Connolly v Eckhout
[2021] NZHC 727
•1 April 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-463-18
[2021] NZHC 727
UNDER the Family Protection Act 1955 IN THE MATTER OF
the estate of JAN DANIEL ECKHOUT
BETWEEN
MICHELLE LEE CONNOLLY
Plaintiff
AND
KAREN ELIZABETH ECKHOUT
Defendant
Hearing: 29 March 2021 Appearances:
SRG Judd for the Plaintiff
No appearance by the Defendant
Judgment:
1 April 2021
JUDGMENT OF FITZGERALD J
This judgment was delivered by me on 1 April 2021 at 11.30am, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Morrison Kent, Auckland To: S Judd, Auckland
K Eckhout, Australia V Tantum (California)
NK Schommer (South Africa)
CONNOLLY v ECKHOUT [2021] NZHC 727 [1 April 2021]
Introduction
[1] The plaintiff (Ms Connolly) is one of six children of the deceased, Jan Daniel Eckhout (Mr Eckhout). Mr Eckhout had two children (Ms Connolly and her sister) with his first wife, and had four children from a second marriage. The defendant (Mrs Eckhout) was Mr Eckhout’s third wife. There were no children of that marriage. Mr and Mrs Eckhout were married for some 20 years.
[2] Mr Eckhout passed away in October 2017. Mrs Eckhout is a primary beneficiary under Mr Eckhout’s Will. While she was not named executor in the Will,1 on 3 October 2018, and on her application, this Court appointed Mrs Eckhout as administrator of the estate. Mrs Eckhout accordingly has two “roles” in the present proceedings:
(a)a (neutral) administrator with a duty to assist the Court (see further at
[22] below); and
(b)a beneficiary of Mr Eckhout’s Will.
[3] Mr Eckhout’s Will made no provision for Ms Connolly. These proceedings concern Ms Connolly’s claim under the Family Protection Act 1955 (the FPA) for provision from her father’s estate. As far as I am aware, none of Mr Eckhout’s remaining children join in the claim, though two (based in South Africa and California respectively) have filed appearances reserving their rights.2
[4] The substantive hearing is scheduled to take place over three days commencing on 27 April 2021. Given the proximity of trial, there is some urgency in delivering of this judgment.
[5] Until recently, Mrs Eckhout was represented in these proceedings (in both her roles as administrator and beneficiary) by solicitors and counsel. On 25 February 2021, her solicitors and counsel were granted leave to withdraw. It
1 The named executor was a South African lawyer who renounced the executorship and appointed Mrs Eckhout in his place.
2 The have also provided email addresses as addresses for service.
appears this resulted from issues in relation to payment of their invoices. Mrs Eckhout now acts on her own behalf.
[6] Withdrawal of Mrs Eckhout’s counsel and solicitors evidently gave rise to some concern on Ms Connolly’s part (and her legal advisers), particularly given Mrs Eckhout’s dual roles as administrator and beneficiary. This is against the backdrop of the assets of a family trust (the Eckhout Family Trust), of which Mrs Eckhout was a trustee (and the beneficiaries of which were various family members, including Ms Connolly and Mrs Eckhout) being distributed to Mrs Eckhout and the trust subsequently being wound up. It appears that the proceeds from that trust, or at least some of them, have been used by Mrs Eckhout to purchase real estate in Hamilton. Mrs Eckhout also recently sold her family home in New Zealand and is presently residing in Perth. At the hearing before me, counsel for Ms Connolly, Mr Judd, did not suggest there was anything untoward in this, as he understands Mrs Eckhout is presently looking after her sick parents. Nevertheless, Mr Judd’s submission is that at least as matters presently stand, there is a degree of opaqueness as to the current status and whereabouts of the assets making up Mr Eckhout’s estate, and whether they are being preserved in accordance with Mrs Eckhout’s role as administrator.
[7] It is against that backdrop that Ms Connolly applies for a preservation order pursuant to High Court Rule 7.55(3). Ms Connolly seeks an order that Mrs Eckhout pay into Court the amount she has recently declared is the remaining value of Mr Eckhout’s estate, being $1,560,000.
[8] As noted, Mrs Eckhout presently resides in Perth. She was offered the opportunity to attend the hearing of Ms Connolly’s application by remote means, but declined to do so. She filed written submissions in advance of the hearing and invited the Court to proceed on the basis of those submissions.
The estate – more detail
[9] An “indicative statement of assets and liabilities” of Mr Eckhout’s estate (as at 18 December 2018) is on the Court file, and states that other than a nominal value
attaching to a Scottish Widows’ pension and two Ducati motorbikes (with a total estimated value of $11,000), the sole and significant asset of the estate is “Luzerner Kantonalbank account (1661.6866.1001) as at 21 November 2011,” said to have an estimated value of $1,676,746.13. Ms Connolly explains in her affidavit in support of her application that her understanding is that this represents Mr Eckhout’s investment fund (the underlying investment being in gold and silver deposits), held by a bank in Switzerland.
[10] Ms Connolly explains that after receiving Mrs Eckhout’s solicitors’ and counsel’s application to withdraw, she contacted the Swiss bank to enquire about the investment funds. The response, from “Attendus Trust Company AG” (which I understand to be an investment trust company for the investment fund) stated as follows:
I have reviewed your mail and the file and note that letters of administration in your father’s estate were formally granted by the High Court of New Zealand, Wellington Registry, on the 3rd October 2018.
We received the letters of administration for the lawyers set out below and thereafter acted in accordance with the terms thereof.
I can confirm that we do not hold or control any assets relating directly or indirectly to your father or his estate.
I am sorry that your relationship with [Mrs Eckhout] is not good but suggest that you initially contact the lawyers that dealt with the issue of the letters of administration with your concerns.
[11] The email then provides contact details for Grayson Clements Limited, being, until recently at least, Mrs Eckhout’s solicitors in this matter.
[12] I pause to interpolate that Mrs Eckhout, in her affidavit sworn in opposition to Ms Connolly’s application, disputes the authenticity of the email from Attendus. It is obviously not possible to resolve that controversy on the present application, and I proceed on the basis that the email is genuine. There is certainly no basis upon which to infer it is a forgery. That would be a serious allegation. I also note that the email is broadly consistent with a memorandum filed by Mrs Eckhout’s (then) solicitor, a Mr McHugh of Grayson Clements Limited, dated 24 February 2021. That memorandum refers to an earlier statutory declaration made by Mrs Eckhout (which I discuss further below), in which she stated that the value of Mr Eckhout’s estate was
around $1.56 million. Mr McHugh states in his memorandum that “The deceased’s estate originally comprised gold and silver deposits held by Attendus Trust Company AG, Switzerland.” Mr McHugh goes on to state:
On 20 October 2020, Grayson Clements Limited contacted Attendus to ascertain an up to date valuation of the portfolio held by Attendus.
Attendus reverted on 20 October 2020 with advice that Grayson Clements Limited contact the defendant directly. Attendus were unable to help Grayson Clements Limited.
Grayson Clements Limited does not have possession or control of the deceased’s estate and is unaware of its current whereabouts.
[13] In December 2020, and by consent, Peters J made orders that, amongst other matters, Mrs Eckhout “provide the plaintiff by 12 February 2021 with an updated valuation of the deceased’s estate”. This order led to Mrs Eckhout providing the statutory declaration referred to in the preceding paragraph. In her statutory declaration, Mrs Eckhout declared:
The value of Dan’s estate is at around $1,700,000 NZD minus around
$140,000 NZD in legal fees. So the total estate is $1,560,000 NZD.
[14] Mr Judd submits that there is some concern attaching to the quantum of the legal fees referred to in the statutory declaration, given it appears that legal fees incurred by Mrs Eckhout in her capacity as beneficiary, and not administrator, have been paid out of estate funds despite there being a claim attaching to the estate. Mr Judd’s point, which is a fair one, is that one would not expect to see fees of some
$140,000 attaching to Mrs Eckhout’s role as administrator of the estate.
[15] In her most recent affidavit in opposition Ms Connolly’s application, Mrs Eckhout does not provide any further detail or information about the estate’s assets, or where and by whom they are held. She states:
When I attested to the balance of funds held by Attendus at the time of Dan’s death, $1,700,000.00 was the sum, but that is not the case now.
The balance of funds are not liquid.
In the event the Court decides to grant the order, I will not be in a position to be able to comply.
[16] In her written submissions in opposition to the application, Mrs Eckhout also says that “Grayson Clements were aware from 2018 that Attendus in Switzerland no longer held the estate fund.” That appears inconsistent with Mr McHugh’s advice to the Court set out at [12] above. Mrs Eckhout also reiterates that the estate’s assets are not liquid and therefore she could not comply with an order pursuant to r 7.55(3) in the event it were granted. She concludes:
It has never been my intention to mislead and I have complied with the Court’s requests at all times and taken the advice of my lawyers.
Applications pursuant to r 7.55 – principles
Rule 7.55 provides as follows:
7.55 Preservation of property
(1)A Judge may at any stage in a proceeding make orders, subject to any conditions specified by the Judge, for the detention, custody, or preservation of any property.
(2)An order may authorise a person to enter any land or to do any other thing for the purpose of giving effect to the order.
(3)The Judge may order that a fund be paid into court or otherwise secured if the proceeding concerns the right of a party to the fund.
(4)The Judge may treat an application under this rule as an application for directions under r 7.43A and give directions accordingly.
[18] As will be evident, r 7.55 distinguishes between tangible property (the subject of r 7.55(1)), and “a fund” (the subject of r 7.55(3)) which may be paid into court or otherwise secured.3 Ms Connolly’s application proceeds under r 7.55(3), on the premise that the estate comprises a “fund”. I accept for present purposes that funds which comprise a deceased estate, held on trust by the executor or administrator of that estate, would ordinarily comprise a “fund” for the purposes of r 7.55(3).
3 See generally, Rapid Metal Developments (New Zealand) Ltd v Rusher (No 2) (1987) 2 PRNZ 85 (HC) at 90.
Application of the principles to this case
[19] In many cases involving applications pursuant to r 7.33, the issue is whether the property that is the subject of the application is properly considered “property” for the purposes of r 7.55(1), or a “fund” for the purposes of 7.55(3). Or alternatively, whether there is a proper basis for making a preservation order, and/or whether other interim orders (such as a freezing order) would be more appropriate.
[20] The difficulty in this case is that the Court is not aware of the present nature of the estate’s assets, or where and by whom they are held. While Mrs Eckhout states the assets are not liquid, it would appear they are sufficiently liquid to have been converted to cash to enable her to make payment of the $140,000 legal fees to which she refers in her statutory declaration. Other than that, however, and Mrs Eckhout’s statement that the funds have not been held by Attendus in Switzerland for some three years, the nature and whereabouts of the estate’s assets are unknown.
[21] While I was initially minded to make an order pursuant to r 7.55(3), on reflection, I have concluded it is not appropriate to do so (at least at this time). In my view, it is premature to make such an order without knowing more about the estate’s assets. Further, and while there has clearly been a transfer of assets from the Eckhout Family Trust to Mrs Eckhout, that is a somewhat separate matter to the FPA claim against Mr Eckhout’s estate (and I do not understand there to be a claim of wrongful conduct on the part of the trustees in distributing the trust assets to Mrs Eckhout). Further, and at least on the materials presently before the Court, there is no evidence to suggest that, other than the $140,000 in legal fees, the value of Mr Eckhout’s estate has otherwise been eroded. There also appears to be a valid reason why Mrs Eckhout is presently residing in Australia (though it is unclear why she has sold her residential home here and if she intends to return to live in New Zealand).
[22] Mrs Eckhout is the administrator of a deceased estate. She was appointed in that role by the Court. As administrator, Mrs Eckhout has a number of duties, including a duty of “even-handedness” as between beneficiaries, including as between beneficiaries and persons entitled or potentially entitled as statutory beneficiaries
under the FPA.4 Mrs Eckhout also has an obligation pursuant to 11A of the FPA to assist the Court:
11A Duty of administrator to assist court
On any application under this Act it shall be the duty of the administrator to place before the court all relevant information in his possession concerning the financial affairs of the estate and the deceased’s reasons for making the dispositions made by his will or for not making any provision or any further provision, as the case may be, for any person:
provided that the duty imposed by this section shall not extend so as to require the administrator to place any such information before the court if it is known to him by reason only of its having come to his knowledge in circumstances which impose an obligation, whether legal or moral, on the administrator not to disclose it, and its disclosure in connection with any application under this Act would be a breach of that obligation.
[23] Mrs Eckhout suggests that she was not advised by her solicitors/counsel of her duties and obligations as administrator. That would be somewhat surprising. I also note that in correspondence from Ms Connelly’s solicitors (Morrison Kent) to Mrs Eckhout’s solicitors dated 15 June 2020, Morrison Kent made express reference to Mrs Eckhout’s duties under s 11A of the FPA. Mrs Eckhout herself also refers to her duties under the FPA in her affidavit sworn on 20 May 2020.5 But irrespective of whether and to what extent Mrs Eckhout was advised of her duties as administrator, the point remains that she is subject to those duties.
[24] In my view, it will plainly be relevant to the forthcoming substantive hearing for the Court to be aware of the current value of Mr Eckhout’s estate, and the nature and whereabouts of the assets which comprise it. Information on distributions from the estate is also likely to be relevant.
[25] I therefore consider the appropriate step on the present application is not to make an order for any liquid assets of the estate to be transferred to this Court, but rather to require Mrs Eckhout (in her role as administrator) to file an affidavit or statutory declaration providing clear information on the current nature and
4 Irvine v Public Trustee [1989] 1 NZLR 67 (CA).
5 At [94]. Although this refers to s 11, rather than s 11A of the FPA, from its contents, it appears to be intended to be a reference to s 11A.
whereabouts of the estate’s assets. I am satisfied I have the jurisdiction to make such an order, being the necessary corollary of an administrator’s duty pursuant to s 11A of the FPA to assist the Court in placing all relevant information concerning the financial affairs of the estate before the Court.
[26] I should emphasise that in making such an order, I am not suggesting any nefarious or other suspicious conduct on Mrs Eckhout’s behalf. Rather, it simply reflects her role as administrator and her duty to assist the Court. I am also conscious that Mrs Eckhout did not appear at the hearing of the r 7.55 application, and thus has not had an opportunity to respond to the suggestion I made at the hearing that she provide further information on the estate’s assets. Nevertheless, Mrs Eckhout had the opportunity to participate in the hearing but chose not to do so. Further and more importantly, the provision of such information by an administrator ought to be uncontentious. I also take from Mrs Eckhout’s statement that she has never sought to mislead any party or the Court and has complied with the Court’s requests to date, that she will have no difficulty or concern in providing the information.
[27] I accordingly make an order that on or before 9 April 2021, Mrs Eckhout file with the Court and serve on counsel for Ms Connolly an affidavit or statutory declaration setting out the following information (as at the date of her affidavit/statutory declaration):
(a)The value (or her best estimate of the value) of the estate.
(b)The form of the assets which make up the estate.
(c)Who is presently holding those assets, and where.
(d)To the extent the assets are not in a cash form or represented by a bank account or similar, what steps would need to be taken to convert them to liquid form.
(e)Information as to any distributions made from the assets of the estate. In this context, Mrs Eckhout should confirm the “split” between that
amount of the $140,000 legal fees which relates to advice provided to her in her role as administrator, and that amount which relates to advice provided to her in her role as beneficiary. For the avoidance of doubt, all that is required is the monetary “split” between the two forms of advice, and not details of the advice given (as that information is privileged).
[28] Mrs Eckhout’s further affidavit or statutory declaration may be filed and served in an electronic form (with the original to follow by post or courier to the Court).
[29] The application for an order pursuant to r 7.55 is dismissed. Whether Ms Connolly considers a further r 7.55 application, or other interlocutory application, is required following provision of the information by Mrs Eckhout will of course be a matter for her to consider with her legal advisers.
[30] The costs of the present application are reserved pending resolution of the substantive proceeding.
[31] Finally, Mr Judd has confirmed that three days are no longer required for the substantive hearing, and that one day should be sufficient. To guard against the risk of unforeseen events arising which mean one day is insufficient, I consider two days should be set aside for the fixture. The third day is accordingly vacated and may be released for the use of other litigants.
[32] The Registry is directed to ensure that early contact is made with Mrs Eckhout about her means of participating in the substantive fixture. It is assumed that this will be by way of suitable remote participation technology.
Fitzgerald J
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