Blake v Baddeley
[2024] NZHC 2192
•7 August 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-000282
[2024] NZHC 2192
BETWEEN LISA KATHLEEN BLAKE
Plaintiff
AND
QUINTON AINSLEY BADDELEY and WENDY LYNETTE McENTEGART as
Executors of the Estate of KATHLEEN MAVIS BADDELEY
Defendants
Hearing: 1 August 2024 Appearances:
Plaintiff in Person
First-named Defendant in Person
Judgment:
7 August 2024
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 7 August 2024 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Copy to:
L Blake
Q Baddeley, W McEntegart
BLAKE v BADDELEY [2024] NZHC 2192 [7 August 2024]
Introduction
[1] The plaintiff, Lisa Blake, applies for summary judgment of her claim for orders that the first-named defendant, Quinton Baddeley, approve payments to her in his capacity as executor of the Estate of Kathleen Baddeley (the deceased). The payments are to repay Mrs Blake for a loan she made to the deceased, her grandmother, to enable her to purchase an occupation right at a retirement village.
[2] Mr Baddeley opposes the orders being made because he considers that the deceased intended to gift $10,000 to each of her grandchildren, including Mr Baddeley’s three children. He considers that he is entitled to retain the money in the estate for these gifts.
[3] As this is an application for summary judgment, the issue to decide is whether Mr Baddeley has a defence to Mrs Blake’s claim. If he has a defence, the claim should be determined following a full trial.
Background
[4] On 6 June 2019 the deceased made her final will. The will appointed the deceased’s children, Wendy McEntegart and Mr Baddeley, as executors and trustees of the will.
[5] Warwick Ayres, solicitor, drafted the will. He has sworn an affidavit deposing that he did so on the deceased’s instructions.
[6] On the same date that the will was signed, 6 June 2019, Mrs Blake advanced a loan to the deceased to enable her to purchase an occupation right at the Aria Park Retirement Village. The loan was recorded in a Deed of Acknowledgement of Debt. The loan was interest-free. Under the Deed, both parties confirmed that they had the opportunity to seek independent legal advice.
[7]Clause 5 of the will, headed “Gift of Residue”, provides:
5.1 I give my Trustee the rest of my property as follows:
(a)To pay my debts, including the loan made to me by my granddaughter LISA BLAKE, my funeral expenses and the administration expenses of my estate.
(b)As referred to above my granddaughter made a loan to me of
$535,000.00 to enable me to purchase an occupation licence at Aria Park Retirement Village. I have signed a Direction For Payment to Aria Park Retirement Village Limited to pay the proceeds of termination of the licence to my granddaughter LISA BLAKE, towards repayment of the loan, and I direct my Trustee to provide any information to Aria Park Retirement Village Limited [to] facilitate [the] payment of the same to my granddaughter LISA BLAKE.
(c)To give the balance to my children WENDY LYNETTE MCENTEGART and QUINTON AINSLEY BADDELEY (or the survivor of them) in equal shares.
[8]On 3 August 2021 the deceased repaid Mrs Blake $171,926.16 of the loan.
[9]The deceased died on 21 January 2023.
[10]Probate of the will was granted (in common form) on 15 August 2023.
[11] On 16 October 2023, Ayres Legal Ltd advised the defendants as executors that there would likely be a shortfall between the assets and liabilities of the estate of approximately $15,000–$20,000, meaning it was unlikely that there would be a balance available to distribute to the defendants (as beneficiaries) under cl 5.1(c) of the will. This also meant that the debt to Mrs Blake of approximately $363,000 could not be paid in full.
[12] On 19 December 2023, Ayres Legal Ltd reported to the executors that they had collected in the remaining assets of the estate and paid various liabilities as recorded in an attached statement of account. The balance available in the estate was just over
$340,000. They recorded that Mrs Blake was still owed more than $363,000. They sought the executors’ agreement to pay Ayres Legal Ltd’s invoice of $5,000, to retain
$5,000 for the estate’s 2024 tax return and any final fees, and to repay the balance of
$340,545.02 to the estate’s creditor, Mrs Blake.
[13] It is understood that Mr Baddeley agreed to authorise payment by the estate to Mrs Blake of $270,545.02, requiring a retention of $70,000 because he considered the deceased had intended to leave a $10,000 gift to each of her seven grandchildren.
[14] On 21 December 2023, Mrs Blake made a demand for the outstanding debt owed by the estate to her.
[15] Also on 21 December 2023, Ayres Legal Ltd wrote to the executors. They advised that as executors of the estate and in terms of their affidavit to the Court for probate, they had agreed to execute the terms of the will. They advised that the will is clear that the debt owing to Mrs Blake is to be repaid as an expense of the estate. They advised that there was no reason they were aware of that, as executors, the defendants could decide not to repay the balance of the estate to reduce the debt owed to Mrs Blake, and they could not see any defence the executors would have to a claim by Mrs Blake for repayment.
[16] In relation to Mr Baddeley’s position that he did not wish to repay the full amount to Mrs Blake and wanted $70,000 held back for the grandchildren, they advised that no claims had been made against the estate and the time had elapsed for notices of claim to be made, so the executors should proceed to distribute the estate.
[17] A further statement of account prepared by Ayres Legal Ltd dated 22 December 2023 records $5,000 being retained for tax and final fees, $30,000 being retained “pending Executors [sic] decision”, and the balance of $311,098.76 being paid to Mrs Blake. It is assumed that Mr Baddeley approved this part-payment to Mrs Blake.
Legal principles
[18]Rule 12.2(1) of the High Court Rules 2016 provides:
The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[19] The relevant principles governing a summary judgment application are well established:1
(a)The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
question to be tried. The Court must be left without any real doubt or uncertainty.
(b)The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.
(c)The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.
[20] The defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the notice of opposition.2
[21]Section 53 of the Administration Act 1969 provides that:
The court shall have power to direct any person named as executor in a will to prove or renounce probate of the will, and (subject to this Act and any other enactment and the rules) to do such other things as it thinks fit concerning… the hearing and determination of proceedings relating to testamentary matters and matters relating to the estates of deceased persons.
[22] The Court has previously used its power under s 53 to make orders in relation to the distribution of estates. For example, Re Fox dealt with an application by the executor of an estate for directions in circumstances where a beneficiary of the estate had passed away.3 The Court made a direction pursuant to s 53 that the executor transfer this beneficiary’s one-eighth share of the residue of the estate into his solicitors’ trust account on an interest-bearing deposit pending a grant of Letters of Administration for the beneficiary’s estate.4 Further, in the recent case of Clark v
2 Middleditch v NZ Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.
3 Re Fox [2018] NZHC 2533.
4 At [13(a)].
Sharma, the Court made orders under s 53 permitting an executor to distribute eight of the 11 equal parts of the residue of the estate to a person whom she had taken extensive measures to locate and identify as the person to whom the deceased had bequeathed that share in the will.5
Analysis
[23]I am satisfied that Mr Baddeley does not have a defence.
[24] There is no dispute that a loan of $535,000 was made to the deceased to purchase an occupation right at the retirement village. Mr Baddeley has suggested that in fact the loan was made by Mrs McEntegart, not Mrs Blake (her daughter). However, there is no evidence before the Court to support that proposition.
[25] Mr Ayres has sworn that he drafted the Deed of Acknowledgement of Debt and attended to its signing by the deceased and Mrs Blake. He confirms that he is certain that the deceased understood the documents she was signing.
[26] Clause 5 of the will is clear that the executors are to use the deceased’s estate to pay any debts of the estate including, specifically, the loan made to the deceased by Mrs Blake (together with funeral expenses and administration expenses). The executors are to give the balance after the debts have been paid (if any) to Mrs McEntegart and Mr Baddeley (or the survivor of them) in equal shares.
[27] In any event, that is the position as a matter of law. The executor of an estate is required to pay the debts of the estate before paying any legacies. This Court has confirmed that:6
….The role of an executor is to realise all assets, and to pay all debts, funeral expenses and legacies. Once that has been done, the residuary estate is created. At that time, the persons named as executors and trustees step into the role of a trustee and hold the residuary estate on the terms set out in the will…
5 Clark v Sharma [2024] NZHC 1434.
6 Burgess v Monk [2017] NZHC 2424 at [65] (footnotes omitted).
[28] This principle is also expressed in the following passage from Nevill’s Law of Trusts, Wills and Administration,7 which has been cited with approval in this Court:8
Since debts must be paid before gifts by will are distributed to beneficiaries, if there is insufficient in the fund set aside for payment of debts then the gifts given by will must be resorted to in order to satisfy those debts.
[29] Mr Baddeley has provided affidavits from two of the deceased’s grandchildren in which they state that they were told by the deceased that each of her seven grandchildren would receive $10,000 upon her passing. However, the deceased did not make any such gifts in her final will.
[30] Even if the deceased wished her grandchildren to receive $10,000 each from her estate, and even if she had specified this in the will, there are no funds left for any gifts after payment of the estate’s expenses and liabilities, which include the debt owed to Mrs Blake.
[31] An executor holds the estate of any person according to the trusts and dispositions of the will.9 Their primary duty is to propound and maintain the will by which they were appointed.10 Mr Baddeley is under a duty to execute the deceased’s estate according to the terms of the will. He is not able to act inconsistently with the will, including by retaining money for gifts that do not form any part of the will.
[32] Mr Baddeley considers that he is empowered to withhold the sum of $30,000 under cl 6.1(a) of the will, which states that the trustees have the power to “retain any assets which form part of [the] estate without being liable for any loss caused by their retention”. I am not persuaded that this is the case. This clause cannot have been intended to empower the executors of the estate to retain its assets as they see fit, contrary to the express terms of the will.
[33]For these reasons, Mr Baddeley does not have a defence.
7 Lindsay Breach Nevill’s Law of Trusts, Wills and Administration (14th ed, LexisNexis, Wellington, 2023) at [15.6.2].
8 Bristow v Smith [2013] NZHC 2866, (2013) 31 FRNZ 610 at [32(b)].
9 Administration Act 1969, s 25(1).
10 Breach, above n 7, at [21.1].
Result
[34]I enter summary judgment on Mrs Blake’s claim in the following terms:
An order under s 53 of the Administration Act 1969 that the executors execute the estate of the deceased according to the terms of the will dated 6 June 2019 for which probate was granted on 15 August 2023, including cl 5.1(a) and (c) which require all debts, including the debt to Lisa Blake, to be repaid, and all expenses paid, before the residue (if any) is distributed to beneficiaries.
[35] As to costs, generally, executors are entitled to reimbursement for costs properly incurred while administering an estate. However, costs may be directed against an executor personally where their conduct has been unreasonable or inconsistent with their duties, or where they have not acted in good faith.11
[36] Mr Baddeley was advised by Ayres Legal Ltd that as an executor of the estate and in terms of his and Mrs McEntegart’s affidavit to the Court for probate, he had agreed to execute the terms of the will. He was advised that the will is clear that the debt owing to Mrs Blake is to be repaid as an expense of the estate and that there is no reason that, as executors, the defendants could decide not to repay the balance of the estate to reduce the debt owed to Mrs Blake.
[37] Mr Baddeley elected to ignore that advice and to oppose this claim. In these circumstances it is appropriate that he, rather than the estate, pays Mrs Blake’s costs.
[38]Therefore, I order Mr Baddeley to pay Mrs Blake her filing fees of $1,350 and
$200, and service fees of $690; a total of $2,240.
Associate Judge Gardiner
11 Van Rijn v Van Ryn (No 3) [2023] NZHC 2414 at [9]–[10].
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