Armstrong v Keenan

[2018] NZHC 1196

IN THE HIGH COURT OF NEW ZEALAND

GREYMOUTH REGISTRY

CIV-2017-418-000031

[2018] NZHC 1196

IN THE MATTER OF

THE ESTATE OF FRANCIS BERNARD KEENAN

BETWEEN

SUSANNE YVONNE ARMSTRONG

Applicant

AND

DIANNE FRANCES KEENAN

First Respondent

AND

FRANCIS BERNARD KEENAN

Second Respondent

Hearing:	14 May 2018
Appearances:	R W Maze for the Applicant
Judgment:	25 May 2018

JUDGMENT OF NATION J

Background

[1]    Frank Keenan died on 25 November 2013 at Greymouth. He was survived by three children who he appointed as trustees and executors of his estate. His estate comprised a bank account with a balance of $20,528.95, three vehicles and a property at 302 Woodstock-Rimu Road, Ruatapu (the property) which I have been told has recently been the subject of a sale at $80,000. In his will, Frank Keenan left his estate to the three children equally.

[2]    Elcock and Johnston, solicitors of Hokitika obtained probate of the will for the three named trustees and executors. They attempted to advance administration of the estate including the sale of the property. Because of disagreements amongst the trustees, they were unable to progress matters in the way that was needed.

ARMSTRONG v KEENAN [2018] NZHC 1196 [25 May 2018]

[3]    In November 2017, one of the trustees, Susanne Yvonne Armstrong (Susanne), obtained leave of the Court to make an application by way of originating application to have her siblings, Dianne and Francis, removed as trustees on the grounds this was expedient because:

(a)   the estate had not been properly administered because the trustees and executors were unable to cooperate and there was no basis to believe that would change;

(b)   the estate had a single remaining asset, the house, which was in a state of disrepair and in respect of which debts were accruing;

(c)   if the administration of the estate was not properly completely promptly, the estate would become insolvent;

(d)   the estate could not afford the expense of an independent administrator; and

(e)   the applicant was a suitable person to administer the estate alone.

[4]    The proceedings were served on Dianne Frances Keenan (Dianne) and Francis Bernard Keenan (Francis). Francis is aged 66. Since his father’s death, he has been living in Whanganui. Dianne is aged 68. She lives in Hokitika. Susanne is aged 62 and has been living in Hanmer Springs.

[5]    In a telephone conference of 11 December 2017, Francis voiced his strong opposition to the application. Dianne did not participate but contacted the registry after the conference had taken place. On 12 December 2017, Mander J issued a minute directing both Francis and Dianne to file notices of opposition and affidavits in support by 29 January 2018 if they wished to oppose the application. A half day fixture was allocated for the proceedings on 22 May 2018.

[6]    On 7 February 2018, Mander J, as an indulgence, extended the time for Dianne and Francis to file notices of opposition and affidavits by 9 March 2018. He directed that, if they did not file those documents by 9 March 2018, the matter would proceed by way of formal proof.

[7]    The proceedings were called again in the list on 26 March 2018. Dianne and Francis appeared by audiovisual link. They indicated that they opposed the application and did not want the application to proceed by way of formal proof. Gendall J noted that neither of them had filed a formal notice of opposition. Dianne had, on 26 February 2018, filed a detailed handwritten affidavit.

[8]    Gendall J refused the request by Susanne’s counsel to allow the matter to proceed by way of formal proof on that day. He directed that, within five working days of 26 March 2018, that is by Monday 2 April 2018, Dianne and Francis were to file and serve a formal notice of opposition to the application with affidavit evidence in support of that opposition. He noted the proceedings were set down for hearing on 22 May 2018 but reserved leave to any party to approach the Court on 24 hours notice if additional directions were required.

[9]    On 29 April 2018, counsel for Susanne filed a memorandum seeking various orders to ensure the proceedings could be resolved without further delay. On 30 April 2018, Dunningham J made orders that:

(a)   Francis, having failed to comply with the order of the Court made on 17 April 2018, was prevented from taking any steps in opposition to the application;

(b)   unless Dianne filed and served a notice of opposition and supporting affidavit evidence within five working days of the date of receipt of the minute, she was prevented from taking any steps in opposition to the application; and

(c)   in the event Dianne failed to comply with that unless order, the matter was set down for an urgent formal proof hearing on 14 May 2018 at 11.45 am.

[10]   A copy of the minute was posted to Dianne on 30 April 2018. Allowing a day for postage, Dianne should have filed a notice of opposition and supporting affidavit by 8 May 2018. She did not do so.

[11]   Dianne did contact the Court on 11 May 2018. She said she had posted her opposition on 3 May 2018. No such document had been received by the Court. On 11 May 2018, I directed that, because she had not filed documents as required by the order made by Dunningham J, she was prevented from taking any steps in opposition to the application. The hearing scheduled for 14 May 2018 thus proceeded by way of formal proof.

The law

[12]   In Frickleton v Frickleton, the Court of Appeal endorsed Heath J’s statement of principles that should guide a Court in dealing with an application under s 21 to remove an administrator.1 These are:

(a)   The starting point is the Court’s duty to see estates properly administered and trusts properly executed.

(b)   This jurisdiction involves a large discretion which is heavily fact- dependent.

(c)   The wishes of the testator/settlor (evidenced by the appointment of a particular executor or trustee) are to be given consideration, but ultimately the question is as to what is expedient in the interests of the beneficiaries.

(d)   Expedience is a lower threshold than necessity, and imports considerations of suitability, practicality and efficiency. Misconduct, breach of trust, dishonesty, or unfitness need not be established.

(e)   Hostility as between administrators/trustees and beneficiaries is not of itself a reason for removal, but hostility will assume relevance if and when it risks prejudicing the interests of the beneficiaries.

The evidence

[13]   The evidence relied on by the applicant was primarily an affidavit from Carolyn Margaret Mexted, an estates administrator working within the law firm Elcock and Johnston. Mr Stobie was the principal at Elcock and Johnston who had been the solicitor for the deceased Frank.

[14]   Ms Mexted’s affidavit records that, in early January 2014, Susanne had come to Hokitika to sort through chattels at the property. She did this with Dianne.

1      Frickleton v Frickleton [2016] NZCA 408 at [29].

[15]   Susanne and Dianne, with different members of their family, sorted through the chattels. It was recorded that Susanne took some items with her as well as taking rubbish to the local rubbish dump.

[16]    Susanne said in her affidavit that she had left it to her sister Dianne to contact Francis so he could be there. When she arrived, Francis was not there. Dianne said she had been unable to contact him and that she could not be bothered with him.

[17]   After this happened, Francis made contact with Mr Stobie and insisted that the chattels taken be returned.

[18]   Susanne said she and members of her family took a few momentoes. She said that later, when she was told by the solicitors that Francis was refusing to assist in the administration of the estate until the items were returned, she offered to return them. She later provided to Elcock and Johnston photographs of what she said she had taken.

[19]   It is apparent from the affidavit evidence that the items taken or disposed of would have been of little monetary value but it may be that, for different reasons, some of those items might have been of some sentimental or other value to Francis.

[20]   It is clear from the affidavits and the history of the matter, as recorded in Ms Mexted’s affidavit that what happened regarding the chattels caused such ill-feeling on the part of Francis that it has become impossible for the three siblings to cooperate over other important decisions that have to be made in respect of the estate for the benefit of all three of them.

Francis

[21]   It is apparent from Ms Mexted’s affidavit that Francis has refused to work constructively with the other trustees since complaining about the removal of chattels from the home in January 2014. The estate solicitors received accounts for insurance and the cost of a memorial in February and March 2014. On 29 April 2014, Elcock and Johnston wrote to the trustees asking them to authorise the closure of Frank Keenan’s bank account so funds could be transferred to Elcock and Johnston’s trust account and invoices paid. In an angry and emotional response to the solicitors,

Francis said he would not sign any forms until items had been returned. A Whanganui solicitor appointed by Francis did send emailed consents in June 2014 but it was not until 12 September 2014 Elcock and Johnston received the original bank forms which ASB required.

[22]   On 16 September 2014, Elcock and Johnston asked the trustees to approve the use of the funds in their trust account to make certain payments. Francis said he would not sign anything until all items taken from the property following Frank’s death were returned to the property. It was not until 10 October 2014 the solicitors received authority to make the payments.

[23]   Francis’ position over the sale of the house has vacillated. In May 2014, the solicitors received an emotional call from Francis when he was refusing to sign any of the forms. He expressed a wish to move to Hokitika and reside at the property.

[24]   On 26 September 2014, Dianne advised the solicitors that both she and Susanne wished to sell the property but, at that point, Francis advised he would not sign anything until all items taken the property following Frank Keenan’s death were returned to it.

[25]   In October 2014, Francis advised he wished for the house to go into a family trust and he would live in it and “up grade it” for sale while living there.

[26]   In December 2014, Francis said it was his intention to come to Hokitika “in the new year” and stay in the property. He told the solicitors he was interested in buying his siblings’ shares and he intended to apply to a bank for a loan to do this. The solicitors had to repeatedly ask him for information as to how he had got on with the bank and whether he was going to follow through over his wish to reside in the property.

[27]   In January 2015, Dianne and Susanne advised the solicitors they had a cash offer for the sale and purchase of the property at $150,000. The solicitors advised Francis of this and urgently asked for his position on the offer. Francis said he would only come to Hokitika when items taken from it had been returned and that he would

not agree to the sale at $150,000 until he had inspected the property personally. The solicitors sought instructions from him to avoid the possibility of a possible sale at

$150,000 being lost.

[28]   On 4 February 2015, the solicitors emailed Francis a letter stressing the need for the other trustees to know whether he was going to purchase the property. Elcock and Johnston advised that the other trustees considered the offer for the property at

$150,000 was very reasonable. They asked him to put to one side his demand that he view the house first and the position that he would not do this until items removed had been returned. Elcock and Johnston advised that, if he did not agree to accept the offer or provide confirmation that he was in a position to purchase the house, Dianne and Susanne would be applying to the Court to have him removed as an executor. Francis’ initial response to this in a telephone call was to ignore the central issues in the letter but to focus on the vehicles. He wanted them brought to where he lived in Whanganui to be sold as scrap. He repeated his position that he would not do anything until the property taken had been returned.

[29]   On 9 February 2015, the solicitors received a telephone call from a new solicitor in Whanganui instructed by Francis. That solicitor indicated that Francis might agree to a sale of the property if $150,000 was a reasonable price. They asked for a valuation. Elcock and Johnston provided a report from a real estate agent. That appraisal recommended a selling price of between $130,000 to $150,000. The report mentioned problems with the roof, the need to replace piles and of sheds not being in the best of condition. Elcock and Johnston endeavoured to ascertain Francis’ position from his Whanganui solicitor but were ultimately told on 27 February 2015 that Francis had dispensed with the solicitor’s services and approached another solicitor.

[30]   Eventually, at the end of February 2015, Francis said he had spoken to the bank but refused to tell the solicitors of the outcome.

[31]   On 12 May 2015, Francis called the solicitors and said he would not sign anything nor would he pay his share of the estate’s expenses until all property was returned and matters had a fresh start.

[32]   In December 2015, Francis told the solicitors he was going to travel to Hokitika and “squat” in the house.

[33]   In May 2017, Francis called at the solicitors’ office asking for keys to the property. He told them that it was his intention to move down and live in the house. He returned the keys a few days later.

[34]   It appears from Ms Mexted’s affidavit that Francis has been unable or unwilling to put the interests of all the beneficiaries and the need for prudent decisions to be made over the sale of the house before seeking personal satisfaction over his grievance about chattels. His communications with the solicitors have been very emotional and angry. On 29 October 2014, he emailed the solicitors advising that he wished to walk away from the fighting. He said he would not agree to any meetings. The solicitors asked him if he wished to be discharged from his duties as a trustee and executor on 4 November 2014 but on 3 December 2014, he denied saying he was walking away from the estate.

[35]   His delay in advising the solicitors of whether he was going to follow through on his stated intention to buy the property caused problems for the other trustees. His withdrawal of instructions to the Whanganui solicitor, who had indicated on his behalf that he might agree to the sale of the property without any constructive suggestion as to how the situation with the property could be dealt with, was also damaging as far as the estate was concerned.

[36]   On 24 October 2015, Francis left a message for the legal executive at Elcock and Johnston complaining as to a lack of communication from them, said he would not give up being a trustee and executor of the estate and expressed the view that his sisters had committed theft and ought to be charged.

[37]   It is apparent from Ms Mexted’s affidavit that, through the way he has communicated with them, Francis has made it difficult for Elcock and Johnston to assist the trustees in the administration of the estate. For example, she referred to several telephone calls Francis made to her on 2 September 2015 where she had to hang up because of his shouting, swearing and abuse. On 27 October 2015, Ms

Mexted emailed Francis a letter from Mr Stobie stating that all future communication should be in writing. He responded by calling a total of nine times during that day.

Dianne

[38]   The affidavit evidence indicates that Dianne assisted all beneficiaries by the way she initially looked after the property and ensured that some maintenance was done on it. Nevertheless, it seems from Dianne’s dealings with Elcock and Johnston, and the affidavit and other material that she has sent to the Court, that although Dianne has often wanted to do what is best for the estate, in the end, the intensity of her feelings has made it difficult for her to make the crucial decisions and do what was required to deal objectively with situations the trustees have faced.

[39]   Elcock and Johnston’s records indicate that, when they were seeking approval for the closure of Frank’s accounts, Dianne spoke to Elcock and Johnston on 29 April 2014 in ways that “sounded highly emotional and accusatory”.

[40]   When Susanne was seeking access to the property in September 2014 and conveyed that wish to Dianne who had the keys to the property, Dianne initially agreed to meet Susanne at the house but then refused to allow her access unless all three trustees were present. She was abusive towards Susanne in that conversation. At that point, Dianne and Francis were both opposed to Susanne having access to the property.

[41]   In December 2014, Elcock and Johnston were frustrated at their inability to obtain clarification as to Francis’ position over the property. Dianne advised Elcock and Johnston that the property was deteriorating and also that the stress resulting from the administration of the estate had taken a toll on her and she had given up her job as a result. She then advised that she had ceased maintaining the property. She had not wanted the Transpower account put in the name of Elcock and Johnston so that power could be reconnected to the property.

[42]   In June 2015, Dianne called on Elcock and Johnston and dropped off a letter. In that letter, she made complaints against both Francis and Susanne and expressed her understandable frustration at the lack of progress but also said that she was then “back on anti-depression medication and having counselling” because of the effect the

whole situation had on her health. It was apparent from the letter that she was deeply and emotionally upset at the whole situation. She saw the disagreement as dishonouring the memory of her parents.

[43]   At the end of July 2015, Susanne contacted Elcock and Johnston with concerns for Dianne’s welfare. In August 2015, Susanne was attempting to obtain a key to the house from Dianne. The solicitors were trying to facilitate this but were unable to obtain a response from Dianne.

[44]   After Susanne had been unable to obtain access to the property, with the knowledge of the solicitors, she arranged for a locksmith to change the locks. She provided to Elcock and Johnston sets of keys for each of the trustees. When Dianne learnt of this, she demanded they be changed back again or she would call the Police. When she went to the solicitors’ office to collect the keys, she was upset and abusive.

Susanne

[45]   I have carefully read the affidavit which Dianne sent to the Court. She makes a number of criticisms and allegations against Susanne which I have considered.

[46]   Susanne is the youngest of the three siblings. She is a motelier who resides in Hanmer. In an affidavit of 28 September 2017, she summarised relatively briefly the involvement she had as a trustee but confirmed the correctness of what was said in the affidavit of Carolyn Mexted as to what had happened in the administration of the estate.

[47]   Susanne’s application is made essentially on the grounds that the trustees are unable to cooperate. The comments Dianne has made in various documents to the Court about her sister are consistent with them not being able to work together to make decisions unanimously for the benefit of all beneficiaries.

[48]   Many of the difficulties in the administration of the estate have seemed to have arisen from Francis’ initial grievance over the fact his sisters had gone through chattels. In documents filed during the proceedings, Dianne has criticised Susanne over what happened with the chattels but, on Elcock and Johnston’s account of what

has happened in the administration of the estate, it seems that what occurred was not then a matter of concern to Dianne. There is no disagreement that Susanne met with Dianne at the property in order to sort through the chattels.

[49]   In December 2014, both Dianne and Susanne confirmed with Elcock and Johnston that they wished to apply for orders removing Francis as a trustee and executor of the estate.

[50]   Although there are criticisms of the way some chattels were taken from the property in early January 2014, I am satisfied that Susanne genuinely intended that all three of the trustees and families would be there and had travelled to Hokitika on the assumption that they would be. Although she or members of her family did remove some items from the property and, although such items may have been of sentimental or desirable value to others, they were modest in number and of little monetary value.

[51]   I accept the evidence from Ms Mexted that Susanne had photographed the items that she or her family had taken from the property and that in December 2014 she offered to return the items if other trustees also returned items they had taken. She said she was then content for the dispute over the chattels to be settled on the basis her siblings retain the remainder of what was left at the property.

[52]   Ms Mexted’s affidavit and the record of Susanne’s involvement in the estate satisfies me that Susanne will be capable of acting impartially in the administration of the estate, that she will accept the advice of the estate administrator and of Mr Stobie as the principal of Elcock and Johnston when this is required. Despite the ill-feeling that now exists between the siblings, the evidence satisfies me that Susanne will be able to make the necessary decisions objectively and fairly in the interests of all beneficiaries.

[53]   Susanne responded promptly to Elcock and Johnston’s requests for approval from the trustee for the closure of Frank Keenan’s bank accounts, the transfer of funds to Elcock and Johnston’s trust account and, when the monies had been transferred, for the payment of outstanding accounts. Those costs included a payment to Dianne for expenses she had incurred or work she had done in maintaining the property. In

August 2014, Susanne responsibly offered to pay the memorial invoice from her personal funds on the sale of her house.

[54]   Susanne did not unilaterally make a decision about the sale of the house in September 2014. She first contacted Mr Stobie, enquired as to whether there was any business for the estate which she needed to attend to and indicated that she wished to show the property to a real estate agent.

[55]   Susanne also agreed in October 2014 to Elcock and Johnston’s suggestion that the trustees proceed to mediation. It was not possible to progress that because of Francis’ attitude.

[56]   Susanne responsibly adopted the same position as Dianne over the potential sale of the property at $150,000 in 2015 and did work with Dianne and the solicitors to try and obtain a positive response over that from Francis.

[57]   In 2015, when the solicitors were making no progress in ascertaining Francis’ position, Susanne went to the trouble and no doubt incurred the expense of engaging solicitors with a view to taking formal steps to have Francis removed as a trustee and executor.

[58]   Although she arranged for a locksmith to change the locks to the property on 31 August 2015, she did so in consultation with Elcock and Johnston and delivered three sets of keys to their office after this had happened.

[59]   Ms Mexted swore her affidavit on 3 October 2017. She said that the only trustee who had been in contact with Elcock and Johnston since December 2015 had been Susanne.

[60]   The inability of the trustees to work together has been to the detriment of the estate. The estate has had no funds to pay house insurance since October 2017. As at 5 July 2017, the balance outstanding for rates was $1,379.05, including penalties of

$113.90 and interest. A further rates instalment was due at the end of August 2017.

[61]   In August 2017, Elcock and Johnston advised the trustees that interest was now payable on the outstanding rates at 20 per cent per annum. In November 2015, Elcock and Johnston advised the trustees that, at that time, there were costs due to them in excess of $6,000 which would have to be met from the sale of the house. Significantly more than that must be due now with all the difficulties that have occurred in the administration of the estate.

[62]   The property must have continued to deteriorate. Dianne’s efforts in maintaining the house have come to an end. In April 2015 when Dianne told Elcock and Johnston she had stopped maintaining the property, she told them the property had deteriorated further and was again infested with rats. In December 2015, Dianne advised Elcock and Johnston that the property could not be rented out because of the power situation.

[63]   The value of the estate is modest. I accept it would be difficult to have a person engaged as an independent trustee in a personal capacity and that requiring the appointment of such a trustee would cause further delay in steps being taken with regard to the administration of the estate that are necessary in the interests of all beneficiaries.

[64]   It is apparent from Ms Mexted’s affidavit that Susanne will, as trustee, engage fully with Elcock and Johnston in the steps she has to take to wind up the estate.

Conclusion

[65]   I recognise that the Court should not readily replace the executors who Frank Keenan had selected to manage his estate. The history I have set out above does however establish that the value of the few assets that exist in this estate would be further eroded if all three siblings remain as trustees. The conflict between them has reached a level where it has become impossible for them to make the decisions and to take the steps necessary to best realise the value of the estate’s property.

[66]   I am satisfied that, despite the criticisms that Dianne and Francis make of Susanne, she will be able to make decisions over the future of the home in the way that is best able to benefit all three siblings who are entitled to share in the estate.

Having made those findings, it is necessary for me to make orders removing Frank and Dianne as trustees and executors of the estate, leaving Susanne as the sole executor and trustee.

Orders

[67]   I accordingly make orders removing Dianne Frances Keenan and Francis Bernard Keenan as the executors and trustees of the Estate of the deceased. I reserve leave to Susanne Yvonne Armstrong to seek further orders, such as an order vesting title to the property or other assets in the trustees names into her name to give effect to the orders made.

Costs

[68]   In her application, Susanne sought an order for costs. She has been the only person represented by counsel in the proceedings. The issue I consider is whether the costs she has incurred should be paid out of the estate. If such an order is made, those costs will effectively be borne by the three siblings so that Susanne will be sharing those costs to the same extent as her brother and sister.

[69]   In submissions when the hearing proceeded by way of formal proof, Mr Maze advised the Court that he had agreed to be responsible for these proceedings on the basis that ultimately his costs would be in accordance with the costs provided for in the High Court Rules on a 2B basis plus one-half. He suggested this was a reasonable basis on which to assess his costs given that the costs recoverable under the schedule in the High Court Rules is regarded as being two-thirds of what would normally be the reasonable actual costs of a party involved in Court proceedings.

[70]   Mr Maze helpfully set out what he considered the costs would be on a 2B basis on a straight application of the schedule. According to the schedule, the time for which Mr Maze seeks costs would be 7.1 hours. Progressing these proceedings has not been easy because of the inability or unwillingness of Dianne and Francis to take advice from counsel and the indulgences which the Court granted them for the filing of documents. This has undoubtedly required additional work of Mr Maze as counsel for Susanne, but some of the work required of him was less because the issue which the

Court had to deal with at a pre-trial conference was confined and reasonably straight forward. There must also have been some reduction in the time required for preparation and for hearings because the work required was a repetition of what had been done earlier.

[71]   I consider his reasonable costs for acting for Susanne should be fixed on the basis that the total time billed should be 5.5 hours. The daily recovery rate according to the schedule would be $2,230 so that, on a 2B basis, his total costs will be $12,265. Because the schedule costs are based on what would be two thirds of reasonable costs, that figure should be increased by one-half, resulting in total costs of $18,397.50. In addition, disbursements Susanne has incurred in bringing these proceedings are:

Filing fee on interlocutory application  $200

Filing fee on originating application  $200

Sealing order  $  50

Process servers   $391

TOTAL  $841

Susanne’s total reasonable costs should thus be fixed at $19,238.50.

[72]   Those costs should be paid from the estate so that they will be shared equally by those entitled to benefit from the estate. Susanne has had to bring these proceedings for the benefit of all beneficiaries in the estate, to ensure that the estate was properly administered, to avoid a further reduction in the value of the estate and to ensure costs incurred with regard to the administration of the estate are paid.

Solicitors:

R W Maze, Barrister, Christchurch.