THE NATIONAL HEART FOUNDATION OF NEW ZEALAND v PALMER [2014] NZHC 1740

THE NATIONAL HEART FOUNDATION OF NEW ZEALAND v PALMER [2014] NZHC 1740 [24 July 2014]IN THE HIGH COURT OF NEW ZEALANDNAPIER REGISTRYCIV-2014-441-00020[2014] NZHC 1740UNDER Section 5A of the Law Reform(Testamentary Promises) Act 1949IN THE MATTER An appeal against a Judgment of theDistrict Court pursuant to section 72 of theDistrict Courts Act 1947BETWEEN THE NATIONAL HEARTFOUNDATION OF NEW ZEALAND andRSPCA (HAWKES BAY)AppellantsAND NEIL PALMER and HEATHER PALMERRespondentsHearing: 4 June 2014Counsel: D J C Russ for AppellantS Smith for RespondentsA McEwan for Eric Burton's estateJudgment: 24 July 2014JUDGMENT OF KATZ JThis judgment was delivered by me on 24 July 2014 at 4:30 pmPursuant to Rule 11.5 High Court RulesRegistrar/Deputy RegistrarSolicitors: Fletcher Vautier Moore, NelsonLawson Robinson, NapierLangley Twigg, NapierIntroduction[1] Eric Burton and Elsie Burton-Whiting were in their 80s when they met in 2005. Mrs Burton-Whiting moved in to Mr Burton's home on Georges Street, in Napier, shortly afterwards. She took with her various household chattels comprising"the usual household items, as well as her collections of pottery, china and crystal".1[2] The couple married in January 2007. They decided to move to a warmer, more modern home in Knightsbridge Place, the purchase price of which was funded by Mr Burton. The transfer was registered on 7 December 2007. Sadly, Mrs Burton-Whiting died on 12 December 2007. It appears that when the parties moved to the smaller Knightsbridge home, much of Mr Burton's furniture was disposed of, while most of Mrs Burton-Whiting's chattels were retained.[3] Mr Burton died in March 2012. His will of 20 February 2012 left his estate in approximately equal shares to three charities, including the appellants. An earlier 2007 will had also left his estate to charity.[4] The respondent, Neil Palmer, is Mrs Burton-Whiting's son.2 He is the executor and residuary beneficiary of his mother's estate. Although his mother's will did not expressly refer to any chattels, Mr Palmer's belief was that the chattels she had taken with her when she moved in with Mr Burton remained her separate property and therefore formed part of her residuary estate. Mr Palmer's evidence was that, following his mother's death, he offered to let Mr Burton (who was then in his late 80s) continue using those chattels for the remainder of his life. Mr Burton's response was said to be along the lines of that it mattered not, because after his death Mr and Mrs Palmer would be getting all the chattels anyway, together with the Knightsbridge Place house and Mr Burton's motor vehicle.[5] Mr and Mrs Palmer live in Australia and did not learn of Mr Burton's death until eight or nine months after the event, when a Christmas card they had sent him was returned. They then made inquiries regarding the chattels and also the terms of1 As described in her granddaughter Kimberley Heremaia's evidence. Her son Neil Palmer'sevidence was to similar effect.2 The other respondent is his wife Heather.his will. Unfortunately all of the chattels in the Knightsbridge Place home (including chattels brought by both parties to their marriage and chattels purchased by Mr Burton after his wife's death) had been disposed of following Mr Burton'sdeath. The total sale proceeds were $11,542.12. Mr and Mrs Palmer also discovered that they were not beneficiaries under Mr Burton's will.[6] After seeking legal advice, Mr and Mrs Palmer decided to bring a claim for the Knightsbridge Place house and motor vehicle under the Law Reform (Testamentary Promises) Act 1949 ("LRTPA"). They were, however, out of time to bring such a claim and accordingly sought an extension of time from the Court.[7] In a judgment dated 20 December 2013, Judge P J Callinicos, in the Family Court at Napier, granted the requested extension of time.3 The appellants now appeal that decision.4 The issue at the heart of the appeal is – who owned the relevant chattels? The appellants say they were indisputably relationship property that passed into Mr Burton's sole ownership on his wife's death. If so, Mr and Mrs Palmer provided no relevant "service" by allowing Mr Burton to continue to use his own chattels. In that event an extension of time should not have been allowed, as any claim under the LRTPA is doomed to failure. Mr and Mrs Palmer submitted, on the other hand, that it was at least arguable that some of the chattels were separate property. Even if they were not, however, the fact that the parties were mistaken as to ownership could give rise to an arguable LRTPA claim.Relevant law and the Family Court decision[8] Section 3(1) of the LRTPA provides:3 Estate of deceased person liable to remunerate persons for work done under promise of testamentary provision(1) Where in the administration of the estate of any deceased person a claim is made against the estate founded upon the rendering of services to or the performance of work for the deceased in his lifetime, and the claimant3 Palmer v Twigg [2013] NZFC 10299.4 The Court's power to extend the time for filing an application for relief under the LRTPAinvolves the exercise of discretion. Accordingly, to succeed on appeal, the appellant must show that the Judge made an error of law or principle; or took into account irrelevant considerations; or failed to take into account relevant considerations; or was plainly wrong: Kacem v Bashir[2010] NZSC 112, [2011] 2 NZLR 1 at [32].proves an express or implied promise by the deceased to reward him for the services or work by making some testamentary provision for the claimant, whether or not the provision was to be of a specified amount or was to relate to specified real or personal property, then, subject to the provisions of this Act, the claim shall, to the extent to which the deceased has failed to make that testamentary provision or otherwise remunerate the claimant (whether or not a claim for such remuneration could have been enforced in the lifetime of the deceased), be enforceable against the personal representatives of the deceased in the same manner and to the same extent as if the promise of the deceased were a promise for payment by the deceased in his lifetime of such amount as may be reasonable, having regard to all the circumstances of the case, including in particular the circumstances in which the promise was made and the services were rendered or the work was performed, the value of the services or work, the value of the testamentary provision promised, the amount of the estate, and the nature and amounts of the claims of other persons in respect of the estate, whether as creditors, beneficiaries, wife, husband, civil union partner, children, next-of-kin, or otherwise.[9] A claim under s 3 of the LRTPA accordingly requires proof of four main elements:(a) the claimant must have rendered services to, or performed work for, the deceased in the deceased's lifetime;(b) there must be an express or implied promise by the deceased to reward the claimant;(c) there must be a nexus between the services and the promise; and(d) the deceased must have failed to make the promised testamentary provision or otherwise remunerate the claimant.[10] If the required elements have been established, s 3 gives the Court a broad discretion to award such amount as is reasonable having regard to all the circumstances.55 In Samuels v Atkinson [2009] NZCA 556, [2010] NZFLR 980 at [76]-[80] the Court of Appeal held that the ultimate test was to award reasonable remuneration "for the services actually identified". The Court suggested that the first step is to determine the extent of the unremunerated benefits by "netting off" the respective benefits and burdens. Once these benefits have been determined, "a reasonable amount" is to be awarded for these identified services with consideration of each of the factors listed in section 3(1).[11] The Judge in the Family Court summarised the principles relevant to the exercise of the discretion to extend the time for filing an application under the LRTPA as follows:(a) Leave to commence an action under the LRTPA will be granted only in exceptional cases.(b) A prospective claimant must show why the circumstances of any delay should not count against them.(c) There is a general policy consideration that once the door is opened to a claim, it should remain open only for a limited time.(d) A prospective claimant must also persuade the Court that a claim, if allowed to be prosecuted, will have some reasonable chance of success.(e) The Court must be satisfied that an extension of time is justified in all the circumstances. The overriding principle is that the discretion as to extension of time must be exercised so as to do justice to all those concerned.[12] On the question of the respondents' delay, his Honour found that there was"ample time" for any person in the respondents' position to prepare and file the claim before the limitation period expired.6 His Honour found that the adequacy of the explanation for delay was not strong and, if delay and adequacy of explanation were the overriding criteria, the discretion would not have been exercised in favour of the respondents.7[13] The key issue before Judge Callinicos (and before me on appeal) was whether Mr and Mrs Palmer could demonstrate a reasonable chance of success ("something more than a mere prima facie case").8 The Judge found that their case6 Palmer v Twigg, above n 3, at [17].7 At [19].8 At [20].was not confronted by any insurmountable obstacles and the merits of their position could be determined only at a substantive hearing rather than through a preliminary argument on the papers.9 The key focus of this appeal is whether the Judge erred in that conclusion.Did Mr and Mrs Palmer arguably provide any "services" to Mr Burton?[14] The LRTPA provides for enforcement of a testamentary promise where services are provided or work is performed in return for that promise. The analysis of a testamentary promises claim usually starts with the issue of whether or not there is a qualifying promise. In this case, however, the appropriate starting point is to consider whether Mr and Mrs Palmer provided any services to Mr Burton. If they did not, then their claim will have no "reasonable chance of success" and the application for an extension of time should be declined.The Judge's findings[15] At [22] of his decision, the Judge referred to the appellants' submission in the Family Court that Mr and Mrs Palmer's claim must fail on the basis that the chattels owned by Mrs Burton-Whiting passed to Mr Burton by way of survivorship. Commenting on this submission, the Judge said "as a matter of strict law that argument would appear to have some merit".10[16] The Judge noted, however, that s 3 of the LRTPA allowed a claim for remuneration "whether or not a claim for such remuneration could have been enforced in the lifetime of the deceased".11 In reliance on this phrase, the Judge concluded that Mr and Mrs Palmer had an arguable claim for "the rendering of some form of service to Mr Burton, albeit arguably of an unenforceable nature".129 At [24].10 At [22].11 LRTPA, s 3(1).12 At [31].Discussion[17] In my view it is not reasonably arguable that Mr and Mrs Palmer provided any services to Mr Burton.[18] Mrs Burton-Whiting may well have originally owned the majority of the chattels in the Knightsbridge Place property. However, at the time of her death those chattels were "family chattels" as defined in s 2 of the Property (Relationships) Act 1976 ("PRA"). Accordingly, by virtue of s 10(4) of the PRA, they were relationship property, unless designated as separate property by a contracting out agreement made in accordance with Part 6 of the PRA (which requires that any such agreement be in writing). No such agreement was entered into in this case.[19] In addition, I note that there is a presumption in s 81 of the PRA that all of the property owned by a deceased spouse at the date of their death is relationship property, in the absence of evidence to the contrary. A person who asserts otherwise has the burden of proving that assertion. There is no evidence before the Court which is capable of rebutting the statutory presumption in s 81. Although there was some suggestion in submissions that some of Mrs Burton-Whiting's chattels mayhave remained separate property, there was no evidence to support that submission. On the contrary, the evidence indicates that her belongings were first moved into the Georges Street property and, subsequently to the Knightsbridge Place property. There was no evidence of any chattels being stored elsewhere, at any time after the couple commenced living together.[20] As the relevant chattels were relationship property under the PRA, they passed to Mr Burton on Mrs Burton-Whiting's death, by survivorship. Mr Burton was accordingly the legal and beneficial owner of the chattels at the time of his conversation with Mr and Mrs Palmer. The chattels never formed part of Mrs Burton-Whiting's residuary estate and Mr Palmer derived no interest in them as her residuary beneficiary. He therefore had no legal right or ability to loan the chattels to Mr Burton. They were already Mr Burton's property. Agreeing to loan a person their own property does not constitute a service sufficient to support a testamentary promise.[21] The Judge's finding that it was arguable that a service had been provided in such circumstances appears to have been based on an erroneous view that the provisions of the LRTPA addressing the issue of unenforceability were potentially relevant to the analysis of whether a service had been provided.13[22] The relevant parts of s 3(1) of the LRTPA provide as follows:Where a claim is made against the estate founded upon the rendering of services to the deceased in his lifetime, and the claimant proves [a]promise by the deceased to reward him for the services by making some testamentary provision for the claimant then the claim shall, to the extent to which the deceased has failed to make that testamentary provision or otherwise remunerate the claimant (whether or not a claim for such remuneration could have been enforced in the lifetime of the deceased), be enforceable against the personal representatives of the deceased in the same manner and to the same extent as if the promise of the deceased were a promise for payment by the deceased in his lifetime(Emphasis added.)[23] The Judge's analysis appears to have overlooked that the question of enforceability is linked to the promise, not the associated service. In other words, the LRTPA recognises promises to do something through a testamentary gift which might otherwise not be legally enforceable. Legal enforceability is not, however, a consideration when examining the issue of whether or not services have been provided.[24] As the learned author of Law of Family Protection and Testamentary Promises14 observes, some promises to leave property to a person by way of testamentary provision will be binding and contractually enforceable under the general law. Experience prior to the enactment of the LRTPA demonstrated, however, that there were many situations where services were performed in circumstances that did not give rise to a contractual relationship.15 This resulted in potential injustice in some cases. For example in Sutherland v Towle16 Ostler J, in dismissing a claim based on an "understanding" (not contractually enforceable) that13 I refer to the Judge's discussion at [25]-[28].14 Bill Patterson Law of Family Protection and Testamentary Promises (4th ed, LexisNexis, Wellington, 2013) at [13.1].15 Refer Nealon v Public Trustee [1949] NZLR 148 (CA) at 159-160.16 Sutherland v Towle [1937] GLR 509 at 511.services would be remunerated by provision in a will, said: "I do not think that the law is equitable, and in this case I feel that it will work an injustice".[25] In New Zealand, such concerns ultimately resulted in the passage of the Law Reform Act 1944, the precursor to the LRTPA. The rationale for the LRTPA was subsequently explained by Cooke J (as he then was) in McCormack v Foley:17The legislation originated as a single section in the Law Reform Act 1944, s 3. In its details, and I think in the judicial approach to the jurisdiction, it has been gradually elaborated and liberalised. The mischief which it was designed to remedy was largely the tendency of testators to persuade people to render services to them by promises later found to be too vague to establish at common law contracts enforceable against the estate. It also overcame evidential difficulties under the Statute of Frauds. It did not displace the common law as to testamentary contracts but created a new discretionary jurisdiction similar in that the object was to enforce the deceased's "promises" — an expression itself liberalised during the history of the statutory jurisdiction.[26] In the course of his discussion, Cooke J referred to a number of authorities in support of his findings. Those authorities each addressed the question of whether or not the alleged promise was enforceable, the claimants in each case having arguably provided services. He did not refer to any cases (and nor am I aware of any) where the issue of enforceability has been linked to the provision of services, rather than the nature of the promise.[27] In summary, under the LRTPA, if services are provided by a person to the deceased, who has promised to reward that person for those services in his or her will, a claim may be made where that promise is not honoured. This is regardless of whether the promise was contractually binding. The reference to enforceability in s 3(1) is a reference as to whether the promise made by the deceased is enforceable (contractually binding) or not. I accept the appellants' submission that, as a matter of logic, one cannot talk of an unenforceable provision of services.[28] Whether services have been provided or work done will generally be a question of fact. If no services were provided, then one of the key elements necessary to establish a claim under the LRTPA will not exist. Either services have been provided or they have not. In some cases it may be arguable whether services17 McCormack v Foley [1983] NZLR 57 (CA) at 61 per Cooke J.have been provided, and in those circumstances it will be necessary to proceed to a full hearing to determine the issue. This is not such a case. In my view it is not reasonably arguable that agreeing to allow an elderly person (or indeed any person) to use chattels that they already own constitutes a service falling within the scope of the LRTPA. The fact that Mr and Mrs Palmer (and possibly also Mr Burton) may have not appreciated that Mr Burton (rather than Mr Palmer) owned the chattels, does not, in my view, change the position. Ultimately, no service was provided.Forbearance to sue[29] At the conclusion of his judgment, the Judge made what appears to be a passing observation about a possible benefit which Mr Burton derived from the respondents' offer to him to utilise the chattels. His Honour stated that:18Even if the [respondent] and the deceased had been aware at the time that there may not have been a strong legal basis for the applicants' position, the debate over such issues can be very distressing for people... Avoidance of further distress, in the form of a legal or even informal challenge over the chattels could in itself be regarded as a service.[30] As the appellants noted on appeal, Mr and Mrs Palmer's claim was not framed in this way. Rather, it was advanced on the basis that a promise was made by Mr Burton in return for the use of the chattels which, at the time, Mr Palmer erroneously believed were his. There is no suggestion in the evidence that either Mr Palmer or Mr Burton ever contemplated litigation over the chattels, or that the avoidance of such litigation was a motivating factor in the making of the alleged promise by Mr Burton. Such an assertion is not pleaded.[31] While I accept that in some circumstances forbearance to pursue a claim may amount to the provision of a service, some consideration would usually need to be given to the substantive merits of the underlying claim foregone. Foregoing a claim that is entirely lacking in merit may be insufficient to constitute a relevant service, whereas foregoing a more meritorious claim may well constitute a service. As the appellants submitted, if this were not the case, a claimant could mount an outrageous and otherwise unsupportable claim against a deceased (potentially an elderly and18 At [38].vulnerable person) during their lifetime, secure a promise in return for not pursuing it, and then allege that forbearance constituted the provision of a service.[32] On the particular facts of this case the issue of forbearance was neither pleaded nor argued and there did not appear to be any evidence to support it. It simply never arose, as Mr Palmer firmly believed that the relevant chattels were his. The facts do not therefore support a forbearance claim.[33] As the Judge noted, leave to commence an action under the LRTPA out of time will be granted only in exceptional cases. A prospective claimant must (amongst other things) persuade the Court that their claim will have a reasonable chance of success. That is not the case here.Other issues raised on appeal[34] The appellants advanced the following additional grounds of appeal:(a) That the evidence does not establish a promise for the purposes of s 3 of the LRTPA. Rather, the evidence indicates that the statements said to have been made by Mr Burton were expressed entirely independently of any offer to allow Mr Burton to use the chattels.(b) That the relief sought by Mr and Mrs Palmer is manifestly disproportionate to the value of any services they allegedly provided. In particular, it was noted that all of Mr Burton's chattels, including those originally brought to the relationship by Mrs Burton-Whiting, realised $11,542.12 on sale. It was submitted that a loan of less than $6,000 worth of chattels19 for a period of four years would be highly unlikely to result in the making of a (discretionary) award under the LRTPA of a house and car worth over $400,000.19 Assuming for present purposes that Mrs Burton-Whiting's estate had a half interest in thechattels.[35] Given my conclusion that it is not reasonably arguable that Mr and Mrs Palmer provided any services to Mr Burton, it is not necessary for me to consider these additional grounds of appeal and I do not propose to do so. One of the essential elements of a claim under the LRTPA (the provision of services) is absent. Accordingly Mr and Mrs Palmer's proposed claim fails to meet the threshold requirement of having a reasonable prospect of success. An extension of time to bring a claim is accordingly not warranted.Result[36] The appeal is allowed. The order made by the Family Court Judge under s 6 of the LRTPA, granting an extension of time to bring a claim under s 3 of that Act, is set aside.[37] This appeal has previously been categorised as type 2B for the purposes of r 14.3 of the High Court Rules. My preliminary view is that the appellants, as the successful parties, are entitled to costs on that basis. As I have not heard argument on costs issues, however, leave is reserved to file memoranda if agreement cannot be reached. Any memorandum on behalf of the appellants is to be filed by 14 August 2014. Any response by the respondents is to be filed by 28 August 2014.____________________________Katz J