Boot v Stephens

[2021] NZHC 3487

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1281

[2021] NZHC 3487

IN THE MATTER

of the Trustee Act 1956

AND

IN THE MATTER

of the Estate of Eric Leslie Hart of Auckland, Deceased

BETWEEN

GAVIN BOOT

Plaintiff

AND

MARLENE MOANA STEPHENS AND BRIAN MATTHEW STEPHENS

Defendants

Continued over

Hearing:	1 December 2021
Appearances:	P J Morgan QC for Plaintiff Defendants in person
Judgment:	16 December 2021

JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 16 December 2021 at 12 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date: ...................................

Solicitors:           Gavin Boot Law, Hamilton Counsel: P J Morgan QC, Hamilton

Copy for:           Mr and Mrs Stephens

BOOT v STEPHENS [2021] NZHC 3487 [16 December 2021]

AND

LENORA LESLEY HIPPOLITE (née HART), CHRISTINA MANA KUTIA (née HART), JARED PARATENE HART, ANGELIQUE IRA GILGEN (née HART), SHARIANNE HINEMOA HEMI

(née HART) Interested Parties

[1]                The plaintiff, Mr Boot, is the executor and trustee of the estate of Mr Eric Hart, deceased (“estate”).

[2]                By his statement of claim dated 13 July 2020, Mr Boot seeks directions pursuant to s 66 Trustee Act 1956. In particular, Mr Boot seeks directions:

(a)that he make an application under s 339 Property Law Act 2007 (“PLA”); and

(b)that his costs in the proceeding be paid from the assets of the estate, that is a Beddoe order.

[3]                Section 339 PLA permits the Court to order the sale of a property owned by co-owners and the division of the proceeds of sale. The nature of a Beddoe order is described in the following passage from the Court of Appeal’s judgment in McCallum Jnr v McCallum:1

[28] As this Court observed in Pratley v Courteney, a trustee has a duty to protect trust assets for the benefit of the beneficiaries. The duty extends to bringing, and defending, claims necessary to fulfil that duty. But they must do so where the grounds for action, or defence, are reasonable. The trustees must exercise due skill and care. If there is doubt as to what they may do, trustees should take legal advice, and they may seek directions from the court. Litigation costs incurred for the benefit of the trust in its defence will generally be paid out of trust funds. But they must be reasonably and properly incurred. A Beddoe order may be sought to confirm pre-emptively the propriety of action or defence, and to confirm the trustees’ entitlement to indemnity for costs to be paid out of the trust’s funds.

Background

[4]                Mr Hart died on 22 April 2017. Probate of his will was granted on 28 July 2017. By his will, Mr Hart left his estate to his six children in equal shares, of whom the defendant, Mrs Stephens, is one. The interested parties are Mr Hart’s other children.

[5]                The most valuable asset in the estate is Mr Hart’s interest in a residential property in Howick (“property”). Apparently, online valuation sites identify the

1      McCallum Jnr v McCallum [2021] NZCA 237 (footnotes omitted).

market value of the property as approximately $1.6 million. In an affidavit sworn on 23 June 2020 in support of the application, Mr Boot also states that the estate holds cash of $103,457.57.

[6]                Mr Boot, as executor, is registered as the owner of a half share of the property, and the defendants, Mr and Mrs Stephens jointly, as owners of the other half share. However, the Stephens contend that their beneficial interest in the property exceeds the half share recorded on the title. Mr Boot is not able to confirm this from the information available to him and, as I understand it, at least some, and possibly all, of the other beneficiaries do not accept this claim.

[7]                Mr Boot holds Mr Hart’s interest in the property upon the trusts set out in the will. In his affidavit, Mr Boot states that the property will need to be sold so that he may recover Mr Hart’s share, distribute the cash to the beneficiaries, and wind up the estate. I accept that evidence.

[8]                As executor and trustee, one of Mr Boot’s duties is to get in the assets of the estate and to convert them to cash. This is provided for in cl 4(a) of the will, even if expressed as a power as opposed to a direction:

4.        I EMPOWER my trustee:

(a)To sell call in and convert to money such part or parts thereof as shall not already consist of money with power to postpone such sale calling in and conversion for so long as my trustee deems advisable.

[9]                There is no prospect of a sale of Mr Hart’s interest alone, unless to Mr and Mrs Stephens. Such a sale is impossible unless there is agreement on the extent of Mr Hart’s interest and fair market value. This seems highly unlikely on the basis of Mr Boot’s evidence and the memorandum the defendants filed in September 2021. This makes an application pursuant to s 339(1)(a) PLA unavoidable. It is because such an application is unavoidable that I decline to direct Mr Boot to make that application. I do not consider this would be a proper use of s 66 Trustee Act.

[10]            That said, I consider Mr Boot should commence his proceeding without delay. In the passage from McCallum cited above, the Court of Appeal states that a Beddoe order may be made to confirm pre-emptively the propriety of action or defence, and

to confirm a trustee’s entitlement to indemnity for costs to be paid out of the trust’s funds. I make such an order in Mr Boot’s favour.

[11]            Mr and Mrs Stephens will wish to take legal advice in respect of any relief they may seek. However, they, and the interested parties also, should understand that the Beddoe order that I have made is in Mr Boot’s favour only. It will be a matter for the Judge determining the proceeding also to determine any issue as to costs between the parties. Mr and Mrs Stephens should also understand that a party who fails in litigation is usually required to pay costs to the party who succeeds. Their solicitor will be able to advise them on their position.

Result

[12]            I decline to direct Mr Boot to make an application pursuant to s 339(1)(a) of the Property Law Act 2007. I make a Beddoe order confirming Mr Boot’s entitlement to indemnity for costs to be paid out of the estate or trust funds in bringing that proceeding.

Peters J