Edmonds Judd

Kids

Goodwill and good process will help prevent turmoil

The time following a separation can be highly emotional – for you and your spouse or partner, and for your children.

 

In this fraught environment, disputes can easily arise about the day-to-day care arrangements for your children or other vital issues such as where they will live, schooling, medical care, religious/cultural choices and so on. These are formally called guardianship matters.

 

In cases where the children are safe in their respective parent’s care, there are numerous ways in which care arrangements can be resolved and guardianship decisions made, without the need to involve the Family Court. A co-parenting relationship extends well beyond the uncertain period following a separation.

 

The best case scenario? Parents agree to ongoing care arrangements and guardianship matters between themselves and cooperatively focus on what is in the best interests of their children.

 

These best case scenarios, however, are not always possible, especially when disputes arise at a sensitive or acrimonious time for separating parents.

 

Can’t reach agreement?

What happens if parents cannot agree? Either parent can initiate the Family Dispute Resolution (FDR) process:

  • This is a mediation service, without lawyers, that deals specifically with care and guardianship disputes
  • A mediator is assigned to work with both parents, individually and/or collectively, to achieve an agreement, and
  • If agreement is reached, this can be documented in a mediated agreement.

 

If parents cannot reach agreement from the FDR process, then either parent can pursue the matter through the Family Court. Importantly, FDR is a prerequisite to attend the Family Court, unless there are urgent concerns for a child.

 

Some parents rely on third party assistance:

  • In many instances, parents can reach agreement after receiving (and following) advice and guidance
  • Using a third party can give conflicting parents an objective perspective, particularly at such an emotional time, and
  • Such support can be obtained through lawyers, counsellors and/or personal support networks such as family and/or friends.

 

Formalising the arrangements

Once you’ve reached agreement, some parents like (or it may be necessary) to have their children’s care arrangements formalised. This can be done with a parenting agreement; this document outlines the specific care arrangements and/or relevant guardianship provisions for children that both parents sign and (should) adhere to.

 

Alternatively, parents can consent to the terms of their agreement with a parenting order; this is a court-sealed document that collates the agreed terms and can be enforced if there are unconsented breaches.

 

Whatever the care provisions, it is in a child’s best interests for arrangements to be tailored to their age, stage and needs. Such arrangements should evolve with each child’s needs and stages and be regularly reviewed. Lawyers and counsellors who specialise in family and child disputes are often well equipped to provide advice on age appropriate arrangements and options.

 

Last resort is the Family Court

A Family Court hearing can be an expensive process – not only financially, but it can also take a significant toll emotionally and on the time of both parents, their children and their support networks. It also involves placing the decision regarding your children in the hands of a third party, the judge.

 

Obviously, having the parents cooperate and reach agreement is always going to be the best outcome for a family. However, there will be some situations where using the Family Court is necessary and preferred, such as when parents cannot reach agreement, where there are safety concerns for a child in either (or both) parents’ care or if urgent intervention is required (for example, preventing a child from being taken out of New Zealand).

 

If you are separating and need guidance about arrangements for your children, it’s important to get advice from a specialist family lawyer. Please don’t hesitate to contact us if this happens to you.

 

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Significant issues raised

In June 2023, the Supreme Court heard the ‘Alphabet case.’ To understand the significance of what is at stake in this case, it is worth considering the facts that gave rise to the litigation and the High Court’s decision.

 

Abuse of A, B and C by Mr Z

Mr Z and Ms J married in 1958 and separated in 1981. They had four children: G (1960-2015), A (b 1961), B (b 1963) and C (b 1971).

Mr Z severely abused Ms J and the children physically, psychologically and sexually. A was repeatedly raped between the ages of seven and 13, but she did not disclose the abuse to anyone until 1983. She did not tell her mother until 1991. A was unable to face taking action against Mr Z.

Mr Z died in 2016 leaving an estate valued at $46,839. He had, however, settled a trust two years previously for the express purpose of preventing his family from “chasing” his assets, to which he had gifted his home and investments worth $700,000. The children were not beneficiaries of Mr Z’s estate or the trust; rather, the trust’s beneficiaries were the children of Mr Z’s former partner.

 

Children’s claims

That should have been the end of the matter because the Family Protection Act 1955 (FPA), that allows children to challenge their parents’ wills, only applies to assets a deceased owned in their personal names; it doesn’t apply to trust assets.

However, the children argued that their father owed them a fiduciary duty and, that because of the abuse, he continued to have obligations to them even after they became adults. They said that Mr Z had breached that duty when he gifted his home and shares to the trust in order to prevent his children from claiming against those assets under the FPA.

 

In the High Court

In the High Court,[1] Justice Gwyn agreed with the children and said they could bring claims under the FPA against the assets that had been transferred to the trust.

The trustees of Mr Z’s estate and trust appealed to the Court of Appeal.

 

Court of Appeal divided over case

The Court of Appeal[2] accepted that Mr Z owed a fiduciary duty to his children and that he breached that duty when he abused them. The issue was whether Mr Z continued to owe those fiduciary duties to his adult children at the time he gifted his assets to the trust.

The majority of the Court of Appeal judges disagreed; they said that the appropriate remedy for the breach of fiduciary duty was equitable compensation (and the children had run out of time to make that claim).

However, one judge said that in some circumstances the inherently fiduciary relationship between a parent and a child may continue after a child becomes an adult (for example, in the case of a severely disabled child).

The judge (who was in the minority, so their views don’t affect the final outcome) decided that A’s position, owing to the abuse she suffered, was analogous to that of a disabled child. Mr Z therefore had a continuing duty to take steps to remedy, as best he could, the enormous harm he inflicted on A, not only when she was living in his care, but also during her adult life. This meant he was required to protect her interests when considering gifting his principal assets to the trust, and failed to do so.

 

Decision awaited

The Supreme Court will tell us whether Mr Z owed a continuing fiduciary duty to A into her adult life because of the abuse he perpetrated on her. Many commentators believe that it is stretching the concept of a child/parent fiduciary duty too far.

If legal principles cannot evolve, however, a situation may emerge where extraordinarily meritorious claimants are left with no effective relief, simply because too much time has passed, and/or because their parent transferred their assets into a trust to prevent claims after they have died.

That raises two questions:

  1. Should time count against people such as A, who have been so seriously abused by a parent?
  2. Should parents be allowed to transfer their assets into a trust in order to prevent their children making claims after their death?

[1] [2021] NZHC 2997.

[2] [2022] NZCA 430.

 

 

DISCLAIMER: All the information published in Trust eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Trust eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


School boards of trustees

Significant obligations and responsibilities

Every three years, state and state-integrated schools hold elections for parent and staff representatives to join the governing bodies for their schools – the board of trustees (BoT).

School trustees are, however, sometimes confused or unsure about their role, and their obligations and responsibilities. The BoT is not like the PTA committee that co-ordinates parent helpers, organises school events, fundraises, etc.

A BoT role is like that of a company director. Although a school is not a commercial business, it should have robust governance processes in place that align with those of a well-run commercial business.

Health and safety aspects

The BoT is responsible for the governance and management of the school. It has discretion to manage the school within the parameters of the laws of New Zealand.

Alongside this governance approach, the Education & Training Act 2020 (E&TA) sets out the BoT’s obligations under the health and safety workplace laws. The Ministry of Education advises that:

School boards and early learning organisations are considered a PCBU (Person Conducting a Business or Undertaking) and must, so far as is reasonably practicable, provide and maintain a work environment that is without health and safety risks.

(Ministry of Education website)

A BoT is the legal entity that is the PCBU. If there is a health and safety failure at a school, the BoT could potentially face prosecution by WorkSafe under the Health and Safety at Work Act 2015 (HSWA).

The best possible policies, and rigid adherence to them, may still not prevent accidents or injuries from occurring. The potential always exists that actions may be taken that do not comply with the policies and issues that arise. In this situation, it would be fair to say that responsibility would fall on those responsible for those non-compliant actions if the obligations of the BOT are shown to have been fulfilled.

Even if the BoT delegates responsibility for these policies, it has over-arching responsibility for the school staff who are operating under those policies. The BoT must take an active role to ensure that any people under its control are safe, and that suitable guidelines are in place to identify and mitigate the risks being faced. Ultimately, it remains an obligation of the school and BoT to be responsible for their students’ safety.

EOTC risks

Out of school activities or education outside the classroom (EOTC) should be managed and controlled by reference to the BoT-approved health and safety policies.

To be effective, the policies must have measurable risk assessment components. For example: what are the risks and how serious is each risk? What is the likelihood of students and accompanying adults being hurt? How can these risks be managed by the activity leader? Does the school’s policy have a tool for assessing risk and the seriousness of the risk?

When things go wrong on an EOTC trip and a participant is badly hurt, there will be investigations by the police and WorkSafe and, if someone dies, the coroner. It is equally possible that, as the result of those investigations, charges could be laid if breaches have occurred.

Prosecutions

Two recent cases[1] have shown that even with a successful WorkSafe prosecution, the fines awarded have either been reduced to $0, or set at a notional figure and payment has not been sought.

Regarding personal liability of BoT members, both the E&TA and HSWA contain exclusions of personal liability for board members provided that any act or omission was carried in good faith with the performance, or intended performance, of the BoT.

Trustees must fully understand their role

The BoT role is not one to be considered lightly, although training and guidance is available so trustees fully understand their responsibilities. BoTs are full of amazing and dedicated people who are doing their best for their community. A crucial part of that role is ensuring the everyday safety of the students and employees at their school.

Trustees must be aware that with the role comes responsibility and accountability. BoTs must manage their duties accordingly and fulfil all legal requirements.

[1] WorkSafe v Tauraroa Area School Board of Trustees [2022] NZDC 21558 and WorkSafe v Forest View High School Board of Trustees [2019] NZDC 21558

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Make it clear in the trust deed

In the recent case of Re Merona Trustees Ltd[1], the High Court was asked to determine who the beneficiaries of a trust were as it was not clear who was intended by the phrase the ‘children of the settlors’ that was in the trust deed.

Background

The trust settlors, Merv and Rona, had two daughters together – Lilly and Miffy. Rona also had two sons from a previous marriage when she was very young – Rob and Ray. When Rona’s first marriage broke down, and in the absence of social welfare benefits, she could not afford to keep her sons, and they both went to live with different extended family members. Rob had occasional contact with Rona and, after Rona’s marriage to Merv, Rob was raised by them both. Ray, however, was raised by extended family and had no contact with Rona. It was only as an adult that Ray came to know Rona and the wider family.

Interpreting the trust deed

Rona died in 2013. Merv died in 2020. After Merv’s death, a question arose as to who were the beneficiaries of the trust they had settled.

The question for the High Court was interpreting the trust deed that referred to ‘the children of the Settlors’. Did it mean:

  • The two natural children of Merv and Rona together, being Lilly and Miffy
  • The two natural children of Merv and Rona, as well as Rona’s son Rob, who was raised as a member of Merv and Rona’s family, or
  • The two natural children of Merv and Rona, as well as both of Rona’s sons, Rob and Ray?

High Court hearing

The court heard two main competing arguments.

The trustees primarily argued that ‘the children of the settlors’ meant Rob, Lilly, and Miffy; the ‘children’ did not include Ray. They said that the context in which the trust was established was highly relevant to the interpretation of the trust deed. In particular, a predecessor trust had been established in 1986 before Ray connected with Rona as an adult. The trust in question was settled in 2002, when Rob, Lilly and Miffy were in their forties and fifties.

Even in 2002, after coming to know Ray, Merv and Rona presented to their professional advisors as a couple with three children – Rob, Lilly, and Miffy. Their accountants recorded Merv, Rona, Rob, Lilly and Miffy as the beneficiaries of the trust. The family’s lawyers also understood Rob, Lilly and Miffy to be Merv and Rona’s three adult children. Merv and Rona also signed memoranda of guidance in relation to the trust, that were effectively instructions to the trustees as to their wishes. These memoranda recorded their wish that ‘our children’ benefit from the trust; Rob, Lilly, and Miffy were named, but Ray was not.

Finally, Rona’s will left a bequest each to Rob, Lilly, and Miffy as her children, and an equal but separate bequest to Ray who was described as her ‘birth son.’ She also left him a letter which asked that he be content with this bequest. The court found that by implication, she did not see him as eligible to benefit from the family wealth which was otherwise held in the trust.

On the other side, Ray’s lawyers argued that Ray was also a beneficiary of the trust. They said that once Ray had been reunited with Rona, they developed a close relationship with each other and the wider family. Although Ray was not close with Merv, Ray was included in family gatherings including at Christmas and birthdays. Ray was treated equally with Rob, Lilly, and Miffy in Rona’s will, and he was a part of the family.

The High Court considered that Merv and Rona had brought Rob up as a child of their own, and that it was ‘inconceivable’ that they would have intended to exclude him as a beneficiary of the trust. The documents signed at the time, and subsequently, showed that Merv and Rona thought that Rob was a beneficiary of the trust. In the context of their family, ‘the children of the settlors’ plainly included him. The only question was then whether Ray was also included.

Decision

The court found that the language of the trust deed could be interpreted to include Lilly and Miffy as natural children of the settlors, as well as Rob, who was raised within the family unit as though he was a natural child of both Merv and Rona.

The wording of the trust deed, however, could not be interpreted to include Ray. While Ray enjoyed a good relationship with the family when they reconnected, he was not raised as a part of Merv and Rona’s family unit.

Care must be taken

This decision emphasises the importance of clarifying who is intended to be a beneficiary of a trust at the outset. This is particularly necessary in the context of blended families where there may be reasons to differentiate between classes or groups of children.

In this case, the lawyers and accountants were not necessarily aware that Rob was not a child of Merv and Rona. It is possible that if they had known at the outset, the trust deed would have been drafted in a way that made it clear who the beneficiaries were.

If you are concerned about the wording of your trust deed and how it may affect your children, please be in touch to review your trust deed.

[1] Re Merona Trustees Ltd [2022] NZHC 1971.

 

 

DISCLAIMER: All the information published in Trust eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Trust eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Bank of children

Children helping their parents

Most of us have heard of the expression ‘Bank of Mum and Dad’ where parents help fund their children to get onto the property ladder or with another investment.

 

What happens in the reverse situation, however, where children become the ‘bank’ and assist their parents financially?

 

Why would this happen?

In recent years, parents may have assisted their children in allowing their property to be used as security for borrowings by their children, they could have helped fund the deposit for a child’s first property or provided financial support in a number of other situations.

 

Sometimes, the boot is on the other foot when parents retire or have their income reduced. That may be the time for children to repay the favour and assist their parents.

 

Family-wide discussion

If children are considering helping out their parents financially, we recommend that you have a family-wide discussion on what sort of assistance could be provided.

 

It is important that the entire family is aware of any proposed arrangements, especially if not all of the children are going to be involved. Those children who are assisting may become part-owners of their parents’ property as part of the agreement.

 

There are various family arrangements that could apply but some children may already own their own home. Other children may already be living with or intend moving in with their parents. All of these circumstances will need to be considered.

 

Contact your parents’ lender

Presuming the transaction will be funded by a loan, rather than cash from the children to the parents, the next step is for the parents to contact their lender (usually their bank) to discuss its requirements. The lender may require the current lending for the parents to be discharged and an updated finance application in the name of all of the joint owners with new loan documents. Often, the lender requires the added security and details of a child’s income for the application.

 

See your lawyer

To prevent any future difficulties and dissention in the family, it is important to arrange suitable documents such as a property sharing agreement. This records each party’s responsibility for who and how the family will use the property, loan repayments, maintenance of the property, rates, insurance and a sale process for the property should there be a breakdown in the parties’ relationship or if one of the parties wishes to sell.

 

A property sharing agreement will be the guiding document for the arrangement. As well as ensuring you have a will in place, the agreement can cover what will happen to the parent’s share of the property when they die. The last thing parents want is a falling out between their children.

 

Other things to consider

Other considerations for both parents and children include:

  • The children’s ability to use KiwiSaver funds in the future to purchase their own home
  • Current and future relationships of the children
  • Parents moving into a rest home and how subsidies could be affected
  • The alternative of a reverse mortgage, and
  • Review of wills and enduring powers of attorney.

 

Conclusion

With increases in interest rates and the rise in the cost of living, more retiring parents may face the difficulty of retaining their family home. Rather than the option of a sale, children may be able to assist with the retention of their parents’ home and keeping past memories alive.

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Shared parenting

Relocating the children without consent

Deciding to move to a new location can be exciting and bring a sense of renewal, particularly after a long cold winter and enduring these Covid years.

 

However, if you are separated with children, what happens to ongoing parenting arrangements in these situations? Can you move with your children without agreement from the other parent?

 

If you do this, it is referred to as a ‘unilateral relocation’, and it can result in applications filed and court orders sought. Both parents are considered a guardian of the children, regardless of how much contact one of the parents may have. There are certain decisions about a child that are ‘guardianship decisions.’ You must discuss these with the other parent. Topics to talk about include where a child lives, where they go to school, any medical decisions and so on.

 

The process

Whatever the reasons for you considering a move, the best option is to discuss this openly and honestly with the other parent. Understandably, the idea of your children moving away can be difficult for the other parent.

 

It may be that you can reach an agreement between the two of you. If it becomes difficult, you can get help initially with mediation forums outside of the Family Court.

 

If you cannot agree, you can file an ‘application to resolve a dispute between guardians’ in your local Family Court and the court will decide for you. The court will look at specific factors, including:

  • What is in the best interests of your children
  • Your children’s relationship with you both
  • What contact arrangements would look like for the other parent, as the court recognises the importance of your children having a relationship with both of you
  • The ages of your children, and
  • Your children’s views on the move.

 

Don’t want them to move?

If your children have not yet moved, and you don’t want them to, you can file an application in the Family Court to stop the children from being moved within New Zealand. You can also ask the court for an ‘order preventing removal’ to stop the children from leaving New Zealand. These applications can be filed on a ‘without notice’ basis, where you ask the court to consider the application without first hearing from the other party.

In this application, you ask the court to make an order that states the children cannot be removed from a specified location (within New Zealand or from New Zealand). With this order in place, it limits your children being removed until further investigations could occur or agreement is reached.

 

What if they are moved anyway?

If the children are relocated without your consent, you can apply to the Family Court for the children to be returned to where they had been living. You would file again for a guardianship order that your children reside in a particular place, and then file for a parenting order. The court will generally favour the status quo location of your children, which is where they were

living for the most recent period before they moved. In determining these applications, the court will always consider what is in the welfare and best interests of the children. This is a paramount consideration.

 

Children’s best interests come first

It is important that your children are happy and settled, and that their interests come first. Ideally both parents will work together to ensure arrangements for their children’s welfare are agreed harmoniously. If, however, agreements can’t be reached, there are options for court intervention. It is wise to try and avoid that as it can be very expensive and take a long time. Most of all, it can affect your children’s relationship with both parents – and no one wants that.

 

If you are concerned about where your children are living, or that they could be moved without your consent, please be in touch with us straight away so we can avoid too much heartache for everyone.

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Get your family details noted now

When someone in your family dies, there are a myriad of things to organise – some of which must be done almost immediately.

One of those tasks is for the death to be registered within three working days of the deceased’s burial or cremation. The funeral director usually organises this. If, however, there is no formal farewell, your family will need to organise this themselves.

Whichever way the death registration is organised, a family needs a great deal of information at its fingertips. Unless one of your family members has an elephantine memory, it may be useful if the required information is documented well before you die! You are more likely to know family details than anyone else. It will also save time after your death when everyone is shocked and it’s easy to forget the most straightforward things.

The Notification of Death for Registration form requires this information:

  • The deceased: Their full name (both at birth and when they died – they could be different); sex; date and place of birth; age, date and place of death; usual home address and their occupation. If not born in New Zealand; how many years have they have lived here; and some ethnicity questions
  • Living children: Ages of each living son and daughter
  • Parents: Their parents’ full names (at birth and when they died); and occupations
  • Relationships: Spouse/partner full name, sex and age when the relationship was formalised; relationship details such as married, civil union, de facto, separated, divorced, etc; and age of the deceased at the time of a civil union/marriage. There is space for up to four relationships to be recorded, and
  • Other: There are boxes to tick if the deceased was a marriage/civil union celebrant, Justice of the Peace and if they held an honour or award.

There are also boxes about the cause of death, date and place of cremation, etc which cannot, of course, be completed until after a funeral.

Medical certificate of death

Different from the death certificate, this notes the cause of death and is provided by the deceased’s doctor or hospital doctor. The estate’s lawyer needs a copy of this document.

Although it may seem morbid, making sure these details are recorded will help your family as they come to terms with your death.

To get more information, go here.

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Gift or loan?

The importance of properly documenting advances between family members

The trusty Kiwi “She’ll be right” approach is often manifested in a reluctance to formally document intra-family lending arrangements. Catch cries of “I trust the kids to sort things out between themselves after I’m gone” and “My new partner says she will never make a claim and I believe her” are common, but all too often lead to disputes down the track.

In this article, we look at three different scenarios that are based on Maddy’s story.

Maddy’s parents help out

In 2016, Maddy’s parents decide to help her buy her first home. The bank will not lend to Maddy without a 20% deposit; her parents offer to lend her $250,000 to make up the 20%. The bank’s rules also require her parents to sign a gifting certificate, confirming that they will not require repayment of the money. Despite that, Maddy and her parents agree verbally that the money is a loan, not a gift, and Maddy will pay them back when she can. This is important to Maddy’s parents, as they also want to help their younger daughter, Sarah, into her first home in a few years’ time once Maddy has enough equity in her home to repay them. Maddy takes out a bank loan, secured by a first ranking all obligations mortgage in favour of the bank and buys her first home. Exciting times.

Let’s look at three different ways in which the failure to document that loan could play out.

Scenario 1: Insolvency

Maddy also owns a hospitality business, which she operates as a sole trader. Maddy doesn’t really understand how it all works, but is pleased that having a mortgage means she gets better lending rates for the business, which improves her caé’s cash flow no end.

Unfortunately, in 2020 Covid hits. While the business manages to hang in there for some time thanks to the Covid business loan and the wage subsidy, the recent removal of all government financial assistance and the move to red level in the traffic light system tip the business over the edge. It owes more than $500,000 to the bank, as well as the debt to the government and various suppliers. Maddy’s creditors file bankruptcy proceedings.

Maddy receive a demand from the bank to pay the $500,000-plus it is owed, which means she must sell her house. There is just enough money left after doing that to repay the bank and all the unsecured creditors.

In an attempt to salvage something from the situation, Maddy argues that the amount her parents contributed to the equity was a loan and not a gift. Unfortunately, there is no documentation to support that; the only documentation is the signed gifting certificate. The creditors rightly say that there is no evidence the money was a loan, and therefore they require repayment of their debts in full.

Scenario 2: Succession

Maddy’s parents died shortly after lending her the $250,000 house deposit. Younger sister, Sarah, is shocked when the estate lawyer says that there is only a house property to divide; Sarah says that she knows her parents had more than $250,000 in the bank which they had lent to Maddy to help buy her house.

Sarah appeals to Maddy, saying that they both know their parents lent Maddy the money. Maddy disagrees, pointing to the bank gifting certificate: she says that it was clearly a gift and she refuses to pay anything back. Lacking any evidence of the arrangements between her parents and Maddy, Sarah is forced to reluctantly accept a lesser inheritance than she believes she was entitled to.

Scenario 3: Relationship property

Maddy’s boyfriend Tom moved into her new home shortly after she bought it. Their relationship broke down four years later in 2020 and Tom claims half the equity in the home under the Property (Relationships) Act 1976.

Maddy accepts that the home is their ‘family home’ and that the equity must be divided equally. She argues, however, that in addition to the bank loan they need to take into account the $250,000 owed to her parents.

Tom says that is the first he heard of any loan from Maddy’s parents, and points to the gifting certificate that he found when he was cleaning out some drawers. Maddy is unable to produce any evidence to support her argument that money is owed to her parents, and has to divide the equity without factoring that in.

The lesson

In every scenario outlined above, a dispute could have been avoided, or minimised, had Maddy and her parents entered into a simple agreement recording the existence of the loan. A deed of acknowledgment of debt, prepared at the time that Maddy bought her house, could have been produced for a minimal fee, thus preventing a multitude of unintended consequences later on.

If you are lending money within your family, do contact us to ensure the loan is documented in a way that protects everyone — both now and in the future.

 

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


Comparing with Britney Spears’ conservatorship

In the Spring 2021 edition of Trust eSpeaking, we looked at whether someone in New Zealand could end up in a similar situation to American entertainer Britney Spears. Britney was under a conservatorship (or guardianship) arrangement that was established against her wishes.

Britney Spears’ conservatorship has now been formally ended. Since then, she has made a number of specific allegations against her conservators including these four points:

  1. She was paid $2,000 per week, despite earning millions per year; this was less than her conservators were paid
  2. Her conservators were unwilling to allow her to marry
  3. Her conservators required her to use contraception so she could not become pregnant, despite her wanting to start a family, and
  4. Britney was forced to work long hours, against her wishes, and despite her sometimes being very unwell.

Could any of these things have happened in New Zealand under the Protection of Personal and Property Rights Act 1988 (PPPRA)? This legislation allows for the appointment of property managers and welfare guardians to make decisions for people who are unable to make decisions for themselves.

The PPPRA also contains what is known as the ‘minimum intervention principle’. When making orders, the court must make the least restrictive intervention possible in a person’s life. Any orders which are made must enable that person to exercise and develop any capacity they may have, to the greatest extent possible.

Let’s look at the four major issues brought up by Britney to illustrate how they would be dealt with in New Zealand. We will call the property manager, Aroha; the welfare guardian, Sam; and Jane is the person whose affairs they manage.

Spending allowance

In New Zealand, Aroha could provide an allowance for Jane. An allowance will help ensure Jane does not spend all of her money and jeopardise her future wellbeing; this allowance will usually be proportionate to Jane’s assets and income. If Jane asks for an increased allowance, the funding for which is available and can be responsibly released, Aroha may well release that money in accordance with the minimum intervention principle.[1]

Aroha can be reimbursed for her out–of-pocket costs, but will not usually be paid for her time administering Jane’s affairs unless the Family Court directs this.[2] Usually only lawyers or other professionals would be paid to act as property manager — not family members.

Marriage

In New Zealand, marriage is not just a social issue; it is a decision that has significant consequences for property under the Property (Relationships) Act 1976. Sam, as Jane’s welfare guardian, may not sign marriage documents on Jane’s behalf nor apply for a divorce for Jane. Marriages have been declared void on the basis that a person did not have sufficient capacity to understand the implications of their decision, particularly the property consequences.[3]

If Jane wants to marry, and given Sam cannot sign marriage documents on her behalf, Jane could approach the Family Court for a capacity assessment and a determination as to whether or not she had capacity to understand the consequences of her decision.

It is possible that Jane may still be able to enter into a de facto relationship; as with a marriage this may also have consequences relating to any property Jane holds.[4]

Medical decisions

Sam can make medical decisions for Jane. It is possible for Sam to decide that Jane should use contraception. If there are concerns about Jane becoming pregnant, the court will usually order long-term reversible contraception rather than sterilisation, in accordance with the minimum intervention principle.[5]

If Sam thought it was important for Jane to use contraceptives, Sam should consult Jane to discuss her wishes. The court might hear from all parties if Jane did not use contraception.

If there was no risk of sexual activity then contraception might not be necessary. If Jane was in a relationship and wanted to have children, the court would consider her capacity to make that decision and direct accordingly.

Working

Jane’s property manager (Aroha) and welfare guardian (Sam) are required to have her best interests at heart. If Jane does not want to work, and is financially secure, it is unlikely that either Aroha or Sam could force Jane to work against her will – even if Jane could generate a substantial income for herself.

Could Britney’s situation arise in New Zealand?

It seems much less likely that someone in New Zealand such as Jane would end up in Britney’s position.

The safeguards discussed in the Spring 2021 edition of Trust eSpeaking would go a long way towards protecting Jane from suffering at the hands of Aroha or Sam. Many of Britney’s specific complaints simply are not permitted under New Zealand law, and others would depend on her capacity. If Britney had capacity to make any specific decision, she would be able to make it herself.

 

[1] Section 28, Protection of Personal and Property Rights Act 1988.

[2] Ibid, Section 50.

[3] X v X [2000] NZFLR 1125; see also Re W [1994] 3 NZLR 600.

[4] See the discussion in E v E (High Court Wellington, CIV-2009-485-2335, 20/11/2009,
Simon France J) at [30]-[35] and [57]-[60].

[5] See the discussion in Darzi v Darzi [2014] NZFC 359 at [32]-[37], although sterilisation was ultimately ordered in that case.

 

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650


A parent dies, but the child is unaware of the death

A child (of whatever age) can make a claim[1] against the estate of their parent under the Family Protection Act 1955 (FPA) if their parent dies and makes insufficient provision for them in their will. What happens, however, when a parent dies and their children aren’t aware of the fact?

This situation can be a tricky position for the executor of a will. Executors are obliged to carry out the terms of the will, and they have duties toward the beneficiaries. However they also have duties toward prospective claimants against a will. When an executor is aware that a person intends to make a claim against an estate, they owe a duty of even-handedness toward that person; this includes ensuring that they do not actively and dishonestly conceal relevant material about the estate from potential claimants who seek information about the estate.[2]

This means that if a child has, for example, engaged a lawyer to act for them and indicated that they intend to make a claim against an estate, the executor must provide information to them and consider their position when administering the estate. The executor cannot sneakily pay out all of the estate assets without telling the child or their lawyer.

There is no general duty, however, on an executor to search for all possible claimants against an estate, nor to inform those people of the fact of death or of their right to make a claim against an estate.

In a 2018 case concerning a relatively small estate, the High Court commented that when assessing an executor’s obligations, ‘regard must be had to the cost and difficulty’ of locating possible claimants or interested parties.[3]

This means that if a child is estranged from their parent and may not be aware that their parent has died, an executor does not have to find them and tell them — particularly if the estate is small and a significant cost would be incurred.

By the time the child finds out about their parent’s death, the estate might have been distributed and the child may no longer be able to make a claim.

The extent of an executor’s obligations toward those of whose claims an executor should be aware has not yet been decided by the New Zealand courts. This might be the case where there is a very large estate and the executor knows a child is impoverished and receives nothing under the will. The child might have contacted the executor at some point, but has not indicated they intend to make a claim against the estate. It is not clear, legally speaking, whether the executor has obligations to that child before distributing the estate and, if so, what those obligations are.

The Law Commission’s report

In December 2021, the New Zealand Law Commission released its final report on the law of succession, along with its recommendations for the government, including a new Succession Act. The report includes recommendations regarding an executor’s duty toward prospective claimants against an estate.

One of the two options that the Law Commission recommends in respect of claims by children is that only children under 25 years old or with a disability be able to make a claim for further provision from an estate. This would limit the ability of adult children to bring claims, which they can currently do under the FPA.

The Commission also recommends that the law should require an executor to notify prospective claimants of relevant information related to their rights. If the first recommendation is accepted, this would mean an executor only needs to notify children under 25 years old or with a disability that the death has occurred and of their rights.

Where a prospective claimant is not known or cannot be found, the Commission proposes that an executor’s duty will be satisfied where they take reasonable steps to search for and give notice to that person. This means that if an executor is unaware of a child, and reasonable searches for information do not disclose the child’s existence, the executor won’t be liable for failing to provide notice or information to that child.

Alternatively, and if the government decides to allow all children to continue to make claims against an estate, the Law Commission does not recommend that executors be required to notify children of the death and/or of their rights. This would continue the current situation.

Conclusion

The Law Commission’s recommendations may dramatically change the law about who can claim against their parent’s estate. If the government takes up those recommendations, the Law Commission also proposes that an executor’s duties should change, and that an executor be required to notify children under 25 or disabled children that their parent has died and what their rights are. This could lead to an increase in estate litigation, though in a smaller group of eligible claimants than is currently the case.

 

[1] Minor children, however, will need someone to bring the application on their behalf.

[2] Sadler v Public Trust [2009] NZCA 364, (2009) 28 FRNZ 474 at [35] and [41]; as referred to in Re Application by Lane (in their capacity as trustees and executors of the estate of the late Carson) [2017] NZHC 3144.

[3] Rattray v Palestine Childrens Relief Fund [2018] NZHC 466.

 

 

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650