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Costs, Settlor; settlors, Testamentary trusts, Trusts, Will trusts, Wills

Null and void

The background to Hamilton v Kirwan can be set out as follows:

  • A 58.9450 hectare block of rural land (the Property) was purchased in 1984
  • In December 1997 the Property owner’s daughter began living on the Property.  In 2000 she built a dwelling on the Property part of which was funded by a $20,000 advance from the Property owner (who in turn had borrowed that money).  In 2013 the daughter built various business premises on the Property  with some assistance from the Property owner
  • A will dated 30 May 2016 gifted the Property to the trustee of a Trust settled by the Property owner in the event that he remained an owner of the property at his death.  Prior wills left the Property to the Property owner’s three children in equal shares
  • On the same day, the Property owner settled the Trust and executed a Deed of Gift whereby he gifted the Property to the Trust. The Property Owner’s daughter was not a beneficiary of the Trust, although his two sons were
  • On 14 June 2016, the Property owner transferred the Property from himself (in his personal capacity) to himself (in his capacity as trustee of the Trust).
  • On 6 July 2016, the Property owner retired as trustee of the Trust and appointed one of his sons as the new trustee

The daughter challenged the gift of the Property to the Trust on a number of grounds.  Her first claim was in proprietary estoppel on the basis that the daughter had an equitable interest in the Property that arose “… because the deceased had created the expectation, on her part, that on the deceased’s death she would inherit the property equally with her brothers.”

To find a proprietary estoppel, which is a species of equitable estoppel, it must be established that:

(a) A belief or expectation by the claimant created or encouraged by words or conduct of the respondent

(b) To the extent an express representation is relied upon, it is clearly and unequivocally expressed

(c) The claimant reasonably relied to his or her detriment on the representation, and

(d) It would be unconscionable for the respondent to depart from the belief or expectation

This argument was successful on the basis that the daughter had acted in reliance of the promise.  As noted at [30]:

“On the balance of probabilities, I am, firstly, satisfied that the deceased created a belief or expectation on the part of [the daughter] that she would in due course receive a share of the property sufficient to provide some form of security for her plans to build a dwelling house and later some cabins on the property.”

The crucial evidence, from the perspective of the court was that there was evidence of the deceased’s creation of a belief or expectation on the part of his daughter that she would ultimately receive a share of the Property, and this was why she expended money and effort build a home and business premises.

In expending time and money to develop part of the Property (being the portion that the daughter expected to be “carved off” for her) the court was satisfied that she had reasonably relied on her father’s promise to her detriment.  See [41] to [43].

The final element of unconscionability was also satisfied.  As noted at [46]:

“Finally, I am also satisfied it was unconscionable for the deceased to depart from the belief or expectation he had created on the part of [the daughter]. The deceased initially invited her to live on the property and consented to the many improvements made to it. [The daughter] has established a life for herself and her family on the property. She has four children, all of whom have lived on the property with her at some stage. She cares deeply for the property and believes herself to be a guardian of the land. She now finds herself without any interest in the land either as owner or beneficiary of the Trust. She would be devastated if she had to leave the property. All her hard work and expenditure over the years would be wasted. It would not be practical for her to take all the buildings away, as has been suggested by others.

The court ordered that the transfer to the Trust was null and void and that the Property was to be distributed to the daughter and her two brothers as tenants in common in equal shares.

For further consideration of equitable estoppel see Thomas v Mathias.

A constructive trust claim failed as the court was not satisfied that the daughter’s contributions manifestly exceed the benefits enjoyed by her (thorough here being able to live on the Property for a long period of time).

An undue influence claim also failed as did a Family Protection Act claim, a Testamentary promise claim and a claim that the executor had failed to properly account for the estate.  Similarly, the application to remove the trustee was unsuccessful.

The case is interesting in that it successfully claws back assets that otherwise would be beyond the applicant’s reach following the gift to an inter vivos trust.

References:

  • Hamilton v Kirwan [2020] NZHC 2149
  • Hamilton v Kirwan [2021] NZHC 19 (Costs)
  • Wilson Parking New Zealand Ltd v Fanshawe 136 Limited [2014] NZCA 407
  • Thomas v Mathias [2021] NZHC 461

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