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Trusts, Trusts Act, Wills

After the horse has bolted

Moon v Lafferty is an unsuccessful claim for discovery before commencement.  The background of the claim is a family estrangement.  The applicants’ mother settled a trust during her life and gifted $300,000 to that trust from a settlement of $388,871 the deceased received from litigation between her and her daughter Jessica (one of the applicants). 

No provision was made for the applicants in their mother’s will and they are seeking information including documents necessary to file a claim under the Family Protection Act 1955. 

As noted at [19]:

An applicant for pre-commencement discovery must satisfy the Court that:

(a) they are or maybe entitled to bring a claim;

(b) it is impossible or impracticable to formulate the claim without reference to certain documents;

(c) there are grounds to believe the documents are or were in the control of the respondents;  and

(d) an order is necessary at the time.

By way of further background:

[28] The principal asset the deceased had during her life appears to have been the settlement proceeds.  The deceased’s lawyers have confirmed that $300,000 from the settlement was gifted to her Trust.  The property she was living in at the date of death was owned by the Trust.  There is no suggestion the deceased had other substantial assets.  There is some reference to chattels and antiques, but again Linden Lafferty as a trustee of the estate has deposed to the chattels held by the estate and provided a schedule.  He has also deposed that his mother sold other chattels to him during her life.  While the applicants do not accept the evidence deposed to by their brother and as recorded by the solicitor’s letter, that is the evidence before the Court and without more that suspicion by the applicants does not support the orders sought.

Importantly the purpose of orders for pre-trial discovery is not to enable applicants to test evidence, the purpose is to enable a party to formulate a claim.

The fundamental issue faced by the applicants was that unless there is a basis for clawing gifted assets back into the estate, any claim that might be able to be made under the Family Protection Act is rendered nugatory. Disposal of assets and whether there should be anti-avoidance provisions to redress this were considered by the Law Commission in its review of Succession Law carried out in the late 1990’s.  See Succession Law Testamentary Claims (preliminary paper 24) at [342] and [343]

Anti-avoidance: enforcing duties to make provision

342 Our present proposals apply only where the will-maker has a clear duty to do something for a potential claimant. Any attempt to evade that responsibility should not be viewed favourably (see, eg, provisions for restraining or setting aside dispositions during the will-maker’s lifetime in Child Support Act 1991 ss 200–201; Matrimonial Property Act 1976 ss 44–45). Yet there is nothing in any of the present Acts dealing with testamentary claims which would prevent a will-maker from putting assets beyond the reach of claimants. Illustrations of anti-avoidance provisions for testamentary claims are found in overseas legislation including the Inheritance (Provision for Family and Dependants) Act 1975 (England) ss 10–13, the Family Provision Act 1982 (New South Wales) Division 2 and the Uniform Probate Code (1990 Revision) § 2–202.

343 Anti-avoidance provisions must achieve an appropriate balance between preventing people from avoiding their testamentary obligations, and protecting certainty and reasonable expectations arising out of property transfers made by will-makers during their lifetime.

To satisfy awards on testamentary claims, claimants should be able to apply after the will-maker’s death to bring back into the estate property comprised in dispositions by the will-maker:

• for less than full value made within three years before the will-maker’s death, and

• made at any time with a view to putting assets beyond the reach of any testamentary claimant, or otherwise prejudicing the interests of a testamentary claimant.

Bona fide purchasers acquiring an interest in the property will be protected, as will those who have acted to their detriment believing in the validity of the disposition.

Also consider D and E Limited v A, which raised the argument that an inter vivos transfer of assets could be in breach of fiduciary duties owed by a parent to children.  As noted by the Court of Appeal at [10]:

“We agree with the Associate Judge that the respondents’ proceedings will require a careful evaluation of whether the evidence demonstrates the respondents’ claim that Z owed them a fiduciary duty at the time he transferred most of his assets to the Trust. While the claims by the respondents may be novel, they are very dependent upon whether or not they are able to establish the facts necessary to underpin their claim that Z owed them fiduciary duties.”

References:

  • Moon v Lafferty [2020] NZHC 1652
  • D and E Limited v A [2019] NZCA 585

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