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11 In this chapter the Commission explains in more detail why the changes it recommends are needed.
12 Some 27 000 people die in New Zealand each year.5 A significant proportion of those who die leave assets. Such statistics as we have show that a grant of administration is not always sought: courts each year make only around 13 000 grants (of probate or letters of administration). This may be because the estate is small in size or because property passes as a non-probate asset. Where, for example, the deceased and spouse owned a family home as joint tenants, the deceased’s interest passes automatically to the surviving joint tenant.
13 Estate sizes vary, but from work done in the 1980s it appears that around 65% of estates will be worth $41 000 or less in June 1997 terms, and 90% worth $171 000 or less. Of course the pattern of values in cases where claims have been worth pursuing is different. A study was made of 235 cases from 1984–1995 where children claimed against their parents’ estates under the Family Protection Act 1955.6 Of these, 52.7% (124) of the estates were worth less than $150 000.
14 Under the present law, section 5 of the Matrimonial Property Act 1963, a widow or widower may claim a share of a deceased’s property. The share is based, usually, on the contribution that the widow or widower made to the property. When introducing the Matrimonial Property Bill 1975 to the House of Representatives, the Minister of Justice, the Hon Dr AM Finlay qc, said:
Broadly speaking, the approach of the present law is to give a wife some rather vague and undefined rights in her husband’s property, if she can prove them. By way of contrast, the approach of this Bill is to give each spouse a share in the matrimonial property as a whole, as of right. (3 October 1975, (1975) 402 NZPD 5115)
15 For spouses whose marriages ended on divorce on or after 1 February 1977 the Matrimonial Property Act 1976 introduced comparable (usually equal) sharing of both spouses’ property.7 It was generally accepted that the Act should shortly afterwards be applied as well to matrimonial property on the death of a spouse.8 This has not occurred. Despite courts more and more often exercising their discretion under the 1963 Act to give widows and widowers results that approximate those for divorced spouses under the 1976 Act, the anomaly remains that a widow can be in a worse position than a divorcing spouse.9
16 As long ago as 1983 a High Court judge felt moved to say:
I cannot see why the entitlement of a widow to share in the assets of the marriage partnership which has been determined by her husband’s death should be any less than that of a wife whose partner is still alive and whose marriage partnership has been determined by a quarrel or by desertion. (In Re Judge (unreported, 3 March 1983, High Court, A52/81))
17 The Matrimonial Property Act 1963 s 5 needs urgent review. Section 5 does not require that both spouses’ property be brought into account. Nor does it make clear whether a property claim is in addition to or instead of any property the widow or widower receives from an estate or as a non-probate asset.
18 In relation to the financial support of spouses, the Family Protection Act 1955 also needs urgent review. At present it fails to integrate properly financial support (that takes into account fully the consequences for a spouse of a marriage)10 with other classes of claim available to a spouse.
19 In 1975 the then Minister of Justice accepted that the law governing de facto partners’ property needed to be changed. As introduced to the House of Representatives the Matrimonial Property Bill 1975 was meant to be applicable as well to the property of de facto partners. In the paper explaining the Bill the Hon Dr AM Finlay qc said that
[w]hile the Government acknowledges the argument that extending the law in this way might be thought to diminish the status of marriage, we are far from convinced that this would be its effect. Indeed, it might equally well be said that without such a provision men wishing to avoid sharing their property and earnings would be discouraged from entering into lawful marriage and tempted to form irregular liaisons. On practical and humanitarian grounds there seems everything to be said for allowing justice to be done, and the interests of children indirectly protected, and the opportunity for exploitation diminished, by legislative intervention. ((1975) AJHR E.6, 13)
20 Again, this necessary change has not occurred.11 A widespread misconception resulted: that the 1976 Act applies already to de facto partners.12 This fact weakens significantly the argument that de facto partners know and (at least implicitly) approve of their lack of legal protection so that their autonomy would be compromised by applying a statutory regime of (usually equal) sharing.
21 In the law of constructive trusts courts recognise already that “the ordinary features of a shared life” taken alone usually make it just for property to be shared. Courts have developed trust law to recognise (but not start by treating as equal) de facto partners’ contributions to property (if not to partnerships with will-makers). But ascertaining de facto partners’ rights to property remains expensive and slow, and results are difficult to predict. Uncertainty now surrounds the way the contributions of partners (including those of the same sex)13 will be assessed, and partners have no support claim. Judges have acknowledged that the legislature might more properly assess and express social expectations in this field, and might do so in a more comprehensive way.14
22 Agreements, for several reasons, fail to protect de facto partners adequately. Heterosexual partners who are unwilling to marry already can,15 but usually do not, protect their property rights or financial support through contracts. Most partners lack the foresight or means, their values or culture may be opposed to a contract, or a stronger partner can oppose the suggestion. A 1994 House of Lords decision in a related context recognised that
[t]he “tenderness” shown by the law to married women is not based on the marriage ceremony but reflects the underlying risk of one cohabitee exploiting the emotional involvement and trust of the other. Now that unmarried cohabitation, whether heterosexual or homosexual, is widespread in our society, the law should recognise this. Legal wives are not the only group which are now exposed to the emotional pressure of cohabitation. (Barclay’s Bank Plc v O’Brien [1994] 1 AC 180, 194 HL(E))
23 The number of de facto partners in New Zealand is still growing in a significant way.16 From the statistics we have, we can expect around 1600 people who die each year to be in a de facto partnership. Over 40% of de facto couples have children, compared to 60% of married couples. Other statutes have recognised the “important legal, public policy and demographic implications” of the increases in the numbers of de facto partners.17
24 New Zealand’s law concerning de facto partners’ property and support has not kept pace with that of Australia, Canada and England. The general tendency in these jurisdictions has been to make provision for de facto partners (including those of the same sex)18 in legislation dealing with lifetime claims, or claims against deceased partners’ estates, or both.19
25 De facto partners are as entitled as married partners to a statutory regime to disentangle their financial affairs when one of them dies. The inclusion in the regime recommended by the Commission of de facto partners is both efficient and just. The draft Act the Commission recommends is of course also consistent with the requirements of the New Zealand Bill of Rights Act 1990 s 19 and Human Rights Act 1993 s 21.20
26 Finally the responses to the discussion paper’s proposals for the property division (endorsed by 56.2% of respondents) and support claim (endorsed by 64% of respondents), show that there is considerable community support for now treating de facto partners in an even-handed manner.
27 Children of any age can now apply for “adequate provision” for their proper maintenance and support under the Family Protection Act 1955.
28 Overseas jurisdictions have restricted claims by children to younger and disabled children, both for clarity and to accord better with community expectations about the limits of parental responsibility. For example, in 1996 the legislature in the American state of Louisiana, following a referendum, altered the state Constitution to limit forced heirship. It is now limited to children under 24 years of age and children of any age who, because of mental or physical disability, cannot care for themselves or their property.21 On 28 February 1997 in the Canadian province of New Brunswick, Royal Assent was given to a similar (though lesser) amendment to the Provision for Dependants Act 1991 s 3. When the Amendment is proclaimed, it will clarify both will-makers’ duties and, for claimants, when claims are worth making.22
29 There is now a significant inconsistency between the laws that apply before and after the death of a will-maker. By contrast to the law that applies after death (the Family Protection Act 1955), will-makers’ duties during lifetime to support children financially are confined to children under 19 years of age. The law that applies to will-makers before death now also makes provision for support claims by a stepchild if a step-parent has assumed, in an enduring way, the responsibilities of a parent of that stepchild.23 But on death stepchildren’s claims are limited. Similarly, while will-makers are not required by law during their lifetimes to support parents or grandchildren, on death these more distant relatives may (few actually do) claim financial support. A significant proportion (60%) of those who commented on the financial support claim for minor and disabled children proposed in the discussion paper supported the basis and priority suggested for these claims.
30 In relation to claims by adult children, the manner in which courts apply the Family Protection Act has changed considerably since 1955, but without any express parliamentary approval. Two cases, 40 years apart, illustrate this change. In the first case the judge said:
Now, here is a testator who seemed to be disposed to think that he would like to leave the capital of his estate to charities, but he recognised his immediate obligations to his widow and also his obligations to his son and his daughter. I do not say it is a just will. On the contrary, I think it is an unjust will, but what right have I to intervene in the guise of making an order under this Act? As I understand the matter, I have no jurisdiction to do so unless I am first satisfied (whatever my views are of the wisdom or otherwise of the testator’s provisions) that there is a need for maintenance. And I just cannot say that in the case of the son – we will deal with his case first of all – because, while I think a father should leave a substantial part of his estate to his immediate relatives, other people might think otherwise, and this testator, being free to make his will as he chose, subject only to the duty to make provision for his son if he was not sufficiently provided for, in my view, was free to make the will he did. (In Re Blakey [1957] NZLR 875, 877)24
31 In the second case, which is only one recent illustration of the general pattern,25 the adult sons who claimed successfully were in no financial need whatsoever. The judge said that:
The approach which I must take is that Mr Forward was entitled to leave his property as he chose, subject to his not being in breach of moral duty to any of his dependants. If I find a breach of moral duty, the award which I make must be no more than is necessary to remedy the breach. Bearing in mind that it is now firmly established that the Family Protection Act is concerned with moral and ethical considerations as well as purely financial ones, I am satisfied in this case that a wise and just father ought to have left something to his two sons. His estate was of such a size that he could readily recognise them in this way without any risk of failing to fulfil his duty to his widow. (Re Forward (unreported, 11 December 1996, High Court, Christchurch, M 398/91), 6)
32 The effect of the cases, Peart concludes, is that
it is no overstatement to say that children nowadays have a right to share in their parent’s estate, irrespective of age or financial position. ((1996) 10 Int J of Law, Policy and the Family 105, 118)
Parents’ duties during their lifetimes to provide financial support to minor and disabled children and former spouses are widely accepted and clearly defined. By contrast, claims by adult children under the Family Protection Act 1955 are in urgent need of review.26
33 The test of a will-maker’s “moral duty” to adult children has never been expressly approved by Parliament as a test for entitlement.27 The test assumes that there is general acceptance of the exact content of a will-maker’s moral duty to adult children. No social inquiry the Commission knows about supports this assumption.28 The test also makes a second incorrect assumption: that New Zealand society is culturally and ethnically homogenous.29 This assumption of homogeneity may make it difficult for will-makers and their families to have their different ethnic and cultural values recognised, respected and protected.30 The consequences of the absence of any norm of this kind are that a deceased’s perception of his or her moral duty is overruled by a particular judge’s assessment of current social norms. This assessment is necessarily based on the judge’s personal sense of the fitness of things, shaped by such factors as religious and cultural background, family history and attitudes, and personal experiences.
34 The law has become unclear in its purposes. Failure by the courts to articulate (beyond the obscure concept of moral duty) why precisely they are altering a will-maker’s arrangements results in a situation where wills are varied according to the subjective values of the particular judge who chances to deal with the matter. This makes it difficult to assess whether the court’s distribution is more commendable than the will-maker’s. There are appreciable differences in the awards made to adult children. These differences mean that conscientious will-makers find it hard to know and comply with the requirements of the law, and bring the law into disrepute. Even though it is not clear now (if it ever was) that the reasons for court intervention are understood or widely accepted by the wide variety of communities and families in New Zealand, claims by adult children succeed in a very high percentage of cases.
35 A very high proportion (almost 90%) of those who commented on claims by adult children accepted the Commission’s analysis that the present law is seriously deficient.31
36 A contributor is any person who, during a deceased’s lifetime, contributes a benefit (eg, money, property, work or services) to the deceased. Contributors may be part of a deceased’s family, but need not be. Usually, however, they will have a close relationship with the deceased. Otherwise they are unlikely to wait until the deceased’s death before they are paid for their services. People who contribute in this way should have a specific statutory claim.
37 Under the general law32 contributors who want to be paid for the benefit must bring a claim under one of the following:
– requested the benefit which the contributors provided, and did not pay for it; or
– knew (or should reasonably have known) that the contributors provided the benefit expecting to be paid, if the deceased had a reasonable opportunity to reject the benefit and did not do so.
– they meant to retain an interest in the property given as a benefit (under a resulting trust); or
– they and the deceased 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); or
– although there was no common intention, the deceased remained silent in circumstances where it is reasonable that contributors share in the property they contributed to (under a constructive trust).
38 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.
39 The general law (a 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 deceased must pay the reasonable value of work or services to the person who provided them, if the deceased made a testamentary promise. To make a statutory claim contributors must show that the deceased promised to reward them by will for providing work or services. The promise need not be an enforceable contract under the general law.
40 There are a number of problems with the present statutory claim. Some of these problems go to basic policy.
41 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.
42 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. 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 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, because “[t]here is a real sense in which provision for one’s dependants [or nominees] can be a reward for oneself”.33 Even so, the present law does not permit the contributor to nominate who will get the benefit of the promise.
43 Another problem is that the 1949 Act does not expressly prohibit recovery on claims where the contributor provided a benefit unlawfully or under an illegal agreement or arrangement.34 The general law is less generous if a contractual or equitable claim involves illegality.
44 Despite these limitations and difficulties, contributors’ claims are frequently brought under the 1949 Act. 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.
45 Estate administration is more efficient if claims under the three (1963, 1955 and 1949) Acts can be heard in a single proceeding.35 If all bases for adjusting succession are set out clearly in one Act the law should also be easier to find, understand and apply. Where clearer law does not prevent a dispute arising, it may limit the scope of a dispute, or encourage non-court resolution of that dispute, often faster and less expensively than a court hearing. The draft Act can also improve the machinery in the present law by:
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URL: http://www.nzlii.org/nz/other/nzlc/report/R39/R39-2.html