Crick v McIlraith

[2012] NZHC 1290

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

CIV-2011-476-000690 [2012] NZHC 1290

UNDER  the Administration Act 1969

IN THE MATTER OF     an application for removal of administrators

BETWEEN  ROSEMARY LEE CRICK JOHN HOWARD MCILRAITH IAN DAVID MCILRAITH Plaintiffs

ANDROBERT BRUCE MCILRAITH IAN DAVID MCILRAITH Defendants

Hearing:         5 June 2012 (Heard at Timaru)

Appearances: L A Andersen for Plaintiffs (on 5 June 2012); P I Pati (on delivery of judgment: 6 June 2012)

J B Lovely for Defendants

D H McIlraith in Person  (a person directed to be served) Judgment:  6 June 2012

JUDGMENT OF ASSOCIATE JUDGE OSBORNE [as to application for removal of administrators]

Introduction

[1]      Alice McIlraith appointed her lawyer, James Wallace, and her trusted son, Robert,  (the  defendants)  as  the  administrators  of  her  estate.    She  died.    James Wallace and Robert obtained a grant of probate.   Three of Mrs McIlraith’s other children as plaintiffs in this proceeding assert that it is expedient that the defendants

be removed as administrators and that others be appointed in their place.

CRICK V MCILRAITH HC TIM CIV-2011-476-000690 [6 June 2012]

Background

[2]      Bruce and Alice McIlraith had a farm.   They also had five children (one daughter and four sons).   Within their lifetimes, Mr and Mrs McIlraith saw their children, all adults, become deeply divided over issues of provision, entitlement and obligation.  I refer to the parents as “Mr and Mrs McIlraith” and, for convenience, to their children by their first names.

[3]      Mr McIlraith died in January 2001.  Litigated disputes over his estate were eventually resolved by a consent order in 2006.  I will return to that consent order.

[4]      This litigation relates to the estate of his widow, Mrs McIlraith, who died in February 2011.  Her mental capacity had been diminished for some years prior to her death.   There is however no dispute as to the validity of her last will, which was dated 20 June 2001.   In it she appointed James Wallace and Robert as her administrators.  Probate was granted on 29 April 2011.  Mrs McIlraith divided her estate equally between her five children.   The evidence indicates that the administrators have faithfully carried out their responsibilities.

[5]      The estate is not large.  It will have a net value of around $270,000 before the costs of administration are deducted.  The home owned by Mrs McIlraith sold for a little over its rating valuation after an initial hiccup when the plaintiffs said that such steps should not be taken in the meantime.  Through arrangements between two of the children, Mrs McIlraith’s chattels have been divided.   That leaves a debt of approximately $195,000 to be collected from Mr McIlraith’s estate.   It also leaves the administrators to deal with a family protection claim issued by a son, Donald.

[6]      Donald indicates that his family protection claim may approach the value of the residuary estate by reference to his understandings that:

(a)        his  brother,  Robert,  received  approximately  $200,000  from  the

family’s wealth; and

(b)      his sister, Rosemary, stands to receive some approximately $150,000;

and

(c)       each of his brothers, Ian and John, has succeeded to farm holdings.

[7]      The evidence does not indicate how accurate these assessments of receipt are. I record them to indicate that the trustees may need to deal with litigation which, if successful, threatens to claim most of the net assets, even without allowance for the cost of such litigation.

[8]      This somewhat negative situation is the backdrop to this litigation.   In this proceeding yet again the children are pitted one against the other.  Rosemary, John and Ian sue their brother, Robert, together with James Wallace as the administrators of their mother’s estate.    They claim orders removing the defendants as administrators and appointing a Mrs Craik and a Mr Guest in their place.   They invoke the power of this Court under s 21 of the Administration Act 1969 and the Court’s inherent jurisdiction.  Their brother, Donald, takes the side of Robert.  The plaintiffs seek summary judgment.

The removal jurisdiction

[9]      The relevant provisions of s 21 of the Administration Act 1969 are as follows:

21       Discharge or removal of administrator

(1)       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 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 them as such shall become and be vested in the continuing administrator or administrators (including any administrator appointed under subsection (1) of this section) who shall have the same powers, authorities, discretions, and duties, and

may in all respects act, as if he or they had been originally appointed as the administrator or administrators.

....

Jurisdiction in equity – the inherent jurisdiction

[10]     The  classic  authority  on  the  Court’s  (inherent)  jurisdiction  in  equity  to remove old trustees and substitute new ones is the judgment of the Privy Council in Letterstedt v Broers1 delivered by Lord Blackburn. For the principles which apply, I refer to what his Lordship said at page 386:

It seems to their Lordships that the jurisdiction which a Court of Equity has no difficulty in exercising under the circumstances indicated by Story is merely ancillary to its principal duty, to see that the trusts are properly executed. This duty is constantly being performed by the substitution of new trustees in the place of original trustees for a variety of reasons in non- contentious cases. And therefore, though it should appear that the charges of misconduct were either not made out, or were greatly exaggerated, so that the trustee was justified in resisting them, and the Court might consider that in awarding costs, yet if satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate.

[11]     I refer also to his Lordship’s subsequent observation at p 387:

In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyond the very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries. Probably it is not possible to lay down any more definite rule in a matter so essentially dependent on details often of great nicety. But they proceed to look carefully into the circumstances of the case.

[12]     These statements have been consistently recognised as stating the law.   In New Zealand a leading authority is the decision of the Court of Appeal in Hunter v Hunter,2 especially the judgment of the Chief Justice Sir Michael Myers at 530-531.

[13]     These authorities are adopted not only in relation to the inherent jurisdiction but also as informing the circumstances in which removal is expedient under s 21 of the Administration Act 1969 or under the parallel provisions for removal of trustees

under s 51 of the Trustee Act 1956.

1      Letterstedt v Broers (1884) 9 App Cas 371 (PC).

[14]     Mr  Donald  McIlraith,  appearing  on  his  own  behalf,  submitted  that  the plaintiffs’ reliance on an inherent jurisdiction in relation to administration matters is misconceived as the inherent jurisdiction relates to trustees and not to administrators. He cited the decision of the Supreme Court of Victoria in Monty Financial Services Ltd v Delmo.3   In that case, Ashley J found that there was no inherent jurisdiction to remove an executor or an administrator (as against a trustee).   In doing so, his Honour expressly resorted to the New Zealand legislative history by reference to the predecessors of the present provisions of the Administration Act 1969.  In particular

he referred to the second reading debate in the New Zealand Parliament in 1907 which showed the legislature’s correct understanding that no inherent jurisdiction existed to remove an executor or an administrator in certain circumstances.  I adopt those conclusions and accordingly proceed on the basis that I am to deal with this application in terms of s 21 of the Administration Act only.

[15]     The intensely discretionary nature of the jurisdiction has been repeatedly recognised in the case law. I refer by way of example to the observations of Dixon J in the Australian High Court decision in Miller v Cameron4 as adopted by Panckhurst

J in Kain v Hutton:5

[272] Against this background I do not consider the failings of the trustees were of a kind to justify removal. I am influenced by the observations of Dixon J in Miller v Cameron (1936) 54 CLR 572 (HC) at 580-1:

“In deciding to remove a trustee the Court forms a judgment based upon  considerations,  possibly  large  in  number  and  varied  in character,   which   combine   to   show   that   the   welfare   of   the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed  unless  circumstances  exist  which  afford  ground  upon which the jurisdiction may be exercised. But in a case where enough appears  to  authorise  the  Court  to  act,  the  delicate  question  of whether it should act and proceed to remove the trustee is one upon which the decision of a primary Judge is entitled to especial weight.”

Hence the particular circumstances of a case are all important.

[16]     The principles which I adopt on the basis of these authorities are:

3      Monty Financial Services Ltd v Delmo [1996] 1 V.R. 65 at 77.

4      Miller v Cameron (1936) 54 CLR 572 at 580–581.

5      Kain v Hutton HC Christchurch M198/00, 3 December 2004 at [272].  See to similar effect the judgment of Starke J in Miller v Cameron at 579.

(a)      this  jurisdiction  involves  a  large  discretion  which  is  heavily fact- dependent;

(b)the  starting  point  is  the  Court’s  duty  to  see  estates  properly administered and trusts properly executed;

(c)      the welfare of the beneficiaries is the “litmus” test; and

(d)hostility as between administrators or trustees and their beneficiaries is not of itself a reason for removal.   It will assume relevance if it prejudices the interests of the beneficiaries.   An example of where hostility is such that the trustee may be described as being “out of sympathy”   with   the  beneficiaries   is   seen   in   the  judgment   of Panckhurst J in Kain v Hutton.6

Expediency

[17]     I remind myself that the legislature has chosen to define the s 21 threshold in terms of what is expedient.   Donald McIlraith referred me to the decision of the Court of Appeal in R v Leitch,7 a decision in relation to the (criminal law) sentence of preventive detention,  but  containing  a discussion  of the term  “expedient” of broader application.   In particular, Richardson P in delivering the judgment of the Court said at [327]-[328]:

“Expedient” is frequently used in statutes — according to a computer check it appears 1,116 times in the statute book. While there may be shades of meaning of the word, depending on the context, reference to standard dictionaries brings out its basic meaning: The Oxford English Dictionary (2nd ed): “conducive to advantage in general, or to a definite purpose; fit, proper, or suitable to the circumstances of  the case”; more  expansively, Webster's Third New International Dictionary definition is “characterised by suitability,  practicality  and  efficiency  in  achieving  a  particular  end:  fit, proper, or advantageous under the circumstances”; Black's Law Dictionary (5th ed) definition is: “Apt and suitable to end in view … Whatever is suitable and appropriate in reason for the accomplishment of a specified object”; and closer to home The Macquarie Dictionary gives as the primary meaning:  “tending  to  promote  some  proposed  or  desired  object;  fit  or suitable for the purpose; proper in the circumstances”.

6      Kain v Hutton, above n 5, at [249].

Clearly, “expedient” as used in the section sets a lower threshold than “necessary”,   a   conclusion   reinforced   by   the   consideration   that   the Legislature often employs the alternative standards of “necessary or expedient” — a computer check gives 411 instances in the statute book. The standard required by s 75(2) is that the sentencing Court be satisfied it is appropriate for the protection of the public, ie it is suitable to the circumstances of the case to detain the offender in custody for a substantial period. Where s 75(1)(a) alone applies, the standard required by s 75(3A) must also be met. The threshold there is “a substantial risk that the offender will commit a specified offence upon release”.

[18]     This observation in Leitch is a reminder that the Court must always return to the legislation itself.   The term “expedient” imports considerations of suitability, practicality and efficiency.  In the context of estate administration the use of the term “expedient” therefore demands an overarching question – will removal of the administrator be a suitable, practical and efficient means of advancing the interests of the estate and of its beneficiaries?

The wishes of the testatrix

[19]     In relation to any application for any removal the Court must retain due respect for the wishes and indeed the autonomy of a testatrix.  It is trite that she who establishes either a will trust or an inter vivos trust may authorise conduct by a trustee which would otherwise amount to impermissible conduct for reasons of conflict of interest, self-dealing or otherwise.   Such conduct may be authorised expressly by the instrument or may be implied through such features as the testatrix’s appointment of someone who already has a conflict.  Donald McIlraith noted that in Monty Financial Services Ltd v Delmo Ashley J had identified as “an important

point” that:8

[T]he testator’s selection of executor should not lightly be set aside.   It should not be disregarded except, at the least, for serious reason.  That is a relevant matter, in my opinion, both when a question of passing over an executor arises and also when removal of an executor is under consideration.

[20]     The testator’s selection of executor should not lightly be set aside.  Ashley J cited as authority for that proposition the (New Zealand) Court of Appeal decision in the predecessor decision to Hunter v Hunter namely In re Hunter (deceased) [1932]

NZLR 911.

8      Monty Financial Services Ltd v Delmo, above n 3, at 75.

[21]     For a recent reinforcement of the testatrix’s autonomy see the judgment of Whata  J  in  Hinde  v  Cranwell9   which  I adopt  as  a  succinct  application  of  this principle.

Summary judgment applications

[22]     For the plaintiffs, Mr Andersen did not dwell on the principles which guide a summary judgment application.  He was content to recognise that the plaintiff bears the onus of establishing that the defendants have no defence to the allegations raised in the statement of claim, by which I took him to mean also as verified by the plaintiffs’ evidence. The principles which I adopt in relation to this application so far as it concerns summary judgment are these:

(a)       Common-sense, flexibility and a sense of justice are required.

(b)The onus is on the plaintiff seeking summary judgment to show that there is an arguable defence.  The Court must be left without any real doubt or uncertainty on the matter.

(c)      The  Court  will  not  hesitate  to  decide  questions  of  law  where appropriate.

(d)The Court will not attempt to resolve genuine conflicts of evidence or to assess credibility.

(e)      In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine the various defences or plainly contrived factual conflicts.   It is not required to accept uncritically every statement put before it, however equivocal and imprecise and inconsistent with undisputed contemporary documents or other statements or inherently improbable.

(f)      In assessing a defence the Court will look for appropriate particulars and a reasonable level of substantiation.

(g)In weighing these matters the Court will take a robust approach and enter  judgment,  even  where  there  may  be  differences  on  certain factual matters, if the lack of a tenable defence is plain on the material before the Court.

(h)Where  a  last-minute  unsubstantiated  defence  is  raised  and  an adjournment would be required, a robust approach may be required to protect the integrity of the summary judgment process.

(i)Once the Court is satisfied that there is no defence, the Court retains a discretion to refuse summary judgment, but does so in the context of the general purpose of the High Court Rules which provide for the just, speedy and inexpensive determination of proceedings.

(j)With particular regard to the breadth of the discretion which the Court has in relation to the removal of administrators, I adopt the warning of Fisher J in Claydon v Herron.10    That case concerned the discretion under the Illegal Contracts Act 1970.  His Honour, at 634, said

... notoriously when one comes to the exercise of a judicial discretion,  unforeseen  circumstances  can  have  a  bearing upon what at the moment may seem obvious.

Robert McIlraith as administrator

The pleading against him

[23]     I will deal first with the role of Robert as administrator as pleaded in the statement of claim.   (Robert and James Wallace were initially sued as “First Defendants”, later becoming the only defendants).   The plaintiffs plead in relation to Robert that:

6(a)     (i)      Robert McIlraith has a conflict between his duty to the beneficiaries of Alice McIlraith’s estate and his interest as a debtor of the estate;

...

6(b)      The First Defendants’ application for probate of the estate of Alice McIlraith is contrary to the wording and spirit of a consent order made in the Family Court in proceedings relating to the estate of Bruce McIlraith:

(i)        The settlement of the family protection  claim brought  in respect of the estate of Bruce McIlraith required the First Defendants  to  not  apply for  probate  of Alice  McIlraith’s estate as a consent order was made in the Family Court on

28 March 2006 under FAM-2002-12-0000812, FP-12-3153-

02 (“the consent order”) to the following effect:

The parties will take steps to ensure that the present trustees of Mrs McIlraith’s will are changed and replaced by the same trustees as the Bruce McIlraith estate.

(ii)      The First Defendants did not advise the Plaintiffs that they were applying for probate notwithstanding correspondence with  the  Plaintiffs’ solicitor  as  to  who  should  apply  for probate;

(iii)      Robert McIlraith applied for probate notwithstanding James Wallace’s advice to the Plaintiffs’ solicitors on 6 April 2011 that Robert McIlraith “would be prepared to step aside as executor in favour of Adair Craik if she is agreeable”.

...

The 2006 consent order

[24]     Mrs McIlraith was not a party to the consent order.  Nor was James Wallace. But the evidence clearly indicates that the consent order represented a series of give and take compromises and commitments by family members.

[25]     A concern for some parties - the naming of Robert and of James Wallace as executors and trustees of Mrs McIlraith’s will - was accommodated by the mutual commitment of the parties to work towards having those trustees replaced by the appointment of new trustees of Mrs McIlraith’s will.   It transpired that such replacement did not occur.  Mr McIlraith’s new trustees declined to offer to become Mrs McIlraith’s executors because of a possible conflict.   Steps were explored to

deal  with  amendments  to  Mrs  McIlraith’s  will  through  the  provisions  of  the Protection of Personal and Property Rights Act 1988 but Mrs McIlraith died before any such step took place.

[26]     What is clear is that the family members who bargained for other aspects of the 2006 consent order have received the benefit of those aspects of the order.  The family members who stipulated for removal of Mrs McIlraith’s trustees did not receive that outcome.

[27]     At this point, Robert’s evidence is significant.  In his affidavit at paragraph 7, Robert McIlraith deals with the situation which arose on his mother’s death thus:

The Statement of Claim alleges in para 6(b) that in applying for a Grant of Probate, the First Defendants breached the 2006 Consent Order.  As is noted in para 8 of the Statement of Claim, the persons referred to in the Consent Order declined to act as Trustees.  In the absence of anything to the contrary, the position reverted to the status quo as provided by my mother in her Will. Despite further Court action over the five years after 2006, no change of Trustees was made.  While the actual wording of the Consent Order was not breached, I acknowledge that it was in the spirit of the overall settlement recorded by the Consent Order that I would not be Trustee.  The same could not be able necessarily to be said for Mr Wallace who was not involved in the Consent Order.  I consequently took the trouble to travel to Oamaru on

17 March 2011 with Mr Wallace shortly after my mother’s death on 11

February to meet Adair Craik, who had been her Property Manager. We took with us a signed Deed of Retirement and Appointment of Trustee in terms of

which she would replace me.  She declined to accept appointment. Over a

month later, at the end of April, about two and [a] half months after my

mother’s death, the First Defendants felt they had a duty as the Executors named in the Will to commence administration.   We accompanied our Application with the Memorandum attached as an Exhibit RLC20 to the Affidavit of Rosemary Crick filed herein so as to disclose to the Court the full circumstances.

[28]     Neither Robert nor James Wallace explains why Robert was apparently not alerted to the possibility of his renouncing his appointment as administrator.   A strong inference as to the reason for James Wallace’s and Robert’s joint application for probate is found in James Wallace’s correspondence of 18 April 2011.  He there advised the plaintiffs’ solicitors that he (James Wallace), would not be prepared in any circumstances to apply for probate alone.

[29]     What is clear is that Robert has honourably recognised by affidavit the fact that his appointment as administrator was inconsistent with the spirit of the 2006 consent order.

[30]      In this proceeding he formally abides the decision of the Court as to his non- removal or removal.  In a sense, that is the parallel of his offer to Mrs Craik before probate was granted, to step aside in favour of Mrs Craik.  As James Wallace’s letter records, the offer was not accepted by Mrs Craik who was not prepared to become a co-administrator with Mr Wallace.  I will return to that.

[31]     It is unnecessary here to focus on the plaintiffs’ allegation at paragraph 6(a)(i) of the statement of claim, of a conflict of interest or on the failure of James Wallace or Robert to advise the plaintiffs of their decision to pursue probate.  Neither of these seem particularly strong allegations to me.

[32]     Robert himself clearly recognised the tension his appointment would create. It was the very outcome that other parties to the 2006 consent order had intended to avoid in the interests of family resolution.  His removal is clearly expedient in that it will remove an understandable and merited resentment and lack of confidence on the part of siblings.  They feel understandably that Robert’s acceptance or appointment as administrator has breached the spirit if not the letter of the 2006 consent order. Equity would be offended in this context by a party to the 2006 consent order taking advantage of contractual form in disregard of true spirit and intent.

James Wallace as administrator

Involvement in the consent order

[33]     The plaintiffs plead in relation to James Wallace that:

6(a)      (ii)      The Defendant James Leybourne Wallace (“James Wallace”) is in a position of conflict because he acts or has acted as the solicitor for Robert McIlraith;

...

6(a)      (iv)      The  actions  of  James  Wallace  are  the  subject  of  an unresolved complaint to the New Zealand Law Society in relation to his dealings with Alice McIlraith during her lifetime  including  (but  not  limited  to)  Alice  McIlraith making gifts to Robert McIlraith when she was incapable of understanding the nature of the transaction.

...

6(b)      (i)        The settlement of the family protection  claim brought  in respect of the estate of Bruce McIlraith required the First Defendants  to  not  apply for  probate  of Alice  McIlraith’s estate as a consent order was made in the Family Court on

28 March 2006 under FAM-2002-12-0000812, FP-12-3153-

02 (“the consent order”) to the following effect:

The  parties will  take  steps  to ensure that the  present trustees   of   Mrs   McIlraith’s   will   are   changed   and replaced  by the  same  trustees  as the Bruce McIlraith estate.

6(b)     (ii)      The First Defendants did not advise the Plaintiffs that they were applying for probate notwithstanding correspondence with  the  Plaintiffs’ solicitor  as  to  who  should  apply  for probate;

[34]     I find James Wallace’s position in a markedly different category to Robert’s.

[35]     I begin  with  the  2006  consent  order  on  which  my conclusion  as  to  the expediency of Robert’s removal turns.   The 2006 consent order was essentially a family settlement of a family protection claim.  The trustees of Mr McIlraith’s estate were involved but, by inference, they were involved in the usual way abiding the outcome reached by the family.  Mrs McIlraith on the other hand was not a party to the proceeding.   She was ordered to be served but there is no suggestion that she entered an appearance herself or through James Wallace.  She did not become a party to the agreement which became the consent order.  James Wallace himself was not a party.

[36]     A major ingredient of the expediency of Robert’s removal arises precisely because he was a party to the commitment by family members (other than Mrs McIlraith) to achieve his removal.  James Wallace was not invited to sign up to such a commitment.  He did not sign up.  Mrs McIlraith’s decision to appoint him through her will was never retreated from by Mrs McIlraith.  In 2004, two and a half years

after her will was executed, Judge O’Dwyer sitting in the Family Court11 reviewed in detail Mrs McIlraith’s capacity to instruct a solicitor.   Her Honour expressly recognised at [27] of her judgment the importance of:

a person’s right to instruct a solicitor of their own choice...

[37]     Significantly,  Judge  O’Dwyer  recorded  as  background  at  [27]  that  Mr Wallace was experienced and that Mrs McIlraith had known him since 1993.  Such a person is precisely the sort of professional a testatrix would be keen to appoint.

[38]     Since Mrs McIlraith chose to appoint Mr Wallace as her executor and trustee and did not subsequently give rise to any understanding that she would revoke such appointment, no member of the family can properly suggest that he or she has been let down in relation to the 2006 consent order so far as it affects James Wallace.

[39]     That is sufficient to dispose of the particular grievance as against Mr Wallace at paragraph 6(b)(i) of the Statement of Claim.

Lack of notice of application for Probate

[40]     I turn to the grievance at paragraph 6(b)(ii) of the Statement of Claim.

[41]     Mr Andersen referred to exchanges of correspondence between the plaintiffs’ solicitor,  Judith  Medlicott,  and  Mr  Wallace’s  firm,  RSM  Law,  which  occurred between 25 March 2011 and 18 April 2011.  I summarise:

25/3/2011 – Ms Medlicott refers to the 2006 consent order and requests the undertaking of Robert and of James Wallace not to seek probate.

6/4/2011 – Mr Wallace confirms a proposal of Robert’s that Robert step aside in favour of Mrs Craik.  He says that he has not heard back from Mrs Craik and will let Ms Medlicott know when he does.

13/4/2011 – Ms Medlicott writes to Mr Wallace:  “Do you intend to seek a

11     Crick v McIlraith (2004) 23 FRNZ 343.

grant of Probate yourself?  Either with or without Mrs Craik?  This would be entirely unacceptable to our client.”

18/4/2011 – Mr Wallace replies that he would not in any circumstances seek to be sole executor or trustee, has not heard back from Mrs Craik, and will contact her shortly because progress in the administration of the estate is important.

That represents the end of that correspondence.

[42]     The defendants,  in  fact  on  22  March  2011,  had  applied  for  probate  and shortly after the correspondence obtained it on 29 April.   Mr Wallace advised Ms Medlicott of that outcome on 6 May 2012.

[43]     Mr Andersen refers to James Wallace’s failure, during his correspondence with Ms Medlicott, to frankly disclose the fact of the application for probate.   He submits that it was such a failure of frankness as to lead the plaintiffs to a view (justifiable especially combined with an alleged failure to honour the 2006 consent order) that James Wallace could not be trusted in his role as administrator.

[44]     It is true that the evidence of the plaintiffs discloses a distrust of James Wallace partly through the course of this correspondence.  Rosemary, for instance, deposes  that  Mr  Wallace’s  “misleading  actions”  heightened  the  plaintiffs’ other concerns.

[45]     But there is no suggestion with one inconsequential exception, that since the grant of probate, James Wallace’s actions (or indeed Robert’s actions) have been other than the appropriate actions of an executor.  The exception comes in the form of a bare allegation by Rosemary to the effect that the defendants tried to sell Mrs McIlraith’s home without it being in a proper state for sale.  The house subsequently sold and there has been no criticism of the sale price achieved.   I disregard this criticism. In relation to Mrs McIlraith’s will, James Wallace as executor was entitled to take the view that he owed Mrs McIlraith the duty to promptly obtain probate if satisfactory alternatives were not in place.  At any time the plaintiffs were free to

caveat the will when Ms Medlicott and her clients did not receive the undertakings that they were insisting upon.

[46]     James Wallace was not asked by Ms Medlicott whether he had made an application for probate or not.  Through not volunteering that information he may be seen by the plaintiffs as having lacked frankness but his actions can at least arguably be characterised as proper actions to get his testatrix’s will probated. His subsequent conduct in the administration of the estate reinforces his willingness and ability to carry out the wishes of his testatrix.

Conflict of interest

[47]     I now turn to the allegations made against Mr Wallace to the effect that he was in a position of conflict.

James Wallace acting for Robert McIlraith

[48]     It is common ground that James Wallace gave Robert some advice around

2001 following Robert’s father’s death. There is also evidence of RSM Law, through

James Wallace, acting for Robert in relation to deeds of July 2002 and September

2002.   A separate solicitor witnessed Mrs McIlraith’s signature.   James Wallace witnessed Robert’s signature.

[49]     Mrs McIlraith’s last will was also executed in 2001.   In it Mrs McIlraith appointed Robert one of her executors.  Nothing in this present proceeding turns on the fact that Mr Wallace was then afterwards acting for Mrs McIlraith’s son as well as herself.  This is a not uncommon New Zealand situation, where a solicitor acts for a number of family members and is found by a testator or testatrix to be precisely the trusted person that he or she wishes to have as executor.

James Wallace’s issuing of proceedings against Mrs McIlraith in her lifetime

[50]     This particular is so lacking in merit that I will deal with it only briefly. James Wallace performed legal work for Mrs McIlraith.  His bill went unpaid.  As

Mrs  McIlraith’s  capacity  declined,  a  property  manager  was  appointed.     The limitation period approached.  James Wallace’s firm obtained a default judgment to protect the costs.   They then awaited collection at an appropriate point.   James Wallace’s actions were at least arguably appropriate. The criticism is misconceived.

Unresolved Law Society complaints against James Wallace

[51]     John McIlraith has filed a Law Society complaint against James Wallace.  It is alleged that James Wallace involved Mrs McIlraith in making gifts to Robert when she was incapable of understanding the nature of transactions.  John has not given evidence.  The documents relating to his complaint are not before the Court.  It is Rosemary whose evidence refers to the fact of this complaint.  Significantly, James Wallace deposes that he has never met or spoken to John.   He records that the complaint remains unresolved and that its outcome needs to be known before any conclusions are drawn.  James Wallace also observes that a specific term of the 2006 consent order was that “no party will challenge the gifts made by Mrs McIlraith to the partnership”.

[52]     The content and tenor of James Wallace’s evidence supports a conclusion that any sense of grievance felt by John or any other plaintiff over the subject matter of the complaint is not something which has affected in any way James Wallace’s professionalism to his duties in this administration.

[53]     It is to be recalled that Mrs McIlraith vested her residue equally in her five children.  It is difficult objectively and realistically to understand how James Wallace might be led into working against the interests of one or more of these equally- entitled beneficiaries.  The course of communication since probate was granted is at least arguably against a conclusion that James Wallace has been tempted to or has unconsciously engaged in conduct to the disadvantage of one or more beneficiaries.

[54]     Mr  Wallace  (together  with  Robert),  when  served  with  this  proceeding promptly recorded to the Court that he would abide the decision of the Court.  This again provides at least arguable confirmation that his intent is to pursue the interests

of this estate and to dampen down the combative themes which have affected this family for far too long and now threaten to continue.

Conclusion in relation to James Wallace

[55]     The plaintiffs’ summary judgment application for Mr Wallace’s removal must fail.  It is at the very least arguable on the evidence that it would not be expedient in terms of the principles as I have identified them to remove James Wallace.   I am satisfied that it is at least arguable that James Wallace’s removal would not be a suitable or efficient means of advancing the interests of Mrs McIlraith’s estate or the interests of her beneficiaries.   Mrs McIlraith, though she is no longer with us, is arguably entitled to have her wishes in the matter of her administration of her estate respected, at least to the extent of James Wallace’s continuing in that role. Furthermore, the discretion exercised in order to remove an administrator could not appropriately be exercised in this summary judgment context.   The breadth of discretion renders it inappropriate, in relation to Mr Wallace, to deal with the issue of removal summarily. When the factual picture is necessarily limited and incomplete.

Whether to appoint a replacement?

[56]     I will be ordering that Robert be removed, but not James Wallace.  That said, I must respect James Wallace’s desire against the history of this family’s dealings not to be left in the position of being a sole executor.  By s 21(1) of the Administration Act 1969 the Court may then appoint any person in Robert’s place on such terms and conditions in all respects as the Court thinks fit.

Mrs Craik

[57]     Mrs Craik is a person in whom the plaintiffs have confidence.  She served for a short period before Mrs McIlraith’s death as her property manager and therefore has a useful understanding of Mrs McIlraith’s estate.   She also implicitly has a measure of respect from James Wallace who would not have supported Robert’s approach to her concerning appointment had James Wallace not been confident as to her abilities.

[58]     She is an obvious candidate as an appointment as a replacement to Robert. Mr Andersen felt obliged to express to the Court the concern the plaintiffs had relayed to him that a second professional trustee would add another tier of administration costs.   I am not prepared to give such a concern any significant weight given the extent to which costs must have been mounting in relation to this litigation which, in my view, has not advanced and may well have delayed the day- to-day administration of this estate.

[59]     The one reservation I have as to Mrs Craik’s appointment lies in her second affidavit.  In her first affidavit she deposed simply that she was prepared to accept appointment as administrator if so appointed.   She confirmed that she has no connections in any way with any of the parties.  In her second affidavit she says that she has previously made it clear to James Wallace that she was not prepared to accept appointment as co-administrator with him.

[60]     I discussed with counsel an inference which I drew, namely that Mrs Craik may  have  taken  the  view  that  James  Wallace  was  in  some  way  conflicted  or otherwise was an inappropriate person to be administrator.  Mrs Craik will now have the judgment of this Court whereby Mrs McIlraith’s appointment of James Wallace is not to be set aside for the reasons I have given.

[61]     It is appropriate in these circumstances that the Court makes a conditional order whereby Mrs Craik has the opportunity to reconsider whether she is prepared to become administrator of the estate alongside James Wallace.  The Court certainly sees a real benefit to all beneficiaries if she is prepared to accept a prompt appointment.

Alternatives to Mrs Craik

[62]     The  second  candidate  submitted  by  the  plaintiffs  is  James  Guest,  an experienced practitioner well known to this Court.  Regrettably, he would not in the particular circumstances constitute an appropriate alternative.  This is not a reflection in any sense on Mr Guest’s qualifications or standing.  Rather there is a particular history relating to his involvement in the Family Court proceeding concerning Mrs

McIlraith’s capacity, out of which Donald McIlraith has developed reservations as to Mr Guest’s further involvement.   It is unnecessary to examine that background in any detail.   What must be avoided in the orders I make is any impact on the due administration of Mrs McIlraith’s estate which might come about through some new sense of grievance created by a particular replacement.

[63]     Accordingly, if after a given period:

(a)       Mrs Craik does not accept appointment; and

(b)      Mr Wallace confirms he does not wish to remain as sole administrator then I will provide for the nomination of a Christchurch legal practitioner with at

least  ten  years’ experience  of  estate  administration  to  be  appointed  as  Robert’s

replacement.

Costs

[64]     I received numerous submissions as to costs yesterday in advance of the delivery of this judgment today.  I have excused both Mr Andersen and Mr Donald McIlraith from appearance today.  In these circumstances I reserve costs.  I look to counsel and the parties to take a practical approach to resolving costs issues between themselves so as to avoid the spectre of further costs being incurred by parties in order to resolve costs issues.

Orders

[65]     I order:

(a)       the summary judgment application in relation to James Laybourne

Wallace is dismissed;

(b)the plaintiffs are by 20 June 2012 to notify the Court and other parties whether or not the plaintiffs intend to continue this proceeding as against Mr Wallace;

(c)      with effect from 12 noon 6 July 2012 Robert Bruce McIlraith is removed as administrator of the estate of Alice May Clark McIlraith, (“the estate”) subject to the following conditions:

(i)       the Registrar is to forward a copy of this judgment to Mrs

Adair Craik;

(ii)Mrs Craik is requested to advise the Registrar by letter to be received no later than 20 June 2012 whether or not she will accept appointment as an administrator of the estate in terms of this judgment;

(iii)in  the event  that  Mrs Craik  declines  such appointment  the Registrar is to have Mr Wallace confirm in writing whether he will then accept the role as sole executor and trustee or decline such role;

(iv)In the event that Mrs Craik declines to be appointed and Mr Wallace declines to accept sole appointment, the Registrar is forthwith to liaise with the President of the Canterbury- Westland Branch of the New Zealand  Law Society  (or his delegate) who is hereby requested and authorised upon discussion and acceptance by the candidate to nominate a suitable candidate to accept appointment as an administrator of the estate in terms of this judgment, such candidate to be a practitioner and to have no less than ten years professional legal experience including in particular in relation to the administration of estates;

(v)The person to be appointed under (ii) or (iv) above as administrator shall be an executor and trustee of the will of Mrs McIlraith in all the terms of that will dated 20 June 2001 including as to its charging clause, clause 5;

(vi)Leave is reserved to counsel and Mr Donald McIlraith to apply for formal orders to be finalised and made when the replacement administrator is identified; and

(vii)Leave  is  further  reserved  to  counsel  and  to  Mr  Donald McIlraith to apply for such amendment or addition to these conditions as may be required for the purpose of giving effect to this judgment.

(d)      The summary judgment application in relation to the appointment of

James Christopher Dexter Guest is dismissed.

(e)       All issues of costs are reserved.

Associate Judge Osborne

Solicitors: Counsel:

Medlicotts Lawyers (J O Medlicott) - Email: [email protected]

(Counsel acting) L A Andersen - Email:  [email protected] / [email protected]

RSM Law – [email protected]
Mr D H McIlraith - Email: [email protected]