Coburn v McDonald
[2023] NZHC 300
•24 February 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-752
[2023] NZHC 300
IN THE MATTER of an application under s 21 of the Administration Act 1969 made under Part 18 of the High Court Rules 2016 BETWEEN
GRANT IAN COBURN AND LOUISE JACQUELINE COBURN
Plaintiffs
AND
STEPHEN JOHN MCDONALD
Defendant
Hearing: 1 December 2022 Appearances:
D R Bigio KC for the Plaintiffs SWM Piggin for the Defendant
Judgment:
24 February 2023
JUDGMENT OF HARVEY J
This judgment was delivered by me on 24 February 2023 at 4 pm pursuant to r 11.5 of the High Court Rules.
Date: …………………..
(Deputy) Registrar
Counsel: D Bigio KC, Auckland
Stephen Piggin Barrister, Auckland
Solicitors: TGT Legal, Auckland
McDonald Law, Auckland
COBURN v MCDONALD [2023] NZHC 300 [24 February 2023]
Introduction
[1] Ian Bowie Coburn died on 8 September 2017. He was survived by his three children, Grant, Louise and Malcolm Coburn and several grandchildren. A grant of probate was issued on 20 November 2017. The defendant, Stephen McDonald, and Doreen Dundas, the deceased’s sister, were appointed executors. Mr McDonald was the deceased’s long-time solicitor.
[2] The plaintiffs, Grant and Louise Coburn, now seek the removal of Mr McDonald as executor of their father’s estate and the appointment of Ms Alison Gilbert of Brookfields Lawyers as his replacement under s 21 of the Administration Act 1969 (the Act).
[3] The plaintiffs argue that the lengthy and inexplicable delays in finalising the estate are unjustified and that this requires Mr McDonald’s removal and replacement. Moreover, they say that delays have been preventing the final distribution to the Gramalou Family Trust (the Trust), of which they are trustees alongside their brother Malcolm.
[4] Mr McDonald was served with the proceedings on 5 July 2022 but has not filed an appearance or a statement of defence. The plaintiffs also say that Mrs Dundas has been served along with other interested persons, namely beneficiaries with specific entitlements in the estate and Malcolm as the third trustee of the Trust – the residuary beneficiary of the estate. The plaintiffs contend that none of the interested persons have elected to participate in the proceedings. At the plaintiffs’ request, the matter was then listed for formal proof by Powell J on 25 October 2022.
[5] The day before the hearing before me, counsel for Mr McDonald filed an interlocutory application for leave to extend the time for filing a statement of defence, and for an adjournment of the proceedings. The application was opposed by the plaintiffs. At the hearing held on 1 December 2022, Mr McDonald’s application was dismissed. This judgment provides reasons for the dismissal. It then deals with the issue of whether the plaintiffs’ application for formal proof should be granted.
Background
[6] The following is taken from the plaintiffs’ evidence and submissions. After the deceased’s passing, disputes arose between his children concerning the estate and the Trust. Those issues were resolved following mediation in September 2019. The terms of settlement are set out in a Deed of Family Arrangement (DFA) dated 11 September 2019. By that deed, specific bequests are to be made from the estate, with the residue to go to the Trust. After the Trust properties are sold and it receives the residue, the whole of the Trust fund will be distributed. The final distribution requires that the estate be finalised first.
[7] Despite the passage of over five years since the grant of probate and three years since the settlement, the estate has not been finalised. The final distribution of the Trust therefore remains outstanding. The plaintiffs claim they have made repeated efforts to assist Mr McDonald conclude the estate’s affairs. In mid-2020, the plaintiffs obtained advice which included an opinion that the finalising of the estate was a relatively straightforward process that should have been underway while the dispute between the siblings was in train.
[8] In October 2021, the plaintiffs asked Mr McDonald to outline what remained to finalise the estate and suggested a timetable to resolve any such matters. Failing that, he was invited to resign as executor. In the absence of a satisfactory response, Mr McDonald was advised that proceedings would be issued seeking his removal. There was no response. In December 2021, Mr McDonald was advised that if the estate was not concluded by 11 February 2022, proceedings would be commenced. Despite this, the estate’s affairs remain unresolved.
[9] As foreshadowed, the day before the formal proof hearing, counsel for Mr McDonald filed an interlocutory application for an extension of time to file a defence, as well as an adjournment. This was followed by detailed written submissions which were then presented at the hearing.
Should Mr McDonald’s interlocutory application be granted?
Defendant’s submissions
[10] In summary, Mr Piggin submitted that the form of the plaintiffs’ application is misconceived in that it cites the Court’s equitable jurisdiction under r 18.1(a)(ix) of the High Court Rules 2016 (the Rules) as to the determination of estate administration issues, while claiming statutory relief under s 21 of the Act. The Act is not one of the statutes listed under r 18.1(b) to which Part 18 of the Rules apply. Mr Piggin contended that the matter was not addressed by the plaintiffs when seeking directions nor the possibility of an alternative application under Part 19. Counsel argued that a Part 19 application against the defendant would not only provide details of the pleaded issues but also the evidence relied on by the plaintiffs. He observed that there did not appear to be any initial disclosure of the documents relied on by the plaintiffs.
[11] Mr Piggin submitted that the plaintiffs, in or prior to commencing the proceeding, ought to have obtained directions under rr 18.1(e) or 19.5A as to filing the statements of claim and defence and accompanying affidavits. This is because, he contended, removal of executor applications are highly fact specific and require the evidence relied on by the plaintiffs to be made known to the defendant from the outset.
[12] Mr Piggin confirmed that Mr McDonald was aware of and apologised for the lateness of his taking any formal steps. Counsel highlighted how delays in responses from the plaintiffs over certain transactions had impacted the defendant’s finalising of the estate’s administration. Mr Piggin argued that an adjournment was necessary to ensure the orderly completion of the remaining estate matters.
Plaintiffs’ submissions
[13] On 1 December 2022, Mr Bigio KC filed a notice of opposition to the defendant’s interlocutory application.
[14]Mr Bigio submitted that the proceedings were properly commenced under Part
18. This is because r 18.1(a)(ix) states that Part 18 applies to “the determination of a
question that arises in the administration of an estate or trust”, and an application to replace an executor under s 21 of the Act falls squarely within that provision.
[15] Counsel also contended that the plaintiffs sought and were granted directions on 16 May 2022 as to service and representation.1 Under those directions, all of the affected parties were served, including Mr McDonald on 5 July 2022. His statement of defence was due by 9 August 2022, but he failed to respond.
[16] In addition, Mr Bigio confirmed that neither the plaintiffs nor counsel have had any communication with Malcolm regarding the proceeding and, by email on 2 August 2022, Mrs Dundas confirmed that she did not wish to participate.
[17] In any case, under r 15.9(2), the plaintiffs were not required to notify Mr McDonald of the formal proof procedure. More importantly, counsel argued that Mr McDonald has offered no reason why he did not file a statement of defence in the time required. His reference to “ongoing correspondence” did not commence until 22 September 2022, well after the time for filing a statement of defence. Moreover, such correspondence has yet to result in finalisation of the estate.
[18] The plaintiffs denied Mr McDonald’s claim that disagreements with them have prevented concluding the estate’s affairs. Mr Bigio submitted that Mr McDonald has been invited to identify any issues of concern but has failed to do so. Counsel also contended that any concerns Mr McDonald may have about the plaintiffs’ conduct are no basis for allowing his application, or for refusing the plaintiffs’ claim to have him replaced as executor.
1 High Court Rules 2016, rr 18.4 and 18.7.
Legal framework
[19]Rule 18.1 provides:
18.1 Types of proceedings
This Part applies to the following types of proceedings:
Equitable jurisdiction
(a)proceedings in which the relief claimed is wholly within the equitable jurisdiction of the court, such as—
…
(ix) the determination of a question that arises in the administration of an estate or trust or whose determination is necessary or desirable to protect the executors, administrators, or trustees:
…
Proceedings directed by court
(e)any other proceeding to which the court directs that this Part is to apply.
[20]Rule 15.9 provides:
15.9 Formal proof for other claims
(1)This rule applies if, or to the extent that, the defendant does not file a statement of defence within the number of working days required by the notice of proceeding, and the plaintiff seeks judgment by default for other than a liquidated demand.
(2)The proceeding must be listed for formal proof and no notice is required to be given to the defendant.
(3)After a proceeding is listed for a formal proof hearing, no statement of defence may be filed without the leave of a Judge granted on the ground that there will or may be a miscarriage of justice if judgment by default is entered, and on such terms as to time or otherwise as the Judge thinks just.
(4)The plaintiff must, before or at the formal proof hearing, file affidavit evidence establishing, to a Judge’s satisfaction, each cause of action relied on and, if damages are sought, providing sufficient information to enable the Judge to calculate and fix the damages.
(5)If the Judge before or at the formal proof hearing considers that any deponent of an affidavit filed under subclause (4) should attend to give
additional evidence, the Judge may direct accordingly and adjourn the hearing for that purpose.
Discussion
[21] As it is a preliminary issue, I address the form of the plaintiffs’ application first. Prima facie, the removal of an executor is “a question that arises in the administration of an estate” as that phrase appears in r 18.1(a)(ix). However, under r 18.1(a), the relief claimed must be wholly equitable.2 The relief claimed by the plaintiffs is statutory being an application to remove and replace an executor under s 21 of the Act. In addition, as Mr Bigio pointed out, the Act is not listed in r 18.1(b) as a statute to which Part 18 applies.
[22] Under r 18(1)(e), however, the Court may direct that Part 18 is to apply to any other proceeding. I would add that an application under s 21 of the Act is not one that r 19.2 expressly requires to be made by originating application under Part 19. The proper course would have been for the plaintiffs to seek permission from the Court to commence the proceeding under rr 18.1(e) or 19.5. However, the Rules do not prevent the Court from making such a direction on its own volition at a later stage in the proceeding. I therefore confirm that Part 18 is to apply to the proceeding.
[23] Turning then to the defendant’s application for an extension of time. As held at the hearing on 1 December 2022, I consider this should be dismissed. Mr McDonald had ample time to file a defence but for reasons that remain unclear, he has taken no steps until very recently. Moreover, the explanation he has provided is not convincing. He had a duty to finalise the affairs of the estate at the earliest opportunity. If he had any concerns, he should have applied to the Court for directions or sought independent advice long ago. With respect, it seems late in the day to take steps and obtain advice when those options had been available to him when served with the proceedings.
2 An example would be a Benjamin order: see Re Plato [1982] 2 NZLR 360 at 364.
Should the plaintiffs’ application for formal proof be granted?
Plaintiffs’ submissions
[24] Mr Bigio submitted that the removal and replacement of Mr McDonald is in the best interests of the beneficiaries. This is because the extent of the delay that has occurred to date is inexplicable. Mr Coburn’s assets comprised cash in bank accounts and term deposits, some shares and a motor vehicle. Counsel contended that it appears the shares have not been sold, even though it was agreed that Malcolm would buy them. It is also unclear what money the estate has received from the vehicle’s sale. Mr Bigio argued that much of the applicable case law under s 21 of the Act includes delay as a key reason for the removal of executors.3
[25] In addition, counsel submitted that Mr McDonald appears to confuse the estate and the Trust, given that there is no separation of funds in the statements he provided. Further, it is said that Mr McDonald proposes to make distributions directly to the beneficiaries of the Trust, rather than distributing the residue of the estate to the trustees as required under the DFA. It is also said that Mr McDonald proposes to make an allowance for an issue regarding one of the Trust’s former properties, which is correctly a matter for the trustees and not the estate.
[26] In any event, Mr Bigio contended that Mr McDonald’s history of failure to finalise the estate has removed any confidence the plaintiffs had in his ability to conclude matters satisfactorily. Moreover, counsel argued that the most recent information Mr McDonald has provided simply confirms the plaintiffs’ view.
[27] In addition, Mr Bigio submitted that Mr McDonald’s removal and replacement is in the best interests of the Trust and its beneficiaries, namely: the plaintiffs; their brother, Malcolm; Malcolm’s two children, Ryan and Jeremy; and Grant’s son, Marley. All of the beneficiaries are entitled to the use of the funds that they are entitled to, having waited over three years for those distributions since the DFA was concluded in September 2019.
3 See Kellock v Kellock [2022] NZHC 155 at [7]; and van Rijn v van Ryn [2022] NZHC 2498 at [4]- [5] and [11]-[12].
[28] Counsel contended that the ongoing delays are causing stress to at least two of the beneficiaries. It is also preventing the family from continuing to repair their relationships following resolution of the DFA. Lastly on this point, Mr Bigio emphasised that Mr McDonald’s administration to date of the estate confirms that he cannot be relied upon to conclude the estate’s affairs and thus enable the trustees to make final distributions from the Trust.
Defendant’s submissions
[29] Mr Piggin submitted that the plaintiffs’ application for formal proof should be declined for the following reasons.
[30] First, counsel contended that the application should not be dealt with by formal proof. In his submission, it would be contrary to the interests of justice to remove the defendant’s opportunity to receive and consider any evidence, and to make submissions and lead reply evidence, on the sole basis that the defendant failed to file a defence in time. Mr Piggin contended that delay, even where misconceived, does not invalidate the issues sought to be raised – especially where a proceeding is not a default judgment but rather involves a broader range of matters, including events since the filing of proceedings. In short, Mr Piggin argued that a “technical knock-out” due to delay was not appropriate.
[31] Counsel also argued that the plaintiffs only advised Mr McDonald at a late stage of the formal proof hearing date, and even then did not provide the affidavits they intended to rely on. Arguably, there is a risk of unfairness arising, he submitted, if the application were determined without Mr McDonald having received these affidavits. Moreover, Mr Piggin submitted that despite Mr McDonald’s late entry, he has filed evidence relevant to s 21.
[32] Secondly, counsel argued that the DFA seeks to deal with the estate, but the executors were not parties to that deed, meaning it cannot operate against them. Moreover, while the DFA provides for the residue of the estate to be distributed to the Trust, it is for the executors to determine what the residue comprises. Mr Piggin highlighted that executors are not “rubber stamps” to act at the direction of the
beneficiaries. Their authority is confirmed or proven by the grant of probate, having been appointed by the will maker. Counsel also underscored that the interests of both executors and all the beneficiaries were relevant, not just those of the plaintiffs and Mr McDonald.
[33] Thirdly, Mr Bigio submitted that in any event, the estate is close to completion. A substantial distribution was proposed but the trustees of the Trust declined to receive it and their solicitors did not provide a substantive explanation. Mr Piggin also referred to the refusal of the plaintiffs to engage with Mr McDonald regarding concerns over estate funds held and eventually returned by the plaintiffs for a number of years following the passing of the deceased, as referred to in the 16 November 2022 letter of TGT Legal.
[34] As against this background, counsel argued that the issuing of directions would be more appropriate than the removal and replacement of Mr McDonald as executor. Mr Piggin proposed a short adjournment to narrow down the remaining issues, which he submitted would be more cost effective and time efficient than engaging a new executor.
Legal principles
[35]Section 21 of the Act relevantly 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.
…
[36] The following principles as set out by the Court of Appeal in Tod v Tod are also relevant to the removal of an executor:4
(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.
Discussion
[37] I accept the plaintiffs’ submission that the estate should have been wound up some time ago and a final distribution made in accordance with the deceased’s will (and where appropriate, the DFA). As Mr Bigio pointed out, any outstanding issues between the siblings are a matter for them to resolve if they consider that necessary. Moreover, none of the matters raised for Mr McDonald addressed the central issue – that the delay in finalising the estate was unreasonable and inexplicable. Added to that was the fact that Mr McDonald appeared to be mixing issues of the estate with those of the Trust in a manner that was not appropriate or necessary, according to Mr Bigio.
[38] I note further that there appears to be growing hostility between Mr McDonald and the plaintiffs, who are also beneficiaries and trustees of the Trust. Each side has voiced concerns as to the other’s conduct. Given their lack of success in resolving
4 Tod v Tod [2015] NZCA 501, [2017] 2 NZLR 145 at [22].
matters relating to the estate to date, I am unconvinced that they would be able to expeditiously finalise any outstanding issues without prejudice to the beneficiaries’ interests.
[39] In any event, I can discern no reason of significance as to why finalisation of the estate remains incomplete. To that end, I am satisfied that it is in the best interests of the beneficiaries that Mr McDonald is replaced so that the estate can be completed, and the deceased’s children and their families are left to get on with their lives without this proceeding hanging over them. That must outweigh the testator’s wishes in appointing Mr McDonald as executor.
[40] In conclusion, I agree that the relief sought by the plaintiffs should be granted with Mr McDonald being replaced as executor by Alison Gilbert.
Decision
[41] Stephen McDonald’s application for an extension of time for the filing of a statement of defence and an adjournment is dismissed.
[42] The application of Grant Coburn and Louise Coburn for the removal of Stephen McDonald as executor for the estate of Ian Coburn and the appointment of Alison Gilbert, solicitor of Auckland, as replacement executor is granted.
[43] Counsel may exchange costs memoranda one month from the date of this decision of up to five pages in length.
Harvey J
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