Darlow

[2022] NZHC 1763

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-833

[2022] NZHC 1763

UNDER

Part 19 of the High Court Rules 2016

IN THE MATTER

of the ESTATE OF JANETTE DIANA MOLETA

AND IN THE MATTER

of an originating application for directions under s 133 of the Trusts Act 2019

BY

CHRISTOPHER ROBERT DARLOW

Applicant

Hearing:	30 June 2022
Appearances:	C G Williams for Applicant
Judgment:	21 July 2022

JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 21 July 2022 at 2.30 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: ...................................

Solicitors:           Grove Darlow, Auckland Counsel:     G C Williams, Auckland

RE DARLOW [2022] NZHC 1763 [21 July 2022]

[1]    This is an originating application for directions under s 133 Trusts Act 2019 (“Act”). I heard submissions on the application in the Duty Judge list on 30 June 2022. I also convened a telephone conference with Mr Williams, counsel for the applicant, on 21 July 2022.

[2]    The applicant is the executor of the estate of Janette Diana Moleta (“estate”). He seeks a direction that, following the conclusion of an appropriate advertising campaign, he may sell, for the best price offered, a property owned by the estate situated at 21A Balfour Road, Parnell, Auckland (“Parnell property”).

Substituted service

[3]    Section 133(2) of the Act provides that an application under s 133 must be served in accordance with the rules of the Court on each person interested in the application.

[4]    The interested parties in this case are Ms Dellisse Moleta (“Ms Moleta”), and her siblings Ms Jolene Schollum and Ms Lorraine Moleta (“the plaintiffs”).

[5]    By application dated 23 June 2022, the applicant applied for substituted service on each of the interested parties, with service to be effected by email.

[6]    The grounds on which the applicant sought substituted service on Ms Moleta was that he does not know her whereabouts and, in any event, he and Ms Moleta have been in the habit of communicating by email.

[7]    To the extent necessary, I grant the application for substituted service. I say necessary because the application  and  supporting  documents  were  emailed  to  Ms Moleta and her legal representative, Ms Judy Maina, on 9 June 2022. By email  to the applicant of 29 June 2022, Ms Maina advised that Ms Moleta would not be entering an appearance and consented to the order sought in the originating application.

[8]The plaintiffs were served on 13 June 2022 and have not taken any step.

Background

[9]    The following appears from the applicant’s affidavit of 26 May 2022 and a memorandum from Mr Williams of the same date.

[10]   The deceased died on 15 July 2017. Ms Moleta was and is the sole beneficiary of the estate.

[11]   The plaintiffs brought proceedings against the estate under the Family Protection Act 1955. Hinton J made awards in favour of each. The estate has paid most of the sums due from the proceeds of sale of a residential property. However,

$50,000 to each remains outstanding, together with court costs totalling $260,000. Accordingly, the estate is required to pay the plaintiffs approximately $360,000.

[12]   The estate does not have sufficient cash on hand to pay this sum. However, it owns two further residential properties, the Parnell property and another in Ellerslie. The applicant has previously advised Ms Moleta that it would be possible to avoid a sale of either property if she put the estate in sufficient funds. This, however, has not occurred. Given that, the applicant considers it necessary to sell one property and a real estate agent, Mr Justin Wu, of Ray White has advised the applicant that it would be better to sell the Parnell property rather than the one in Ellerslie.

Reason for application

[13]   The main reason given for seeking an order under s 133 is that, if sold now, the Parnell property will realise a sum less than its apparent value. The relevant information is as follows.

[14]   In February 2022, the applicant engaged Mr Wu to sell the Parnell property. The property was marketed for sale with a deadline sale date of 24 March 2022. On that date, Ray White referred to the applicant a conditional offer to purchase of

$865,000. That same day, Auckland Council issued its valuation for the Parnell property at $1.8 million. The applicant considered the Auckland Council valuation high as the property is relatively modest and there was a substantial discrepancy between that valuation and the offer submitted.

[15]   Accordingly, the applicant instructed a firm of registered valuers, Gribble Churton Taylor, to value the property. That firm assessed the market value of the property at between $1.15 and $1.3 million as of 30 March 2022, so still substantially more than the offer received.

[16]   The applicant then instructed Ray White to seek further offers. This brought about a further offer of $870,000, again substantially less than the Gribble Churton valuation.

[17]   The applicant discussed the matter further with Gribble Churton at the end of April 2022. Subsequently, by email of 2 May 2022, the firm advised the applicant that a realistic sale price at that time would be between $1 million and $1.150 million but that any offer of more than $1 million should be considered carefully. The valuer also advised that he considered the Auckland Council valuation “completely unrealistic” even at the time it was issued.

[18]   Throughout, the applicant has been in communication with Ms Moleta and her various solicitors or legal advisers. It has been made clear to Ms Moleta that, if she wishes to avoid the sale of the Parnell property, she should put the estate in funds to pay the outstanding sums to the plaintiffs. She has not done so and, as I have said, Ms Moleta has now advised the applicant that she consents to the order sought.

Legal issues

[19]   One consequence of making a direction under s 133 is to deprive the beneficiary of any opportunity of alleging that the trustee’s actions constituted a breach of trust and seeking compensation for any loss thereby suffered. Hence the need for caution.

[20]   It is well accepted that there are four circumstances in which the Court may give a direction to a trustee pursuant to s 133 of the Act.1

1      Re PV Trust Services Ltd [2017] NZHC 2957.

[21]    The first is if the trustee is unsure of whether a proposed course of action is within his or her powers. That is not the position here. The applicant has power to sell. Nor are the third and fourth categories relevant to the present case.

[22]   The second category, which is said to be applicable in this case, is for a determination that a proposed course of action would be a proper exercise of the trustee’s powers. In such a case there is no real doubt as to the nature of the trustee’s powers or how the trustee wishes to exercise them. However, “because the decision is particularly momentous” the trustee wishes to have the Court’s “blessing” for the action on which he or she has resolved.

[23]In Richard v Mackay, Millett J (as he then was) said:2

Where, however, the transaction is proposed to be carried out by the trustees in exercise of their own discretion, entirely out of court, the trustees retaining their discretion and merely seeking the authorisation of the court for their own protection, then in my judgement the question that the court asks itself is quite different. It is concerned to ensure that the proposed exercise of the trustees’ power is lawful and within the power and that it does not infringe the trustees’ duty to act as ordinary, reasonable and prudent trustees might act, but it requires only to be satisfied that the trustees can properly form the view that the proposed transaction is for the benefit of beneficiaries or the trust estate.

Discussion

[24]   Although the applicant has power to sell the Parnell property, I have reservations about whether the decision to do so could be described as “momentous”, as is required to bring the matter within the second category of case.

[25]   Aside from that, however, the order proposed is “open ended” in the sense that it would authorise the applicant to sell the Parnell property for any price, no matter how modest, provided that it was the best offered after a marketing campaign (of which no specifics have been advised). None of the cases I have considered, including those to which Mr Williams referred in his memorandum, has approved of such a

2      Richards v Mackay [2008] WTLR 1667 (Ch).

proposal.3 Rather, the trustee has come to the Court with a specific proposal, for instance to sell for a particular price, on particular terms, and why the proposal is considered the best achievable, enabling a determination of whether the intended course of action is a proper one.

[26]   As Mr Williams pointed out in the telephone conference to which I refer above, the proposed order permits of a sale but does not require it. That is correct but it does not alter the effect of the order.

[27]   As Mr Williams submitted, an alternative would be for the Court to vary the order so that it permits of a sale at or more than a nominated value. This however would require current valuation information which the Court does not have before it, and which might be quickly superseded in any event and thus of little utility.

[28]   For these reasons, I decline to make the order sought and the application is dismissed.

Peters J

3      Public Trustee v Cooper [2001] WTLR 901 (Ch); Gailey v Gordon [2003] 2 NZLR 192 (HC); Richard v Mackay, above n 2; Jones v Firkin-Flood [2008] EWHC 2417 (Ch); Cotton v Brudenell- Bruce [2014] EWCA Civ 1312, [2015] WTLR 39; Chambers v S R Hamilton Corporate Trustee Ltd [2017] NZCA 131, [2017] NZAR 882; Re PV Trust Services Ltd, above n 1; Covic v Barbarich [2021] NZHC 2159; Re Darlow [2021] NZHC 2184; Re Macalister [2021] NZHC 3572; Re Saint John’s College Trust Board [2022] NZHC 259; Macnamara v Macnamara [2022] NZHC 547; and Turvey v Vance [2022] NZHC 1167.