Cartwright v Joseph

[2021] NZHC 145

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE

CIV-2016-488-000058

[2021] NZHC 145

IN THE MATTER

of the Family Protection Act 1955

AND

IN THE MATTER

of the estate of John Boyd Harrison

BETWEEN

CATHERINE DAILE CARTWRIGHT and SARAH BEVERLEY HARRISON

Plaintiffs

AND

NITA WAIRANGI JOSEPH, BARRIE AGAR, BRETT HOGAN and TREVOR

DRAFFIN as trustees and executors of the estate of John Boyd Harrison

Defendants

Hearing:

(On the papers)

Counsel:

Plaintiffs in Person

Johanna Robertson for Nita Joseph Juliet Golightly for the Executors

Judgment:

12 February 2021

JUDGMENT OF MOORE J

[Re application to vary orders]

This judgment was delivered by me on 12 February 2021 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar Date:

CARTWRIGHT & ANOR v JOSEPH & ORS [2021] NZHC 145 [12 February 2021]

Introduction and background

[1]    On 11 September 2018 I released my judgment in which I determined that John Boyd Harrison (“Tim”) had breached his moral duty to his two daughters, the plaintiffs.1 I determined that they were entitled to adequate provision for proper maintenance and support in the order of 20 per cent of the value of the estate, divided equally between them. I left open the question of how that award should be met by the estate and invited further submissions on that discrete point.

[2]    On 6 November 2018, after receiving further submissions, I made orders as to how the plaintiffs’ award was to be met by the estate.2 I reserved leave to the parties to apply for such other orders or directions as might be necessary in the event any subdivision and/or sale was impeded for reasons outside the control of the executors, or if unforeseen costs arise.3 This was because certain real property held by the estate needed to subdivided and sold to meet the plaintiffs’ award.

[3]    That judgment was followed by a memorandum filed by the plaintiffs seeking further orders in respect of the award. They submitted that the proposed subdivision would be costly and more complex than had been expected. It was not practicable and, they submitted, the award should be satisfied in an alternative way. They suggested they be granted a 10 per cent interest in each block of land comprised of block 610 and 609, secured by a caveat over the titles to those sections. They considered that this would give the executors control as to how the estate would be disposed of. Alternatively, they proposed cash awards of $380,000 each (representing 10 per cent of the lowest valuation of the estate provided by the executors).

[4]    The plaintiffs’ proposal was opposed by the executors and Tim’s long-term partner, Nita. Their opposition was founded on various grounds. Relevantly, one was that by seeking orders of this sort, the plaintiffs were attempting to challenge the outcome of my previous judgments when, in fact, the appropriate course would be by way of appeal.

1      Cartwright v Joseph [2018] NZHC 2383.

2      Cartwright v Joseph [2018] NZHC 2867 at [18].

3      At [18](f).

[5]    On 10 March 2020 I refused the plaintiffs’ application to vary my orders of 6 November 2018. 4 I observed that the orders sought went against the substance of my original orders. To adopt the plaintiffs’ suggestions as to how the estate should be divided would bind the executors for an unreasonable period and put pressure on Nita to sell. I stated:

“[13] …that the exact amount [the plaintiffs] would be awarded was always contingent on practical considerations. The extra delays, costs and consent requirements that have arisen in this matter do not seem extraordinary for land transactions of this type. Furthermore, it does not appear that they can be practically avoided. [The plaintiffs] have not criticised the actual method by which the executors are trying to solve the access issues. Essentially, they are disputing the order that they bear 20 per cent of the costs of creating a vested road to S11/1.

[14]  The executors must  be able to  complete the subdivision and sale of  the land in a cost-effective and timely way. Fixing the access irregularities may even benefit 610 and 609 and improve their sale price. The current orders are the only practical and mutually beneficial option. For these reasons, I do not think it is appropriate to further delay this matter by making the orders sought.”

The plaintiffs’ application

[6]    The plaintiffs now seek further orders. By memorandum received by this Court on 24 January 2021, the plaintiffs apply for orders that:

(a)the award of 10 per cent should be satisfied from the combined sales proceeds of Lot 1 and 2 (the residual 609 title including S11/1 and the amalgamated 610 title); and

(b)such other orders as [the Court] considers appropriate to satisfy the judgment of 11 September 2018.

[7]    The basis for seeking the further orders is set out in the plaintiffs’ memorandum. For completeness it is reproduced in full below:

“1.6 This memorandum seeking further orders is made on the basis that:

(a)The Plaintiffs are concerned that the executors have not met their obligation to act in the best interests of the Plaintiffs to maximise the value of the amalgamated 610 title so as to

4      Cartwright v Joseph [2020] NZHC 455 at [13]–[14].

satisfy the judgment. In particular, the executors have divested a significant portion of that title without assessing the impact on its value, are pursuing a closed sales process with the intention of selling it at any price (notwithstanding the judgment) and have failed to consult with, and withheld information from, the Plaintiffs.

(b)The underlying concern that Nita should not be forced to sell all the land no longer exists, as the executors have confirmed that [she] has requested the sale of residual 609 title (including S11/1) in early 2021 (concurrently with the amalgamated 610 title). It is therefore possible to realise the full value of the estate without imposing hardship on Nita.

(c)The disparity in value between the residual 609 title and the amalgamated 610 title means there is a material risk that the sale of the amalgamated 610 title will yield substantially less than 10 per cent each of the value of the estate, which would be contrary to the judgment of the court and an inequitable outcome for the Plaintiffs.

1.7The above factors amount to a significant change in circumstances   since the judgment of 6 November 2018 and the Plaintiffs therefore reluctantly seek further orders to ensure satisfaction of the judgment and an equitable outcome for all parties.”

[8]    I interpolate at this point to observe that no formal application has been filed as it should have been. However, the defendants have responded in opposition by memorandum. I can see no prejudice to either party if I was to treat the mode of initiating this application as if it was procedurally compliant. To do otherwise would be to delay matters which have already been plagued by disruption.

[9]    The plaintiffs’ memorandum makes it clear that the essence of their complaint is a concern that the executors are in breach of the fiduciary duties by failing to act fairly by all the beneficiaries of the estate and their duty to act in the beneficiaries’ best interests, particularly their financial interests.

[10]   The memorandum sets out, in considerable detail, the reasons for claiming the executors are in breach of their duty of fairness. There are two:

(a)they divested 17 hectares of the amalgamated 610 title as coastal marine reserve land without consulting the plaintiffs and without assessing the impact on the value of the amalgamated 610 title. The divestment reduced the size of the amalgamated 610 title from approximately

71 hectares to approximately 54 hectares. The result is that the residual title (Lot 2) now supports only two 20 hectare lots, whereas prior to the divestment, it supported three lots; and

(b)a closed sale process has been proposed by the executors for Lot 2. The plaintiffs complain that this process lacks transparency and will not maximise the sale proceeds of Lot 2. They claim that a closed bid process could result in just one bid which fails to satisfy the spirit of the judgment. This is further complicated, the plaintiffs say, by the fact that the executors have confirmed their intention to market Lots 1 and 2 for sale concurrently using the same real estate agents (Bayleys) and the same law firm which currently acts for the executors (Marsden Woods Inskip Smith). The plaintiffs express concern that this creates a conflict of interest as the beneficial interests in the titles are held by separate beneficiaries (Nita for Lot 1 and the plaintiffs for Lot 2) whose interests may not align. The plaintiffs complain they have not received any information from the executors regarding the expected value of Lot 1 or Lot 2. Bayleys have refused to communicate directly with them on the basis they are retained by the executors but have confirmed that they have not valued Lot 2. The plaintiffs claim they have requested the right to see offers relating to Lot 2 and to reject an offer if the plaintiffs consider it is neither fair or reasonable. The plaintiffs have said the executors have rejected these requests. The plaintiffs submit there can be no justifiable reason for refusing to disclose offers received for Lot 2 to the plaintiffs or proceeding with the sale of the property to the highest bidder if the offer fails to satisfy the judgment of the Court.

[11]   The plaintiffs also complain that the executors have failed to consult with them on significant decisions regarding the subdivision and proposed sale and they have been excluded from meetings and communications between the executors and other related parties but have, nonetheless, been required to contribute to the costs of those meetings and communications. This has contributed to a general lack of transparency and has also increased costs as the plaintiffs have then been obliged to attempt to obtain the information themselves.

[12]   A further complaint is that it is claimed there is a significant disparity in value between Lots 1 and Lot 2 which means there is a material risk that the sale of the amalgamated 610 title will yield substantially less than 10 per cent each of the value of the estate, resulting in an inequitable outcome for the plaintiffs.

[13]   In response, counsel for the executors by memorandum, opposes the making of any amended orders but makes certain undertakings. In particular, the executors undertake:

“[36] To avoid the perception of conflict of interest identified by the plaintiffs during sale of Lot 2, the executors undertake not to market or distribute any proceeds of sale of Lot 1 until after 4 June 2021 (the estimated date of issue of new titles), or until Lot 2 is subject to an unconditional sale agreement, whichever is the sooner.”

[14]   The executors have also advised they would consider transferring Lot 2 to the plaintiffs upon issue of the title rather than marketing for sale, if approached by the plaintiffs in a timely way on appropriate terms.

[15]   The executors also take issue with the plaintiffs’ criticism that they have not consulted sufficiently. The executors claim that they have consulted extensively with the plaintiffs at each stage of the subdivision and sale process. They will continue to relay advice and consult with the plaintiffs on matters affecting subdivision and sale of Lot 2, as they have been doing (albeit, they will not allow the plaintiffs to veto or obstruct the sale). They complain that there has been a pattern of the plaintiffs failing to meet the Court’s order that certain costs are to be borne by them to the extent of 20 per cent. This has resulted in substantial delays in the issue of the resource consent.

Discussion

[16]   Because the ability of the estate to maximise its realisation for the benefit of the plaintiffs, my 6 November 2018 judgment noted that the exact amount the plaintiffs would be awarded was always going to be contingent on practical considerations.5 These included the ability of amalgamating titles, successful resource consent applications and subdivision. It was for that reason I made orders that the executors

5 At [16].

were to arrange for the subdivision of block 609 by separating the S11/1 area from the residue of the title and amalgamating the residue with the title of block 610.6 I also empowered the executors to create an easement subservient to block 609 along the northern boundary of block 610 and I directed that the executors would be responsible for the sale of the amalgamated title and were to distribute the proceeds of sale to the plaintiffs.

[17]   Significantly, I reserved leave for the parties to seek such further orders in the event subdivision and/or sale is impeded for reasons outside the control of the executors or if unforeseen costs arise.7 This reservation recognised that realising the award was necessarily contingent on factors beyond the control of the executors.

[18]   I am not satisfied that the plaintiffs’ most recent application should be granted. My reasons are several.

[19]   First, there are serious procedural and evidential difficulties. No formal application has been filed. Had it been, the affected parties would have filed notices of opposition and the dispute proceed in the usual way with the filing of evidence and submissions. The plaintiffs’ assertions of fact are contained in their memorandum. It is not in the form of sworn evidence. Significantly, the plaintiffs’ claims are not accepted by the executors. Indeed, not only do the executors refute material aspects of the plaintiffs’ claims but they make counter-allegations. None of these claims is presented in an acceptable evidential form. Relatedly, given the divergence between the parties’ accounts it is impossible for the Court to reconcile the correct factual position. That would require oral evidence and cross-examination. This simply highlights the impossibility of dealing with this most recent application on the basis it has been presented to the Court.

[20]   Secondly, the plaintiffs’ application is not authorised by the limited grant of leave I reserved for the parties in my 6 November 2018 decision. I have already explained why I granted leave to apply. It was a practical step designed to ensure that if any unforeseen exigencies arose or processes beyond the control of the executors

6 At [18].

7      At [18](f).

operated to frustrate the spirit and effect of my orders, then further orders could be made.

[21]   Thirdly, and more significantly, the essence of the plaintiffs’ complaint is that the executors, by their present and proposed actions, are not acting in the best interests of the beneficiaries, particularly the plaintiffs, and are thus in breach of their duties as executors. As the plaintiffs expressly acknowledge, their complaint relates to the conduct of the executors. Any remedy for alleged breaches of duty by the executors and trustees does not arise from these proceedings but rather in a claim against the trustees for breach of duty.

[22]   Fourthly, I am satisfied that I am functus officio for reasons which follow. Before coming to that conclusion I considered whether I might have the power to vary the orders under s 12 of the Family Protection Act 1955. That section relevantly provides:

“12     Variation of orders

(1) Where…the court has ordered…any part of the  estate…to  be…  invested for the benefit of any person or persons, it shall have power to inquire whether at any subsequent date any party deriving benefit under its order is still living or has become possessed of or entitled to provisions for his proper maintenance or support and into the adequacy of the provisions, or whether the provisions made by its order for any such party remain adequate, and may increase or reduce the provisions so made or discharge, vary, or suspend its order, or make such other order as is just in the circumstances.

[23]   The difficulty with resorting to s 12 is whether my orders could be described as having the effect of investing part of the estate for the benefit of the plaintiffs. It seems that the only relevant caselaw on the point is the decision of Ronald Young J in McNeil v Public Trust.8 There the Judge interpreted s 12 in narrow terms. His comments are reproduced below:

[12]      I turn now, therefore, to consider the plaintiffs’ claim for a capital payment. I consider the words of s 12 of the Family Protection Act plainly cover only a situation where the Court has ordered periodic payments or where a lump sum has been ordered to be held as either a class fund or invested for the benefit of any persons not a direct payment of capital to a claimant. The section is concerned only with variation to some form of periodic

8      McNeil v Public Trust (2004) 24 FRNZ 984.

maintenance. As relevant in this case, s 12 allows the Court to vary orders for periodic payments if amongst other matters it comes to the conclusion that the provision made by the previous order is no longer adequate. It may then amongst other orders, increase such a payment. The Court is thus entitled to inquire whether the provisions made by its previous order remain adequate.

[13]      The plaintiffs’ submissions in support of a power to make capital payments rely upon the last phrase of s 12. They submit that the words “or make such other order as is just in the circumstances” gives the Court a wide discretion to go outside a simple variation of a periodic payment and make an entirely new order for the payment of capital from the estate. I reject that submission. I consider the section plainly focuses on variation of periodic payments justified because of established change in adequacy of a previous order. In such circumstances the Court has a variety of powers set out in the latter part of s 12. It may reduce the provision, discharge it, vary or suspend it. The final part of the section relied upon by the plaintiffs simply empowers the Court to make any other order in relation and directly related to the periodic payment and the established change in adequacy. The use of the words “such other order as is just” is governed by the previous words in the section which show the section is concerned with variation of periodic payments in some form or other.

[14]      The Court can order a variation by way of an increased lump sum (if available from the estate) to be invested for the benefit of any persons. However, it cannot vest any of the capital of the estate, even if still available, in a claimant.”

[24]   I agree with Ronald Young J. I cannot see how s 12 can be called in aide for the benefit of the plaintiffs.

[25]   Therefore, it follows I am satisfied that I am functus officio. This conclusion is reinforced by the plaintiffs’ own claims that their complaint is that the executors are not meeting their obligations and duties as trustees and executors of the estate. That is a complaint which may be pursued in separate proceedings should the plaintiffs wish, but is quite different and goes well beyond seeking additional or other orders designed to facilitate the spirit of the judgment. As noted, it certainly does not fit within the grant of leave set out at [18](f) of my 6 November 2018 judgment.

Conclusion

[26]   It follows I am not prepared to make any orders because I am satisfied that not only am I functus officio, but the plaintiffs’ application is procedurally flawed and falls outside the grant of leave to apply for further orders.

Result

[27]The plaintiffs’ application is declined.

Moore J

Solicitors:

Ms Robertson, Auckland Ms Golightly, Whangarei

Copy to:
The Plaintiffs