the agreed arrangements become more onerous as the will-maker gets older or because of strong pressures brought to bear by the will-maker or other family members.

But there is a problem of definition. Often contributors will have had a very close association with the will-maker, but would not usually be considered “family” in the ordinary sense of the term, as meaning “kin”. Further, there is no strong reason why will-makers’ families should make contribution claims on different grounds from other contributors. The same principles of liability should apply even though the court will need to take into account the effects of a long-term association on the parties’ expectations.
There is no advantage in confusing provision made for the purpose of (a) supporting family and (b) rewarding valuable services for which the will-maker should in fairness pay. This confusion is already apparent in the existing law, although courts have sometimes advanced a distinction between services rendered as part of “normal family relationships” and those which are part of “much more than normal family relationships”, tending to discount contributions in the former case, because of their reciprocal character.¹⁵⁴ This ambiguity of purpose is most evident where claimants are de facto partners who at present cannot make support claims.¹⁵⁵ In the Commission’s view, claims for support should be addressed directly (as they are for spouses, de facto partners and dependent children: chapters 4–6).

• Repealing the Law Reform (Testamentary Promises) Act 1949 so that contributors could only claim under the general law as it would apply if both people were still alive. The present general law is complex and is not the preferred way of proceeding in New Zealand. It may not go far enough for the deserving contributors we have identified. In some respects, the criteria we propose, though based on established theory, are not yet accepted by the courts as appropriate rules in this particular context. Example 15 (para 298) is one instance where the present general law provides no remedy.

Reasons for the proposal

303 The Commission considers that the proposal

• ensures that people who have conferred benefits on the will-maker without appropriate recompense will be able to make a claim;
• includes cases where the will-maker has not made an explicit promise to reward the contributor, but where justice requires compensation;
• sets out clear principles for determining the size of awards and when they will be made, and, in particular;
• ensures that contribution claims are dealt with separately from claims based on need and recognition of parental duties.

304 The Commission’s proposal also sets outer limits on when claims should succeed. Awards cannot be made merely because:

• Claimants have been promised or believe that they will receive something under the will when they have given nothing in return. We do not propose any relaxation of the well-established rule that the courts do not assist people who have not given anything in return for the promises on which they rely.
• Claimants have conferred the benefit making it clear at all times that they do not expect to receive any kind of reward. The proposal is not a charter for claims by people who perform family and good-neighbourly services and later change their mind about not being paid. If benefits are represented as gratuitous, claimants should get what they consistently hold themselves out as wanting: nothing.
• Claimants have conferred a benefit where there is no express agreement and good reason to believe that the will-maker will not reward them for it. Where, for example, the will-maker does not know that the claimant is performing services, the will-maker has no opportunity to reject them and therefore should not ordinarily be liable to pay for them. Similarly, where the will-maker makes it clear to the claimant that nothing will be paid for the services, it is then unjust for the claimant to seek payment later.

305 There will always be difficulties in finding out what the intentions of the parties are. They can only be ascertained by looking at the nature of the services and any discussions which have taken place between the parties. But even if there are no express arrangements, courts should be permitted to make an award if services are substantial and the parties have not determined that the services will go unrewarded. Their silence may be caused not by that determination, but by the closeness of the relationship and their unwillingness to spell out terms which people bargaining at arm’s length would not hesitate to include.

Proposal in detail

306 Under our proposals, contributors will rely upon either an agreement or a promise, or the unjust enrichment of the will-maker.

307 AN AGREEMENT OR PROMISE

308 This provision may be compared with the present law under the Law Reform (Testamentary Promises) Act 1949. First, it follows that Act in providing that a promise does not necessarily have to be made before the benefit is conferred. It is sufficient that, at some point, the will-maker has seen the benefit as something for which recompense should be made. This rule is particularly important in cases where services begin at a low level, but gradually increase as the will-maker becomes older. The parties’ initial intentions may not be a reliable indication of whether the benefit should be paid for.

309 Second, the proposal departs from the Act, in that the Act limits promises to those which will be honoured in the will. It will be sufficient that the will-maker has promised recompense, but has not made it by the time he or she dies. The fact that performance of a promise has been deferred until after death, is a strong (though not invariable) indication that the parties are in a close relationship as family or friends. This makes it appropriate for the claim to be assessed alongside other testamentary claims. Further, since the principles of our proposed provisions are largely identical with those of the general law, there is no need to draw a sharp distinction between promises to leave property by will, and promises to make recompense in other ways.

310 Third, the proposal departs from the Act by requiring that the promise be express.¹⁵⁶ If there is clear evidence of a contribution in circumstances which make it just that the contributor be rewarded, courts under our proposals will have power to make an award without the need to find an “implied promise” which the facts of the case may not sustain. Further, as amounts awarded will normally be established by promises specifying rewards (see paras 319–321), courts should rely only on express promises, because it will be clearer whether or not will-makers made them, and what the effect of performing them is.

311 In some cases the testamentary promise will create a contract, legally enforceable apart from the proposed contribution right. In those cases, we propose that the contributor be permitted either to sue under the contract or to make the contribution claim. However, except in cases of ordinary commercial bargains, which do not involve family members or close associates, the court will have power to order that both claims be taken. They will then be heard concurrently according to the procedures laid down for testamentary claims (see paras 323–324).

312 THE UNJUST ENRICHMENT OF THE WILL-MAKER

313 In Example 15 (para 298) Contributor provided onerous unremunerated work and services for her mother over a period of 20 years. She had an expectation of a benefit under the will and Will-maker told her nothing to the contrary. At no time did Will-maker request the work or services provided, promise her daughter any reward in the will or pay her any money. Will-maker knew of the conferment of the benefit (rule 1) and did not inform Contributor that the benefit was unwanted or would not be paid for (rule 2). Having regard (in this case) to the application of rules 3(b) and 3(c), the court could make an award. The court might award Contributor the reasonable unremunerated value of the work and services she performed for her mother (at $25 000 per year for 10 years this would be the entire estate: see para 299).

314 Alternatively it might be said that the case comes within rule 3(a), though there is little evidence of what Will-maker knew about Contributor’s expectations. In most cases one would expect there to have been some discussion between mother and daughter about what would happen when Will-maker died. But an inference may be drawn from the fact that the mother said nothing at all, together with the size of the benefit Contributor conferred and her probable expectations as a daughter. This would be sufficient for the court to infer that the mother in all likelihood kept her intentions secret because she knew that Contributor would be disappointed.

315 REMUNERATED BENEFITS

316 This provision is of particular importance where the contributor and the will-maker are in a long-term relationship in the course of which benefits have been conferred both ways. In such cases the court ought not to look at a single transaction but the totality of the arrangement between the parties and contributions passing from one to the other.

317 ILLEGAL BENEFITS

318 As under the general law illegality in the conferral of a benefit should make the benefit non-compensable unless the court in its discretion orders otherwise.¹⁵⁷

319 AWARDS

Where the will-maker made a promise specifying the reward for the work or services provided, then the court would normally order that the specific promise be carried out according to its terms.

In any other case the court would normally award the contributor the reasonable unremunerated value of the work or services provided.

The court can in either case award a greater or lesser sum where there are circumstances arising, for example, out of

• the provisions of any arrangement or understanding between the parties,
• whether the arrangement was fair and reasonable when made, and whether it now operates fairly, and
• the time that has elapsed since the services were provided and any change in circumstances occurring after that time.

320 In general, if the will-maker promises a certain amount or particular property as the reward for the benefit conferred by the contributor, this will set the appropriate value of the award. Where no such promise is made, the court will be required to estimate the objective value of the services. There will be cases when the amount may need to be increased; for example, where the contributor has improved property years before the will-maker dies and that property has increased in value. There will also be cases when the award will need to be reduced; for example, where the will-maker has made an imprudent promise or has otherwise been imposed on by the contributor.

321 These provisions may be compared with the corresponding rules under the Law Reform (Testamentary Promises) Act 1949. In its original form, the Act required promises for specific sums and property to be carried out in full.¹⁵⁸ This was found to be too inflexible. In 1961 the Act was changed, so that in all cases the court awarded “such amount as may be reasonable” not exceeding the value of the promise.¹⁵⁹ We consider that this latter formulation is too open-ended and the upper limitation too strict. There should in general be a preference for awarding the promised amount. However, there may be circumstances, as set out above, where awarding the promised amount would be unjust.

322 FORM OF AWARD

323 RIGHTS UNDER THE GENERAL LAW OF CONTRACT AND RESTITUTION

324 This provision would be applied in cases where the contributor is a family member or close friend of the will-maker who would normally be expected to claim under the Commission’s proposed provisions. However, on the facts, the contributor may argue that the promise made by the will-maker is a contractual one. Our proposal will result in the matter being dealt with under the more informal procedures we envisage for testamentary claims. It will also encourage the court to take into account the wider considerations which follow from the close relationship between the parties; for example, the fact that both parties have given services to each other over an extended period.

325 The contributors’ claim will usually displace the law relating to claims based on the unjust enrichment of the will-maker. Yet if the enrichment occurred in the context of a strictly commercial transaction with parties who had no close personal connection with the will-maker, the court will be able to grant contributors special leave to make these other claims.

326 PRIORITY OF CONTRIBUTORS’ CLAIMS AND POWER TO PERMIT TRACING CLAIM

327 Appendix B sets out proposals for resolving the relative priorities of contributors’ claims competing with other claims and one another.

328 CONTRIBUTORS AND WELFARE

329 Like partners’ property divisions (see para 122), the contributors’ claim is a claim for property belonging to the contributor. When a person applying for means-tested welfare can make a contributors’ claim the amount of this claim should be taken into account, even if the claim is not actually made, in any welfare test of the person’s financial position.

330 Conversely, where it is the will-maker who is receiving social welfare benefits (eg, the residential care subsidy), an amount corresponding to the value of any contribution claim which could be made against the estate should be deducted from the will-maker’s assets. This has been recognised, to a certain extent, by the new administrative arrangements made by the Government for the financial means assessment of people in long-stay residential care. However, these new arrangements only apply in limited circumstances and require the concurrence of the will-maker in care and the making of an immediate disposition to honour the obligation (see Appendix D).

331 The claim should be recognised when the will-maker first goes into care. This recognition would not require the will-maker to make an immediate disposition to fulfil the obligation. We would prefer that the will-maker have the option of recognising the claim at that time. If the will-maker is unable or unwilling to recognise that the claim is valid, recognition by the Social Welfare Department should be conditional upon the contributor bringing proceedings to enforce the claim within a limited period after the will-maker’s death. In either event the claim should be counted as a liability in the assessment of the will-maker’s financial position on going into care.