Courteney v Courteney

[2015] NZHC 2563

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2013-485-5912 [2015] NZHC 2563

UNDER

the Family Protection Act 1955

IN THE MATTER

of the estate of JOAN AYLEEN COURTENEY

BETWEEN

STEVEN COURTENEY First Plaintiff

KLAUDIA ARIANE COURTENEY Second Plaintiff

AND

STUART COURTENEY Defendant

Hearing:	12 October 2015
Counsel:	P W Michalik for Plaintiffs No appearance for Defendant
Judgment:	20 October 2015

JUDGMENT OF CLIFFORD J

Background

[1]      This is a family protection claim by the plaintiffs, a son and granddaughter of the deceased.   The defendant, the other son, is the executor and sole beneficiary under the will.

[2]      The  plaintiffs  say  that,  in  leaving  her  entire  estate  to  the  defendant, Mrs Courteney failed to discharge her moral obligations.  They say an earlier will,

COURTENEY v COURTENEY [2015] NZHC 2563 [20 October 2015]

which divided her estate more or less equally between her two sons, would have done so.1

[3]      The plaintiffs’ substantive claim is yet to be heard.

[4]      Facing difficulties with discovery and other matters, the plaintiffs applied for an  order  recalling  probate  and  appointing  an  independent  executor,  Mr Lance Pratley, a solicitor of Wellington, in place of the defendant.  The background to that application  is  fully  explained  in  a  Minute  of  MacKenzie  J  (who,  before  his retirement, was dealing with this matter) of 16 April 2015:

[1]       … At the hearing this morning, I had an exchange with counsel about the issues between the parties which have led to this application being brought, to seek to identify the best way forward for the litigation.

[2]       The essence of the issue before the Court at this stage is how best to achieve an “equality of arms” between the plaintiffs and the defendant, given the superior position of the defendant which derives from his possession of material and information in his capacity as an executor.

[3]       The   defendant   has   two   distinct   and   separate   roles   in   these proceedings.  The first is his role as executor.  In that role, he owes a duty of even-handedness between the plaintiffs, as claimants against the estate, and the beneficiaries under the estate.2   Aspects of that duty are given statutory expression in s 11A of the Family Protection Act 1955.  The duty is wider than  that.   The  second  is  his  role  as  beneficiary.    In  that  capacity,  the defendant is able to take a partisan stand supporting the dispositions in the will.

[4]       That dual role of the defendant creates a conflict of interest.   The defendant has filed an affidavit sworn on 13 March 2015 in which he says that on balance, he does not consider he has a conflict of interest.  That is wrong.  He does. The conflict is, as a matter of law, inherent in the dual role.

[5]       The dual role of the defendant as both executor and beneficiary, and the conflict of interest which that necessarily involves, make it highly desirable that the defendant should have had separate legal advice in relation to each of those capacities.   To date, his solicitors have been representing him in both capacities, or at least there has been no clear definition of the capacity in which they have been advising him.

[6]      The defendant has now taken steps to obtain separate legal representation for the proceedings, in his capacity as a beneficiary.  That step

1      The defendant in Germany, to receive all Mrs Courteney’s moveable personal property (the bulk of which was outside New Zealand at the time of her death), and the first plaintiff to receive the parents’ family home in New Zealand, which is on land given to them by the first plaintiff and his wife.

2      Sadler v Public Trust [2009] NZFLR 937, at [35].

is a positive one and is to be commended.   What is now necessary is to address the question of legal advice in his capacity as executor.

[7]       The duty of even-handedness means that an executor should obtain separate legal advice from a legal adviser who is visibly independent of the protagonists in the litigation, in a way which will satisfactorily address the inequality of the positions of plaintiffs and defendant.   The history of the matter suggests that the defendant’s current legal advisers would reasonably be perceived by the plaintiffs as not independent of the defendant in his personal  capacity.    In  the  circumstances,  I  consider  that  it  would  be preferable for a new legal adviser to be appointed.

[8]       I consider that it is appropriate to adjourn the application for a short period, to allow the defendant an opportunity to obtain new and separate legal advice as to his duties as executor.  If he does so, and if he follows the advice which he is given, then it may be that he can demonstrate that the duty of even-handedness which the executor owes can be observed, and be seen by the Court to be observed, by him.  If he does not, then, as I indicated quite firmly at the hearing, my consideration of the papers and counsel’s written submissions suggests to me that it will be difficult to avoid the conclusion that the defendant should be replaced by an executor who can perform that function.

[9]       The application is adjourned to 28 April 2015 at 10 am.

[5]      For various reasons the hearing was not continued on 28 April.   Rather, a telephone conference was held by MacKenzie J, with Mr Michalik for the plaintiffs and  new  counsel,  Mr  Barkle for  the defendant  in  his  capacity as  executor  and Ms Forrest for him in his capacity as beneficiary.  MacKenzie J’s Minute records:

[1]       Following my minute of 16 April 2015, Mr Barkle has now been instructed to act for the defendant in his capacity as executor.  He has not yet been able to obtain full instructions on which to advise the defendant.

[2]       I have made it clear to Mr Barkle that I regard the defendant’s duty of even-handedness as executor as requiring him to obtain urgent advice as to his obligations, in particular on the disclosure, on an even-handed basis, to counsel for the plaintiffs as well as to counsel for the defendant in his personal capacity, of information which may have a bearing on the plaintiffs’ claim.  I have informed Mr Barkle that the Court is placing reliance upon his obligations as an officer of the Court to ensure that the defendant receives, and acts in accordance with, advice as to material which should be disclosed, or any other assistance which the defendant in his capacity as executor should provide to the Court relating to the matters in issue in this claim.  I make it clear that, if the issues cannot be addressed in this way to the satisfaction of the Court, further steps will be necessary, and those steps would be likely to include the replacement of the defendant as executor, as sought by the plaintiffs.

[3]       The  matter  is  adjourned  to  a  further  telephone  conference  on Thursday, 7 May 2015 at 10 am.  Mr Michalik and Mr Barkle are each to file a memorandum setting out their position in the light of progress made in the

interim, by Wednesday 6 May 2015 at 5 pm.  Ms Forrest may, if she wishes, file a memorandum setting out the defendant’s position in respect of his personal capacity if she chooses to do so.

[6]      A further fixture, 3 June, was vacated.   A telephone conference Minute of

MacKenzie J of 12 August 2015 records:

[1]       This telephone conference was set to review this proceeding, having regard to the fact that the fixture for 3 June 2015 had to be vacated.

[2]       The plaintiffs filed an application dated 3 March 2015 for orders recalling probate and appointing an independent executor, and an affidavit in support.   A notice of opposition was filed, together with an affidavit in support of that opposition.

[3]       I addressed that application in three minutes dated 16 April, 28 April and 7 May 2015.  Those minutes took into account the then pending fixture of  3 June.     Mr Michalik’s  memorandum  of  10 August 2015  refers  to continuing issues over the supply of information from the executor.  Neither Mr Mundy-Smith nor Ms Forrest has been able to obtain current instructions from the defendant.  I consider that the appropriate course, to address these issues, now that the fixture has been vacated, is to set the application for recall of probate and appointment of an independent executor down for hearing.

[4]       I therefore give the following directions:

(a)      any  further  affidavits  by  the  plaintiffs  in  support  of  the application are to be filed and served by 28 August 2015;

(b)      any further affidavits in opposition to the application are to be filed and served by 11 September 2015; and

(c)      a half day fixture for the hearing of the application, before a

Judge, is to be allocated on the first available date after

14 September 2015.

[7]      The application was set down to be heard by me on Monday 12 October

2015.

[8]      Matters have progressed no further in terms of the defendant receiving advice and responding to it.  Following Mr Barkle’s appointment as a District Court Judge, Tripe Matthews & Feist (Mr Mundy-Smith) was briefed by Mr Barkle to represent the defendant in his capacity as trustee and executor.  Neither Mr Mundy-Smith nor Ms Forrest have received any instructions from the defendant and, therefore, have not been in a position to provide him any advice.  Both sought leave to withdraw

from the hearing before me, and I granted them leave accordingly shortly before the hearing.

[9]      On  the  day  of  the  hearing,  the  defendant  (who  is  overseas)  filed  a memorandum. As relevant, that memorandum provides:

May it please the Court,

1.        The  deceased,  Joan Ayleen  Courteney,  passed  away  on  21  May

2012.

2.In June 2011, whilst resident in NZ prior to her death, she had made a will.  The will was properly executed in accordance with the requirements applicable in NZ at the time.

3.The will was valid worldwide and was not challenged outside NZ, despite the fact that this would have been possible.

4.        At the time of her death, the deceased was a permanent resident in

Munich, Germany.

5.Under German law, regardless of how a testator decides to distribute the assets, he or she must not justify that distribution.

6.The disposition of assets outside NZ was made in 2012, shortly after Mum’s death, in accordance with the terms of the will and according to the relevant local legislation.

7.        Probate was granted in NZ in September 2012.

8.Mum died leaving a house in Masterton, for which she had already agreed a contract of sale.  In August 2012 the plaintiff had lodged a caveat with the land registry in NZ, thereby preventing a transfer of ownership and effectively blocking the sale.    Since under international law gifts of immovable assets are governed by the law of the country in which the property is situated, what now happens to the house in Masterton is governed by the law of NZ.

9.The Court in NZ has at no time had jurisdiction over the assets that were outside NZ.

10.Following the advance of Duncan Cotterill, and in order to satisfy the NZ Court’s request for information regarding the moral duty of the testator, I have, as executor of the estate, disclosed the value of the worldwide assets.

11.       Despite the fact that I have acted at all times to the best of my ability and on the basis of the information available to me at the time, the plaintiffs have persistently called into question the value of those assets and continue to make absurd claims in an attempt to inflate that value and thereby the amount that they hope to be awarded in any settlement.

12.Following  the  advice  of  Garry  Barkle,  and  in  order  to  be  as transparent as possible, I have, as executor of the estate, disclosed bank statements for the accounts held by the deceased prior to her death.

13.The appointment of a new executor in NZ by the High Court will not change the value of the assets at the time of death; it will merely increase  the  costs  to  the  estate,  thereby  reducing  the  amount available for distribution, and prolong any settlement.

14.In 2014 I made an out of court settlement offer to the plaintiffs, which was not accepted.

15.In order to put an end to this sordid and tragic situation, I would suggest that the Court now rule to remove the caveat on the house in Masterton, which represents the bulk of the worldwide assets at the time of death, so that the house can finally be sold, and further that the Court order that the proceeds of that sale, less all outstanding debts, be shared equally between the defendant (50%) and the joint plaintiffs (50%), on condition that the plaintiffs agree to accept such arrangement as a full and final settlement of any claims against the defendant.

Analysis

[10]     As reflected in MacKenzie J’s Minutes, the defendant has failed to discharge his  duty  to  act  even-handedly  as  executor  and  trustee.    His  discharge  of  his obligations has been adversely affected by his interest as sole beneficiary of his mother’s estate.  Whilst an independent executor and trustee of Mrs Courtney’s will may have limited ability to make enquiries outside New Zealand, I am nevertheless satisfied, as MacKenzie J clearly was, that in these circumstances it is appropriate that  this  Court  makes  the  order  sought  by  the  plaintiffs  recalling  probate  of Mrs Courteney’s  will  and  appointing  Mr  Lance  Pratley,  solicitor,  as  trustee  and executor in the defendant’s place.  Mr Pratley’s costs will be payable from the estate. Mr Pratley will, I am sure, be mindful of the need for proportionality in the steps he now takes as executor and trustee.

[11]     The plaintiffs applied for costs against the defendant on this application.  In my view, that question should await the determination of the substantive claim.

Clifford J

Solicitors:

WCM Legal Limited, Carterton for Plaintiffs