M v Lyon & Ors [2022] NZCA 559

M v Lyon & Ors [2022] NZCA 559 [17 November 2022]ORDER SUPPRESSING THE NAME OF M AND ANY IDENTIFYINGINFORMATION REGARDING HER (AS DEFINED IN S 11C OF THEFAMILY COURT ACT 1980).IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA357/2022[2022] NZCA 559BETWEEN M (CA357/2022)ApplicantAND DAVID ANTHONY LYON, E AND S ASEXECUTORS AND TRUSTEES OF THEDECEASED'S ESTATERespondentCourt: Gilbert and Katz JJCounsel: W G C Templeton and R M N Marsich for ApplicantP L Rice for RespondentsJudgment:(On the papers)17 November 2022 at 9:30 amJUDGMENT OF THE COURTA The application for leave to bring a second appeal is declined.B The applicant must pay one set of costs to the respondent for a standardapplication on a band A basis, with usual disbursements.C We make an order suppressing the name of M and any identifyinginformation regarding her (as defined in s 11C of the Family Court Act1980).____________________________________________________________________REASONS OF THE COURT(Given by Katz J)Introduction[1] M (now aged 14) commenced proceedings in the Family Court through herlitigation guardian, seeking provision from her paternal grandfather's (the deceased's)estate under the Family Protection Act 1955 (the Act). M alleges that the deceasedfailed to discharge his moral duty to make adequate provision in his will for her propermaintenance and support.1[2] Judge Druce found that the deceased had not breached his moral duty to M(the Family Court decision).2 M appealed that decision to the High Court. Harvey Jdismissed the appeal (the High Court decision).3 M then applied to the High Court forleave to bring a second appeal. Harvey J declined to grant leave (the leave decision).4M now applies to this Court for leave to bring a second appeal.5 The application isopposed by the respondents, who are the executors and trustees of the deceased'sestate.Background[3] There is no material dispute between the parties as to the factual basis for theseproceedings. In the summary that follows, we have accordingly drawn from theFamily Court and High Court decisions.[4] The deceased died on 7 April 2019. He is survived by E, his wife of 53 years.The couple had three sons:(a) A — the father of M.(b) P — who predeceased his parents, leaving two young children.(c) J — a successful businessman living overseas. J has been estrangedfrom his parents since he was a teenager.1 Family Protection Act 1955, s 4. See generally Williams v Aucutt [2000] 2 NZLR 479 (CA);Little v Angus [1981] 1 NZLR 126 (CA); and Vincent v Lewis [2006] NZFLR 812 (HC).2 Gilchrist v Lyon [2021] NZFC 8409 [Family Court decision].3 Gilchrist v Lyon [2022] NZHC 506 [High Court decision].4 Gilchrist v Lyon [2022] NZHC 1516 [leave decision].5 Pursuant to the Senior Courts Act 2016, s 60(2).[5] The deceased and E executed mirror wills almost contemporaneously inFebruary 2019. Those wills provided for the surviving spouse to receive thewill-maker's residuary estate, should they survive the deceased for 14 days. If thesurvivor did not live that long, their estate was to be divided into two shares with oneshare going to A and the other share going to the family trust (the Laurie Trust) for thebenefit of P's children. J is not a beneficiary under his parents' wills and makes noclaim on his father's estate.[6] At the time that the deceased made his will, A was a property developer. A wasbankrupted after his father's death. E then made a new will providing that if Apredeceased her or continued to face issues with bankruptcy he would be removed asa beneficiary and what was previously his share of her estate would be left to theLaurie Trust, for the benefit of M.[7] Further relevant background is helpfully set out in the Family Court decisionas follows:6[5] [A] has lived in the Auckland area maintaining close links with hisparents. He was married and [M] is the sole child of his marriage. [M] hasbeen in the shared care of her parents since her parents' separation. [M]'smother works part-time and is said to be in limited financialcircumstances. There is no direct evidence of [M]'s mother's or maternalgrandparents' financial positions and their likely ability to contribute to [M]'ssupport and maintenance in the future.[6] P commenced a relationship with [his wife] in 2007 and the couplemarried in 2009. They have two children P unexpectedly died on 9November 2018 [P's wife] and the children remain living in their familyhome in Mt Eden which is believed to be owned by a family trust and theyretain a family bach acquired prior to P's death. [P's wife] is a [healthprofessional] with her own suburban practice, working six days per week.[7] The Laurie Trust was settled by the deceased on 31 March 1995. Priorto his death, the trustees of the trust were the deceased, [E] and David Lyon,[a] retired lawyer. The trust deed provides for the three children and [thedeceased and E] to be final beneficiaries and for all grandchildren (andspouses of children) to be discretionary beneficiaries. The assets of the trustin April 2019 were close to $2 million. As at 31 March 2020, the trust's netassets are reported to have been $1,950,728.26.[8] On 8 February 2019, 10 days prior to the deceased executing his will,the trustees resolved in writing to pay [M]'s private school fees from Term 12019 for such time as she remained a pupil at the school. The commitment6 Family Court decision, above n 2.amounts to close to $28,000 per annum and has since continued to be paid(albeit complicated by [A]'s preferences as to the method of payment). It hasbeen more recently confirmed by [E] that she has provided the trustees withher Memorandum of Wishes that the trustees support all three grandchildrenthrough their secondary and tertiary education with the explicitly stated goalof enabling each grandchild to complete their education without incurring anystudent loans.[9] The deceased's estate is reported by the executors to have been worth$1.561 million as at 31 March 2020. [10] [A] provides evidence that he and his father shared a common interestin property development and discussed their business matters regularly. Thereis evidence of the deceased making advances to, and investments in, both [P]and [A]'s business entities particularly in earlier years. It is therefore likelythat the deceased was relatively well informed of [A]'s difficult financialposition from 2008 onwards. It is very likely that he would have known that[J] had lent [A] substantial monies following the 2007–2008 downturn andthat in October 2018 [J] had made a formal written demand to [A] for fullrepayment. [J] obtained a summary judgment order in the AucklandHigh Court for US$865,123.72 (together with interest) on 8 May 2019, justone month after [the deceased's] death.[11] On the other hand, there is no evidence the deceased or his friend andco-trustee, Mr Lyon, foresaw [A] facing bankruptcy. The best evidence of thisis that the deceased's will provided that in the event of [E] pre-deceasing him,the estate was to be divided with [A] receiving one half and the other halfgoing to the Laurie Trust for the benefit of [P's] children If [A]'sbankruptcy had been foreseen, then the family trust would very likely havebeen used to protect [A]'s (and through [A], [M]'s) inheritance.The Family Court decision[8] The Family Court Judge was not satisfied that the deceased had breached hismoral duty to M by failing to make adequate provision for her in his will. He foundthat:(a) With the exception of relationships with J, this was a close and lovingfamily. There was no evidence that the deceased or E preferred anygrandchild over another, but rather that all three grandchildren weresaid to have had close and loving relationships with their maternal andpaternal grandparents.77 Family Court decision, above n 2, at [39].(b) In April 2019, the deceased faced no known circumstances that wouldadversely impact on his grandchildren's inheritance expectations if heprovided solely for E upon his death.8(c) It was likely that the deceased saw A as being able to pass on his shareof his inheritance to M in due course if E did not survive him, and, ifshe did survive him, of her passing on the residue of her estate to A andto P's children upon her death.9(d) Any risk to M's inheritance had been avoided by the deceased's estategoing to E and her new will dated 2 December 2020, the terms of whichprotected M's inheritance in the event A continued to face bankruptcyissues at the time of E's death.10(e) In the context of a "moderately sized estate" the deceased had a primaryduty to provide for his wife who may require financial support andmaintenance as her ability to care for herself would understandablyreduce over time.11(f) Any moral duty to include bequests to M had been discharged by theLaurie Trust's resolution to pay for her private school secondaryeducation, a not insignificant expense.12The High Court decision[9] After summarising the relevant legal principles Harvey J referred toBlack v Black, a decision of the Full Bench of the High Court (Whata andGendall JJ).13 In the opening paragraphs of that decision, the Court stated as follows:[1] This is an unusual and perhaps unique case which involves a familyprotection claim by natural children (and one of the grandchildren)challenging their deceased father's will which left all his estate to his survivingspouse, the mother and grandmother of the claimants. Unlike the frequently8 At [40].9 At [41].10 At [45].11 At [50].12 At [50].13 High Court decision, above n 3, at [61], referring to Black v Black [2014] NZHC 1478, [2015]NZFLR 9.seen second-marriage situation where natural children challenge aparent's will which leaves assets to a step-parent spouse, here the contest isbetween the biological or natural children and grandchildren and theirestranged mother/grandmother.[2] In the usual case involving an ordinarily harmonious family situation,s 4 Family Protection Act 1955 (the Act) is not engaged where a testator has,by leaving his estate to his surviving spouse thereby left nothing to thechildren of their marriage/relationship. But, on the quite exceptional facts ofthe present case, where the test as to whether a testator has breached his moralobligation to his children is clearly met, the Court is required to interfere.[10] Harvey J then stated that:14[64] It is well settled that the scheme under ss 3 and 4 of the FamilyProtection Act necessitates a fact specific approach to the question of moralduty routed in the circumstances of the case. However, Black v Black isauthority for the point that, in the ordinary course of events, in the absence ofunique circumstances imposing a particular moral duty on the grandparent toprovide for their child or grandchild, there will be no breach of the duty wherethe grandparent provides only for the surviving spouse.[65] In addition, s 3(2), presumably, reflects the fact that a Court mustconsider the position of the grandchild separately from that of their parentwhere their positions conflict. A parent's circumstances, such as bankruptcyin this case, may mean that any award in the parent's favour, either under thewill or under the Act, will not automatically revert eventually to thegrandchild. Where the grandchild's position may clash with that of theirparent, the scope of the testator's moral duty must then consider that dynamicand adjust for it accordingly.[11] The Judge identified the relevant question as being "whether a wise and justtestator standing in the deceased's shoes would have made separate provision for M".15He concluded that such a testator would not have, based on the following key factors:(a) The strong prospect M had of an inheritance from her grandmother.16(b) All other relevant family members who might provide for M, with theexception of the deceased, were living.17(c) With the exception of J, the family maintained close relationships. Mhad (and has) a close relationship with E, and there was no reason for14 High Court decision, above n 3.15 At [66].16 At [66].17 At [68].the deceased to suspect that a portion of the estate received by E wouldnot pass to M in due course.18(d) There was no evidence to suggest that M did not also stand to inheritfrom her mother and the maternal side of her family, either directly oreventually as a future successor to her mother.19(e) A grandchild has an expectation of benefitting from both parents as wellas both grandparents, whereas a child has only their parents to expectto benefit from. Accordingly, the content of a moral duty to agrandchild is notably different to that of a moral duty to a child:20This significant difference inevitably impacts on both theexistence and the extent of any moral duty owed to agrandchild in such circumstances as are evident in this case,particularly when the other three grandparents and bothparents are living.(f) With the deceased making his will while in hospital (and shortly beforehis death), there was little to no risk of his wife predeceasing him, so asfor half of his estate to go to A and become exposed to creditors.21(g) A had not been adjudicated bankrupt at the time of the deceased's death.In addition, at some point in the future he will be discharged frombankruptcy:22While not strictly relevant to this assessment, the fact that thedeceased's wife wrote a will the year of his death, followingA's bankruptcy, which moved funds for M into theLaurie Trust so as to protect them, has borne out the course ofaction which the deceased could reasonably have anticipatedwould occur. E would survive him and then make provisionfor M. This was a reasonable assumption and one whichgrandparent testators make in the vast majority of cases inNew Zealand.(h) The deceased had made particular provision through the Laurie Trustfor M's education, and she remained a discretionary beneficiary of18 At [66] and [68].19 At [68].20 At [71].21 At [66].22 At [67].that trust.23 Harvey J noted the Court of Appeal's finding inFlathaug v Weaver that there is no reason why in a proper case adiscretionary entitlement under a trust cannot be taken into account.24Leave to bring a second appeal — legal principles[12] The test for granting leave to bring a second appeal to this Court is wellestablished. The appeal must raise some question of law or fact capable of bona fideand serious argument in a case involving some interest, public or private, of sufficientimportance to outweigh the cost and delay of a further appeal. As this Court said inWaller v Hider:25Upon a second appeal this Court is not engaged in the general correction oferror. Its primary function is then to clarify the law and to determine whetherit has been properly construed and applied by the Court below. It is not everyalleged error of law that is of such importance, either generally or to theparties, as to justify further pursuit of litigation which has already been twiceconsidered and ruled upon by a Court.When the disputed matter is entirely or largely a question of fact the task ofthe applicant is harder. An issue of fact in a matter falling within thejurisdiction of an inferior Court will seldom be of public importance. It isbetter that we make no attempt to define the circumstances in which a factualcontest can be taken to have private importance but obviously it may do so ifthe amount at stake is very substantial or the decision reflects seriously on thecharacter or conduct of the would-be appellant or, the judgment below hasspecial consequences (for example, bankruptcy) for the losing party. Eventhen, however, leave cannot be anticipated if the applicant is seeking to disturbconcurrent findings of fact in the lower Courts.Does the proposed appeal raise some question of law or fact capable of bona fideand serious argument?[13] A number of proposed grounds of appeal are identified in the notice ofapplication for leave to appeal. A further proposed ground of appeal was referred toin the submissions of counsel for the applicant. We address each proposed ground ofappeal below.23 At [68].24 At [70], citing Flathaug v Weaver [2003] NZFLR 730 (CA) at [36].25 Waller v Hider [1998] 1 NZLR 412 (CA) at 413. See also Butch Pet Foods Ltd v Mac Motors Ltd[2018] NZCA 276, (2018) 24 PRNZ 500 at [4].Is it seriously arguable that the Judge erred by (a) failing to determine whether thedeceased had breached his moral duty as at the date of his death and (b) finding thatthe deceased could have anticipated that his wife would make a (new) will to makeprovision for M?[14] The Judge is said to have erred by failing to properly focus on whether thedeceased had breached his moral duty as at the date of his death. Rather, the applicantsubmits, the Judge wrongly took into account the new will made by E, after thedeceased's death. As mentioned, E's new will removes A as a beneficiary (if hecontinues to face bankruptcy issues) and instead gifts his former share to theLaurie Trust, for M's benefit. The applicant further submits that the Judge erred infinding that the deceased could reasonably have anticipated that E would act in such away. These two issues are closely related, and we will therefore consider themtogether.[15] The applicant relies in particular on the passage of the High Court decision setout at [11[11](g)] above. In our view, that passage, viewed in the context of thejudgment as a whole, does not support the contention that the Judge relied on futureevents in assessing whether the deceased had breached his moral duty to M. Rather,the Judge determined whether a breach of moral duty had occurred with reference tothe situation as at the date of the deceased's death. He articulated the relevant questionas being "whether a wise and just testator standing in the deceased's shoes would havemade separate provision for M".26 Further, the Judge expressly acknowledged that thelater will made by E was not "strictly relevant" to such an assessment.27[16] The quoted passage is arguably somewhat ambiguous, however, as to preciselywhat the "deceased could reasonably have anticipated would occur" after his death.28Considered in context, however, we understand the Judge to be saying that thedeceased could have reasonably anticipated that in the event of a material adversechange in circumstances (such as A's bankruptcy) E would take steps to protect M,who would clearly be prejudiced if her father's inheritance were to go to his creditors.We agree that the deceased could reasonably have anticipated such a course, given theclose relationship between M and her grandmother (and the fact that it is inherently26 High Court decision, above n 3, at [66].27 At [67].28 At [67].unlikely that a parent would prefer the interests of their child's creditors over those oftheir child or grandchild).[17] In any event, as the applicant emphasises, whether the deceased breached hismoral duty to M must be assessed as at the date of his death in April 2019. On theJudge's findings, the deceased faced no known circumstances at that time that wouldadversely impact on his grandchildren's inheritance expectations if he provided solelyfor E upon his death. The reasoning underpinning that conclusion is robust and, in ourview, it is unlikely that it could be successfully challenged on appeal.Is it seriously arguable that the Judge erred by relying on E's subsequent will, giventhat it provided for M's inheritance to be held in a discretionary trust?[18] The applicant submits that the Judge erred in taking into accountE's subsequent will, given that it provided for M's inheritance to be held in adiscretionary trust in which she had no exclusive benefits or legal certainty.29 Anuncertain future entitlement could not satisfy the deceased's moral duty.[19] We have previously rejected the submission that the Judge relied on futureevents (specifically E's subsequent will) in assessing whether the deceased hadbreached his moral duty to M. Rather, the Judge correctly assessed whether thedeceased breached his moral duty to M as at the date of his death. The provisions ofE's subsequent will are therefore irrelevant to the discharge of the deceased's moralduty to M. It can only be relevant to the discharge of E's moral duty to M, which isan issue for a future time (if at all).Is it seriously arguable that the Judge was led into error as a result of his reliance onBlack v Black?[20] The applicant makes two related submissions under this head:(a) The Judge misinterpreted and/or placed undue reliance on the"generalised statement" in Black v Black that in "ordinary course" ofthe "usual case involving an ordinarily harmonious family situation"29 The applicant relies on the cases of Flathaug v Weaver, above n 24; and Re Hardie [2002] NZFLR229 (HC).there will be no breach of a moral duty where the grandparent providesonly for their surviving spouse.30 As a result, the Judge inappropriatelylimited the exercise of the wide discretion available to the Court indetermining whether there has been a breach of moral duty.(b) In any event, this case does not fall within the scope of the "usual case"identified in Black v Black, as one of the deceased's three sons, J, isestranged from the family and there has been "significant dissentamongst all the siblings for some years".[21] In relation to (a) above — assessing whether there has been a breach of moralduty is an evaluative exercise, rather than an exercise of discretion. The Judge wasrequired to undertake that exercise with reference to the circumstances existing as atthe date of the deceased's death. It is apparent from his judgment that he did so. Thereis nothing to suggest that he inappropriately relied on the observations made inBlack v Black to find that there had been no breach of moral duty, avoiding the needfor any case-specific analysis.[22] In relation to (b) above — the fact that J was estranged from the family is oflittle or no relevance on the facts of this case. J has made no claim to his father's estateand the issue of whether the deceased has breached any moral duty to J does not arise.The issue is solely whether the deceased has breached his moral duty to M. Whenassessing that alleged breach, the Judge was correct to focus on the familyrelationships between M, her father A, and her grandparents (the deceased and E). Ofthose, the key relationship was between A and M. If that relationship was "ordinarilyharmonious" (and there is no suggestion that it was not) it was reasonable for thedeceased to assume that A would ultimately inherit half of his parents' estate(as provided for in their mirror wills) and M would benefit indirectly from that. Asthis Court observed in Re Horton (deceased):31 the need (if any) of grandchildren for provision must be measured in thelight inter alia of the ability of their own parents to provide for them.30 See Black v Black, above n 13, at [2].31 Re Horton (deceased) [1976] 1 NZLR 251 (CA) at 255.[23] Fisher J's observations in Fraser v O'Grady are also apt:32... it is often difficult for a grandchild to establish a claim where thegrandchild's parent is a living child of the deceased. As a starting point oneexpects that the bounty for that particular family will filter down to the secondgeneration via the first. But it is no more than a starting point and it is easilydeparted from whenever there is a reason for doing so.[24] In addition, M's close relationship with her grandmother E provided a furtherlayer of protection in the event of a material adverse change of circumstances, assubsequently occurred with A's bankruptcy.[25] It is accordingly not seriously arguable, in our view, that the Judge made eitherof the alleged errors set out at [20](a) and [20](b)] above.Is it seriously arguable that the Judge erred by stating that there was a notable andsignificant difference in the content of the moral duty owed to a grandchild as opposedto that owed to a child?[26] In the course of considering the relevance of the provision that the deceasedhad made for M through the Laurie Trust for M's education, and the fact that sheremained a discretionary beneficiary of that trust, the Judge distinguished the case ofRe Hardie (relied on by counsel for M) as follows:33[71] M's situation and the family trust is quite different. Her father is nota trustee and being minors, neither is she nor her two cousins. Moreover, asmentioned, the content of a moral duty to a grandchild is notably different tothat of a moral duty to a child. Whereas the child has only their parents toexpect to benefit from, the grandchild has an expectation of benefiting fromboth parents as well as both sets of grandparents. This significant differenceinevitably impacts on both the existence and the extent of any moral dutyowed to a grandchild in such circumstances as are evident in this case,particularly when the other three grandparents and both parents are living.[27] The applicant submits that the Judge erred in stating that there is a notable andsignificant difference in the content of the moral duty owed to a grandchild as opposedto that owed to a child.32 Fraser v O'Grady HC Auckland M262/96, 20 May 1997 at 4.33 High Court decision, above n 3.[28] If the Judge was intending to say that the content of a moral duty to agrandchild will (regardless of individual circumstances) always be notably differentto that of a moral duty to a child, then it is seriously arguable that he was in error.When the passage relied upon by the applicant is read as a whole, however, it appearsthat the Judge was simply saying that parents will tend to have a greater moral dutytoward their children than their grandchildren in circumstances where (as here) agrandchild's parents and their other grandparents are still living. Such an observationis uncontroversial (as counsel for the applicant accepted) and is consistent with thecases referred to above at [22] and [23] above.[29] The only criticism that can realistically be made of the relevant passage is thatthe qualifier "generally" or "ordinarily" should have been added to the observationthat "the content of a moral duty to a grandchild is notably different to that of a moralduty to a child". It is apparent from the judgment as a whole, however, that the Judgeunderstood that the assessment of moral duty is always fact specific, and that heundertook the assessment in this case on that basis. The Judge expresslyacknowledged, for example, that he was required to undertake "a fact specificapproach to the question of moral duty routed in the circumstances of the case".34 Hefurther observed, referring to the Act, that:[65] In addition, s 3(2), presumably, reflects the fact that a Court mustconsider the position of the grandchild separately from that of their parentwhere their positions conflict. A parent's circumstances, such as bankruptcyin this case, may mean that any award in the parent's favour, either under thewill or under the Act, will not automatically revert eventually to thegrandchild. Where the grandchild's position may clash with that of theirparent, the scope of the testator's moral duty must then consider that dynamicand adjust for it accordingly.Conclusion[30] We have not been persuaded that the proposed appeal raises questions of lawor fact capable of bona fide and serious argument. Family protection claims such asthis are intensely fact specific. The proposed appeal does not raise any issues of widerimportance or engage with any novel or important principle of law that requires34 At [64].clarification. We do not consider that the private importance of the appeal to M canjustify the cost and delay of a further appeal on the basis of the proposed grounds.[31] Finally, we note that publication of the Family Court decision is restricted bys 11B of the Family Court Act 1980 as M is under the age of 18. Statutory suppressiondoes not, however, automatically apply to this judgment. It is obviously appropriate,however, given M's age, that publication of this judgment also be restricted. Weaccordingly make a suppression order below, to protect M's identity. In addition, wehave anonymised the names of M and her family members in this judgment, and havenot included any information that would identify her.Result[32] The application for leave to bring a second appeal is declined.[33] The applicant must pay one set of costs to the respondents for a standardapplication on a band A basis, with usual disbursements.[34] We make an order suppressing the name of M and any identifying informationregarding her (as defined in s 11C of the Family Court Act 1980).Solicitors:Dyer Whitechurch, Auckland for ApplicantPidgeon Judd, Auckland for Respondents