An appeal to the High Court last month raised an interesting question about a testator’s moral duty. The appeal was against a decision of the Family Court on an application under the Family Protection Act 1955 for provision from the estate of the appellant’s late father.
Background to the case
The appellant, Peter was the only child of his father, Sam. When Sam died, he left the whole of his estate to Peter’s mother, Fiona. Sam and Fiona were married at the time Sam wrote his will in 2005 but subsequently separated at the end of 2009. In 2012, they entered into a written agreement recording a full and final settlement and division of their relationship property. While Sam and Fiona remained close despite their separation, never resumed their romantic relationship. When Sam became ill in early 2017, Peter had been living and working in Australia for a decade. He resigned from his employment and returned to New Zealand to be his father’s primary caregiver until Sam passed away in June 2017.
Family Court decision
Peter claimed in the Family Court that Sam had failed to discharge his moral duty by failing to make any provision in his Will for Peter’s proper maintenance and support. Even though the Court found that Sam had not breached his moral duty, Peter was awarded 10% of the estate because as his only child “a modest award [was] appropriate to recognise his place in the family”. The value of Sam’s estate totalled $288,682 so Peter’s notional entitlement was $28,868.
In the High Court, the Judge noted that a “significant and unusual feature of the circumstances” relevant to the question of Sam’s moral duty was that he and Fiona had separated and divided their relationship property. The Will was clearly made on the assumption that he and Fiona would still be married at the time of his death and as they had already divided their property and were living independent lives at the time of Sam’s death, Sam’s moral duty to make testamentary provision for Fiona had been effectively extinguished.
The Court found that Sam had a moral obligation at his death to make adequate provision from his estate for his son’s maintenance and support. He was in breach of his duty when he failed to make any provision for Peter in his Will. Peter’s return home to New Zealand to care for his father demonstrated the strength of their relationship. The Judge’s view was “substantially informed” by the fact that Peter was his only son, that Peter’s financial situation was modest and as he was in his mid-forties, it was unlikely that he would ever accumulate enough capital to purchase a home.
In recognition that Sam had not discharged his moral duty, an order was made directing that Peter receive assets comprising close to half of the value of the estate. The High Court found the value of Sam’s estate was actually $472,147. Peter received assets totalling $216,000 which was approximately 46% of the total value of the estate.
Testamentary freedom can be displaced if the testator does not discharge their moral obligation to an applicant who should have been provided with proper maintenance and support in the Will. Often this moral duty is owed to a spouse/partner or child, but in some circumstances can also include grandchildren, step-children and parents.
A testator can owe a duty to multiple people simultaneously. For example, if Fiona and Sam had not separated and completed the division of their relationship property, then it is likely Peter’s award would have been much smaller because there would have been competing moral claims between Peter and his mother. As Sam’s only child, Peter was the only person to whom Sam had a moral obligation to provide maintenance for.
The size of the estate is highly relevant to the award that is granted. Interestingly, the High Court noted that although Sam’s estate did not have a substantial value, it was still sufficient to enable Sam to discharge his moral duty.
It is important to update your Will at the end of the relationship, particularly after a relationship property settlement has been reached. This provides greater certainty for your family and reduces the risk your Will might be challenged.
*Note: names have been changed to protect the parties’ anonymity.