Boyd v Connolly
[2015] NZHC 2884
•19 November 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-485-603154 [2015] NZHC 2884
IN THE MATTER of an application for Probate in Solemn
Form
IN THE MATTER
of the Estate of Fiona Marie Duncum
BETWEEN
KAREN MICHELLE BOYD Plaintiff
AND
SEAN CONNOLLY Defendant
Hearing: 16 November 2015 Appearances:
J Hunter for the Plaintiff
K E Swading for the DefendantJudgment:
19 November 2015
JUDGMENT OF THOMAS J
This judgment was delivered by me on 19 November 2015 at 12.00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Solicitors:
Glaister Ennor, Auckland.
Agmen-Smith and Co, Auckland.
BOYD v CONNOLLY [2015] NZHC 2884 [19 November 2015]
[1] These proceedings involve competing applications for the administration of the estate of Fiona Marie Duncum. The plaintiff, Karen Boyd, and the defendant, Sean Connolly, are the two executors and trustees named in the will.
[2] By her statement of claim, Ms Boyd sought appointment as the sole executrix and trustee. Shortly prior to the hearing she changed her position and claimed that she should remain as executor and trustee and Mr Connolly should be replaced by a named Auckland lawyer.
[3] In his statement of defence, Mr Connolly opposed the application. He did not accept that there was a conflict of interest in his role as executor and trustee despite the fact that he and Ms Duncum had been in a relationship to which the Property (Relationships) Act 1976 (the PRA) applied, and their relationship property had not been settled at the time of Ms Duncum’s death. Mr Connolly sought the appointment of an independent executor and trustee.
[4] Closer in time to the hearing, Mr Connolly accepted the potential for a conflict in representing the estate in any resolution of the relationship property interests. His preferred position is that both executors should be replaced with his fallback position being that he should be replaced with an independent executor.
Background
[5] Ms Duncum died at Auckland on 10 December 2013. She is survived by her three children (children), Amanda now aged 23, Tadhg, now aged 18, and Ciara, now aged 15.
[6] Ms Boyd was a long standing and close personal friend of Ms Duncum.
[7] Mr Connolly is the former de facto partner of Ms Duncum. He is the father of Tadhg and Ciara and the step father of Amanda.
[8] Ms Duncum and Mr Connolly separated in April 2013. Prior to her death she and Mr Connolly shared the care of the children and in were negotiations regarding their relationship property.
The will
[9] Ms Duncum’s will is dated 27 September 1998. It appoints Mr Connolly and
Ms Boyd as executors and trustees.
[10] All Ms Duncum’s personal chattels and the whole of the interest in her
principal residence owned by her at the date of her death were left to Mr Connolly.
[11] The remainder of the estate after payment of debts was to be paid to the FMD Family Trust (the Trust).
[12] Despite raising with her lawyer the question of whether she should change her will post separation, Ms Duncum did not change her will before she died.
[13] Ms Duncum’s estate comprises approximately $400,000 and interest currently on term deposit, any relationship property interest she might have in a property on Waiheke Island, her half share in a property at Riverhead which has now been sold, and any relationship property interest in Mr Connolly’s business which has not been active for some time.
The law
[14] Section 21 of the Administration Act 1969 (the Act) provides:
21 Discharge or removal of administrator
(1) Where an administrator is absent from New Zealand for 12 months without leaving a lawful attorney, or desires to be discharged from the office of administrator, or becomes incapable of acting as administrator or unfit to so act, or where it becomes expedient to discharge or remove an administrator, the court may discharge or remove that administrator, and may if it thinks fit appoint any person to be administrator in his or her place, on such terms and conditions in all respects as the court thinks fit.
(2) The administrator so removed or discharged shall, from the date of that order, cease to be liable for acts and things done after that date.
(3) Upon any administrator being discharged or removed as aforesaid (whether or not any other administrator is appointed) all the estate and rights of the previous administrator or administrators which were vested in him or her or them as such shall become and be vested in the continuing administrator or administrators (including any administrator appointed under subsection (1)) who shall have the same powers, authorities, discretions, and duties, and may in all respects act, as if he or she or they had been originally appointed as the administrator or administrators.
(4) This section shall, with all necessary modifications, extend to the case where an administrator dies, and the powers and authorities hereby conferred may be exercised and shall take effect accordingly.
(5) Nothing in this section shall restrict section 8.
[15] Justice Panckhurst succinctly discussed this power in Coot v Warren where he said: 1
[11] The term expedient means something less than necessary, rather that removal is a suitable, practical and efficient step to take in order to advance the interests of the estate and its beneficiaries. As to this see the discussion in Crick v McIlraith.2
[12] That said, the authorities in this context stress that the removal of executors, or trustees, is not to be undertaken lightly. Where possible, the wishes of the testator should be honoured. The Courts jurisdiction to intervene reflects its duty to ensure that estates are properly administered and trusts properly executed. The welfare of the beneficiaries, what will best safeguard their interests, is the yardstick to be applied. As a consequence, the jurisdiction is fact dependant and involves a large element of discretion. The circumstances of individual cases will necessarily be determinative of their outcome.
[16] In Baird v Fisher Collins J discussed the similar provision contained in s 6 whereby the Act confers a discretion on the Court to grant administration or probate to one or more executors or some other person where, by reason of “special circumstances the Court thinks it necessary or expedient to do so”.3
[17] Collins J described the relevant factors for the court to consider in such cases in the following terms:4
1 Coot v Warren [2013] NZHC 3210 at [11]-[12].
2 Crick v McIlraith [2012] NZHC 1290 at [17] – [18], per Associate Judge Osborne.
3 Baird v Fisher [2014] NZHC 1347.
4 At [6].
(1) The welfare and interests of the beneficiaries are a primary consideration.
(2) The fact that there may be hostility between executors may not be in itself a reason to bypass one or both of them.
(3) The Court is required to be satisfied that there are special circumstances that justify the bypassing of an executor having regard to the factors identified in s 6(4) of the Act. Special circumstances will be found when the integrity of the administration of the estate is at risk and the welfare of the beneficiaries is compromised.
[18] To that list I would add a fourth distinct consideration (albeit it could be incorporated under (3) in terms of the integrity of the administration of the estate) and that is the existence of an actual or potential conflict of interest.5
Analysis
The welfare and interests of the beneficiaries
[19] Pursuant to the will, the assets of the estate will be paid to the Trust. The beneficiaries of the Trust are the children and include Mr Connolly. The trustees of the Trust are Ms Duncum, Ms Boyd and Mr Connolly.
[20] Mr Connolly candidly acknowledges that he will not seek to benefit from the Trust. The only claim he envisages making on the Trust is in connection with seeking a contribution of 50 per cent of the costs he personally incurs in supporting Amanda while she is at University.
[21] Mr Connolly explained that both he and Ms Duncum had set up family trusts and both were the beneficiaries of each other’s trust. Neither of them had changed that position after separation.
[22] Shortly before the hearing, a settlement proposal was put to Mr Connolly. Part of the proposal was that he should be replaced as a trustee of the Trust. When
giving evidence, Mr Connolly explained that was unacceptable to him saying:
5 Hunter v Hunter [1938] NZLR 520 (CA) at 530-531 and Preston v Preston [1960] NZLR 385 (CA) at 402.
From my point of view, as the parent and as the only person in this room who has actually got a real close connection to those kids, it is my – I am in the best place to look after their future outcomes and that trust.
[23] Mr Connolly confirmed that he had not changed his will, as, despite the separation, he would still have trusted Ms Duncum to look after the interests of the children. That comment was made in the context of his being asked whether, as a matter of common sense, when parties separate, it is appropriate to have independent people involved in the administration of an estate rather than the former partner.
[24] I refer to all of this because, although the issue before me is the identity of the administrator of Ms Duncum’s estate, part of that consideration involves the interests of the beneficiaries. That inevitably brings into consideration the terms of the Trust. I accept that, as a general proposition, there is no reason why a former partner should not continue as a trustee of a family trust if the other partner has died. Arguably, it would be sensible for that position to continue given Mr Connolly’s relationship to, and interest in, the future of children of the relationship.
[25] Given that, in May 2013, Ms Duncum specifically turned her mind as to whether she should change her will, it could be inferred that such consideration might well have included the Trust. However, there is no information about that.
[26] I do not accept the plaintiff’s proposition that Ms Duncum was advised not to change her will until the relationship property was settled. All her then lawyer advised was as follows:
Yes it would be worthwhile to consider a new will – however, if you were to die prior to to (sic) seettlement (sic) of relationship property matters Sean is able to under the Property (Relationships) Act 1976 claim half our (sic) estate.
[27] On my reading, all Ms Duncum’s lawyer was saying was that, Mr Connolly would have a claim on her estate even if she made a new will. In other words, a new will would not somehow preclude a claim under the PRA. I fail to see how that advice could be read as saying Ms Duncum should not change her will until after settlement of any such proceedings. For that reason, I am satisfied on the evidence that Ms Duncum specifically considered whether to change her will and decided not
to. Given then that she was content, it seems, for Mr Connolly to remain an executor of her will, it would seem even more likely she was content he should remain a trustee of the Trust.
[28] The point about this analysis is that a consideration of the interests of beneficiaries involves not just their short term interests. As I put it to Ms Boyd, as matters stand, she and Mr Connolly are the trustees of the Trust and they need to work together in the children’s best interests long term.
[29] It is clear from the evidence that Ms Boyd has taken a relatively confrontational approach to Mr Connolly and the relationship property proceedings.
[30] In January 2014 Ms Boyd and Mr Connolly agreed that another lawyer should be asked to act for the estate, following the lawyer then acting having misplaced the Trust deed. Mr Connolly emailed Ms Boyd following that meeting recording what had been discussed and agreed and he emailed her again on
29 January 2014. Both emails were copied to Amanda.
[31] In his email of 20 January 2014, Mr Connolly noted that no decision had been made on the next steps to identify an alternative solicitor as Ms Boyd had said she was not ready and would not be so until she had understood Ms Duncum’s affairs and considered various documentation.
[32] In his email of 29 January 2014 Mr Connolly concluded by saying:
I still haven’t arrived at what my position is on how to best to meet the intentions of the will, memorandum of wishes or what Fiona would want if she was sitting at the table with us. But I do know that it is not appropriate for me to retain ownership of the joint assets that transfer to me via survivorship. As per our original conversation, I am determined to act in a fair and transparent way.
[33] Soon after that, Ms Boyd engaged the law firm Asco Legal without reference to Mr Connolly who has never agreed to their appointment as solicitors for the estate. In her first of two affidavits Ms Boyd said that work done by Asco Legal was with Mr Connolly’s approval, at least on an implied basis. Mr Connolly refuted that.
Ms Boyd’s position was somewhat unclear. Her evidence in Court was that she
instructed Asco Legal to act for her as named executrix.
[34] Ms Boyd instructed Asco Legal to prepare a draft deed of family arrangement. There was no discussion about this with Mr Connolly. As well as removing Mr Connolly as a beneficiary of the Trust, the effect of the draft deed was to remove him as a trustee and to appoint two other trustees, one a professional trust company nominated by Ms Boyd and the other a trustee nominated by a lawyer acting on behalf of the children.
[35] Ms Boyd expects the costs of the legal representation and advice she has received from Asco Legal and other counsel to be met from the estate but she was unable “off the top of her head” to estimate what costs have been incurred.
[36] Both Amanda and Tadhg filed affidavits in the proceedings. Amanda’s position is that the best outcome would be the appointment an independent executor to administer her mother’s estate. She eloquently expresses her opinion as follows:
Firstly, my predominant feeling regarding my mum’s estate is that I don’t want or agree with the case being taken to court. I do not agree that it is worth the cost involved to have either Sean removed from his position as executor and trustee, or to have both parties stand down and an independent executor appointment. It is not what the money in the estate was intended for and I think that my mum would hate to see money that was meant for her children being spent on lawyers and a court case. I have tried, by myself and with the assistance of my lawyers, to encourage discussion and negotiation between both parties to avoid this outcome. During this process I received a positive response from Sean who was also keen to use mediated, collaborative discussions to resolve any issues. I saw much less clarity and openness, and very little willingness to negotiate from Karen which has been a cause of frustration over the last 18 months.
After recent discussions with both parties it is clear that, at this stage, they are both firmly set in their respective positions and there is nothing I can do to prevent court proceedings. Given that this is the situation, after much consideration, I have decided to support Sean in his bid to have both parties stand down and an independent executor appointed to administer the estate.
[37] Amanda’s opinion is that the one person who is best to represent and protect the children’s interests would be Mr Connolly. Amanda does not consider Ms Boyd would be suitable as a sole executor, finding her and the lawyers she has recently used to be difficult to deal with, obstructive, unresponsive, counter-productive and
lacking in transparency and clarity. She says she has not had much involvement with Ms Boyd in the last 10 years and she questions whether Ms Boyd is harbouring some of what she describes as her mother’s resentment towards Mr Connolly at the time of her death, and she is concerned that this could cloud her judgment in dealing with estate matters.
[38] Tadhg’s position is that Mr Connolly should remain a trustee of the Trust because he understands the children and knows what is best for them better than anybody else. He does not consider Ms Boyd a suitable executor because she has not been helpful or cooperative, is incurring costs in taking the matter to Court and he believes she demonstrates either flawed logic or the failure to tell the truth. He has seen Ms Boyd twice in the last year and a half.
Is there any hostility?
[39] The considerations relevant to this are, in large part, set out above.
[40] Ms Boyd maintains that the action she has taken has simply been to try and protect the interests of the estate, particularly because of the relationship property issue.
[41] While that is an understandable position, I am mindful of the observation from Amanda of her concern that Ms Boyd was motivated by what she knew of Ms Duncum’s resentment towards Mr Connolly post separation. I consider that the act of drafting a deed of family arrangement without prior discussion with Mr Connolly was, on one interpretation, an extremely aggressive act and, even on the most benign interpretation, an insensitive and counterproductive one.
[42] I hope that the matters have not reached the stage where there is actual hostility between the parties. What the circumstances do suggest to me, however, is that, until the relationship property issue has been concluded, the prospect of any hostility between Ms Boyd and Mr Connolly continuing and indeed escalating is high. In my assessment, that would not be in the best long term interests of the children. It is clear from their own comments that this is an assessment with which they agree.
[43] My concern is reinforced by the costs which Ms Boyd has incurred without agreement and which she expects the estate to pay. The concern she expressed, that the lawyer proposed by Mr Connolly would be expensive and focused on pursuing every single point, is therefore, somewhat ironic. I consider lawyers to be better placed at assessing when a matter is suitable for settlement by weighing up the advantages and disadvantages of continuing with legal action. In making such a decision, emotion will not cloud their judgment.
Other special circumstances
[44] It is clearly appropriate for Mr Connolly to step down as executor, given the potential conflict of interest relating to the relationship property proceedings. I acknowledge that he has changed his position from when he filed his statement of defence. The plaintiff has also changed her position.
Conclusion
[45] Given the considerations outlined above, I am satisfied that the appropriate course in this case is for an independent administrator to be appointed. It is expedient, given all the circumstances to which I have referred. It will remove any element of hostility between Ms Boyd and Mr Connolly who remain the trustees of the Trust and is, therefore, in the best interests of the children. Both sides have expressed concerns about mounting legal costs and, given proceedings to date, I consider that a solicitor is likely to be the most cost effective solution.
[46] I am satisfied that the solicitor proposed by the defendant, Catherine Atchison, partner in Martelli McKegg, Auckland, is appropriate. Mr Connolly confirmed he had had no prior dealings with her and he had simply asked his lawyer to suggest a neutral independent party.
[47] The lawyer suggested by the plaintiff cannot be really considered given there is no information before the Court about him, this being a late proposal. In contrast, I have an affidavit from Ms Atchison who practises in the area of trusts and estates. I note her wide experience in the area and that she has often accepted appointments as an independent executor and trustee. She currently holds three such court
appointments. She has given her consent to act in these proceedings and she has a general understanding of the issues involved, including the relationship property issue. She has provided her terms of engagement which provide the hourly rates for those likely to be involved in the work, depending upon their expertise and experience, ranging from legal executives, to solicitors to partners.
[48] In all the circumstances, I am satisfied that she is an appropriate appointment. In saying that, I have considered the matters specified in s 6(4) of the Act given this situation is analogous to that for which provision is made in s 6.
Result
[49] For the reasons given, Ms Boyd and Mr Connolly are removed as administrators of the will and Catherine Atchison, barrister and solicitor, of Auckland is appointed as administrator.
[50] It appears that the costs of these proceedings will need to be borne by the estate. If there is any dispute as to that, memoranda are required within 21 days of
the date of this decision.
Thomas J
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