de Gregorio v Surridge
[2017] NZHC 2061
•28 August 2017
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2017-485-602870 [2017] NZHC 2061
UNDER the Administration Act 1969 IN THE MATTER OF
the Estate of Wilbur George Surridge
BETWEEN
NUNZIO DE GREGORIO Plaintiff
AND
ANNE JOSEPHINE SURRIDGE First Defendant
AND
PAUL HOUSTON SURRIDGE Second Defendant
Hearing: 15 August 2017 Counsel:
J A Langford for Plaintiff
C T Patterson for First Defendant
S J Iorns for Second DefendantJudgment:
28 August 2017
JUDGMENT OF CLARK J
[1] This judgment determines two interlocutory applications under s 7 of the
Administration Act 1969:
(a) an application by Anne Surridge (the first defendant) to appoint the Public Trust, Grant Thornton Ltd or Deloitte as a temporary administrator; and
(b)an application by the plaintiff for an order appointing himself as temporary administrator.
[2] At issue is the administration of the estate of Wilbur George Surridge (the deceased) who passed away on 15 December 2016. Mr De Gregorio (the plaintiff) is
DE GREGORIO v SURRIDGE and SURRIDGE [2017] NZHC 2061 [28 August 2017]
the named executor and trustee under a will executed by the deceased on 21 January
2014. The deceased had five children, two of whom are parties to this proceeding.
Jurisdiction
[3] Section 7 of the Administration Act 1969 provides:
Administration pending legal proceedings
(1) Where any legal proceedings touching the validity of the will of a deceased person, or for obtaining, recalling, or revoking any grant of administration, are pending, the court may grant administration of the estate of the deceased to a temporary administrator, who shall, until he or she is discharged or removed under section 21, have all the rights and powers of a general administrator, other than the right of distributing the balance of the estate remaining after payment of debts, funeral and testamentary expenses, duties, and fees, and every such temporary administrator shall be subject to the immediate control of the court and act under its direction.
(2) The court may, out of the estate of the deceased, grant to a temporary administrator appointed under this section such reasonable remuneration as the court thinks fit.
[4] Relatively recent decisions under s 7 have noted the sparse authority on the principles which are to guide the exercise of the court’s jurisdiction under s 7.1 The cases tend to be fact specific. Acknowledging the paucity of authority dealing with the prerequisites to the exercise of jurisdiction under s 7 Whata J in Re Estate of McHugh proceeded on the basis that:2
(a) There must be a legal proceeding touching the validity of the will of a deceased person or the grant of administration;
(b)It must be necessary to grant an order for interim administration in order to preserve and to manage the assets of the estate pending the
resolution of the proceedings; and
1 Re Estate of McHugh [2015] NZHC 1271 at [11]; and see Laery v Grout [2014] NZHC 1881 at [9].
2 At [12].
(c) The proposed appointee must be suitably qualified to perform the tasks of the administrator and must have sworn to faithfully administer the estate.
The grounds advanced by the two applicants
First defendant’s application
[5] In her interlocutory application for orders, including for the appointment of a temporary administrator, the first defendant seeks an order that the plaintiff be removed and replaced by Public Trust, Deloitte, Grant Thornton Ltd or an administrator determined by the Court. The first defendant’s application is made on the grounds the plaintiff is hostile to the first defendant and the efficient administration of the estate requires his removal and replacement. The first defendant relies upon the Public Trust’s and Deloitte’s prior involvement and familiarity with the issues concerning the estate.
[6] The plaintiff opposes the first defendant’s application on the grounds:
(a) He is not hostile towards the first defendant and, as named executor in the will, he ought to administer the estate;
(b)He has the skills and experience to administer the estate competently and at minimal expense;
(c) The deceased would not have wanted his affairs managed by the
Public Trust or Deloitte; and
(d) The first defendant’s application will result in significant unnecessary
expense.
Plaintiff ’s application
[7] In his “cross-application” for appointment the plaintiff relies upon grounds
that mirror those in his opposition to the first defendant’s application.
[8] There is familial support for the plaintiff’s application. The second defendant is the deceased’s oldest child and only son. The second defendant opposes the application made by his sister, the first defendant. The second defendant’s position is that the first defendant’s claims are unfounded; her application will cause unnecessary expense to the estate and unnecessary delay; and there are no grounds to appoint a temporary administrator other than the named executor and plaintiff, Mr De Gregorio.
[9] The second defendant is not alone in his strong support of the plaintiff being appointed as a temporary administrator. Two of the deceased’s four daughters have sworn affidavits endorsing the plaintiff as the appropriate temporary (and permanent) administrator.
[10] The first defendant opposes the appointment of the plaintiff on the basis of his long-standing personal and professional relationship with the second defendant who is one of the beneficiaries of the estate and has had effective control, it is said, of many of the deceased’s assets over the past two years. Appointing the plaintiff as temporary administrator could risk bringing him into conflict, or the appearance of bringing him into conflict, with the second defendant. Additionally, the first defendant submits the plaintiff does not have the skills and experience to administer the estate competently.
Assessment
[11] It is not necessary to canvass the evidence in detail. But I must observe the affidavits reveal extreme hostility and mistrust on both sides. A senior officer with the Public Trust, Michael Pynenburg, has sworn an affidavit in reply to the evidence of the second defendant who criticises the Public Trust’s involvement in the management of the affairs of the deceased. The Public Trust was appointed to act as the deceased’s property manager in June 2016. Mr Pynenburg’s view is that it seems inadvisable for the Public Trust to be appointed in the place of the plaintiff given the negative feelings expressed by the second defendant toward the Public Trust, apparently backed by two sisters. Mr Pynenburg deposed:
Public Trust has no wish to be placed in the position where we are unable to deal with the estate due to hostility from the beneficiaries. Public Trust will however be happy to assist any executor with the information we have gathered during our appointment as Property Manager for [the deceased].
[12] I have no doubt that the prerequisites for the appointment of a temporary administrator are established.
(a) First there is a legal proceeding touching the validity of the deceased’s
will.
(b)The material before the Court satisfies me that it is not only clearly desirable in the interests of the estate but it is necessary to appoint an interim administrator to preserve and manage the assets pending resolution of the proceedings.
(c) I am satisfied that in light of the complexities and difficulties likely to confront an administrator the temporary administration of the estate should be put in the hands of an independent and experienced professional.
[13] I turn to discuss these three findings in greater detail.
Legal proceedings touching validity of will
[14] The deceased passed away on 15 December 2016. On 8 March 2017 the first defendant lodged a caveat to prevent probate being granted without notice to the first defendant. The plaintiff filed for probate in common form on 8 March 2017.
[15] In April 2017 the first defendant, and a grandson of the deceased, filed in the Family Court a claim under the Family Protection Act 1955. Orders and directions for the management of the various proceedings, including a foreshadowed counterclaim by the first defendant challenging the deceased’s will, were made on
15 May 2017. The first defendant filed her counterclaim on 11 August 2017. The counterclaim is advanced on the following bases:
(a) A comprehensive settlement deed was entered into by the testator, his children, and the respective directors of Philip Moore & Co Ltd, Philip Moore (Auckland) Ltd, Philip Moore & Co S.I. Ltd and Kyle Chemicals Ltd (the Surridge companies) in May 2016. The settlement deed was to resolve High Court and Family Court proceedings brought by the first defendant challenging enduring powers of attorney granted by the deceased in 2014. The Family Court appointed the Public Trust as property manager for the deceased in June 2016. The order tasked the Public Trust with implementing the settlement deed.
(b)The Public Trust’s ability to implement the settlement deed was impeded by the actions of the second defendant and his wife (Ms Pearson) specifically, their refusal to provide transaction information.
(c) The deceased lacked testamentary capacity as at January 2014. The
2014 will was therefore invalid.
(d)In addition, the deceased was vulnerable to, and subject to, undue influence by the second defendant and Ms Pearson to advance their individual or joint interests.
[16] The first defendant’s proceedings challenge not only grants made under the will but the validity of the will itself. Accordingly, the first of the jurisdictional thresholds for the grant of administration under s 7 of the Act is met.
Is temporary administration desirable?
[17] Mr Patterson, for the first defendant, described the estate as complex in the sense that it comprised operational companies. The estate comprises the following assets and includes several companies owned or controlled by the late Mr Surridge:
(a) NZ Cleaning Supplies Ltd (51 per cent shareholding); the first defendant holds the remaining 49 per cent and is currently the sole director;
(b)Philip Moore & Co Ltd (Wellington) (99.98 per cent shareholding); Ms Pearson, the second defendant’s wife, is currently the sole director;
(c) Philip Moore & Co (S.I.) Ltd (99.98 per cent shareholding); Ms Pearson is currently the sole director;
(d)Kyle Chemicals Ltd (10 per cent shareholding); the first defendant holds the remaining 90 per cent and is currently the sole director;
(e) other standalone companies; (f) Westpac bank accounts;
(g) a number of properties including a rental property in Taihape and two
Evans Bay properties; (h) shares;
(i) a boat; (j) chattels.
[18] Discord within the family as to management of some of the Surridge companies has created complexities. From June 2016 the Surridge companies were overseen by the Public Trust but since December 2016 there had been no management or oversight of the companies by the Public Trust as its role as property manager effectively ceased on the death of the late Mr Surridge. Mr Pynenburg’s evidence is that matters became more complicated in September 2016 when a new dispute arose involving two of the Surridge companies and raising issues about adherence to the settlement deed. In addition the Public Trust, while acting as
property manager, reported irregularities including, for example, unexplained
withdrawals from the deceased’s personal bank accounts of approximately $300,000.
[19] Even taking the point that it is not for an administrator to assume responsibility for the management and running of the companies, it is clear that temporary administration of this estate is necessary because temporary administration will provide effective oversight of the estate and provide the best means of protecting and preserving the assets of the estate.
Who should be appointed?
[20] Hostility as between administrators and beneficiaries is not of itself a reason for removal of an executor.3 The first defendant’s mistrust of the plaintiff, and her doubts about whether he will be fair and even-handed in the discharge of his responsibilities, is not determinative of either application. What is significant, in considering the proper administration of this estate, is the gross hostility manifested in the affidavit evidence of some of the beneficiaries towards others. Mr Pynenburg
deposes to the lack of co-operation from various parties in regard to the management of the deceased’s affairs and the Public Trust’s attempts to implement the settlement agreement which the deceased’s children and Surridge companies entered into in May 2016. The settlement deed remains only partially implemented.
[21] I have carefully considered all that has been advanced in support of the plaintiff’s application: the plaintiff’s generous offer to assume the responsibility for little or no fee, and the insistence of three of the five beneficiaries that their father’s wishes should be respected. The plaintiff was the deceased’s chosen and appointed executor.
[22] As against the arguments in favour of the plaintiff’s appointment the evidence shows the parties to be unlikely to agree, or incapable of agreeing, on very much at all. As well, the appearance of impartiality is an important factor in the
mix.4 It is not that the first defendant’s opposition and assertion of partiality prevails
3 Frickleton v Frickleton [2017] 2 NZLR 154 at [29(e)].
4 Laery v Grout, above n 1, at [18].
but that, in the end, it is unrealistic to expect a close friend of some members of a divided family to be able to efficiently discharge the role of administrator in such an acrimonious setting. Even accepting the plaintiff’s willingness and desire to act in the interests of the estate and “the legacy” of his friend, the late Mr Surridge, the Court can have little confidence that the plaintiff can achieve his objectives and that the estate can be administered effectively by him in the face of uncompromising hostilities within the family, including towards the plaintiff.
[23] The evidence satisfies me of the need to appoint an interim administrator who is independent of any individual family member’s personal or business (past and present) interests in order to secure the proper management of the assets of the estate.
[24] Clearly the Public Trust has a familiarity with the business operations of the companies comprising the estate. As I observed earlier the Public Trust identified issues relating to the deceased’s personal bank accounts under the control of Ms Pearson since the deceased lost capacity in 2014. The Public Trust identified numerous withdrawals which did not appear to relate to the deceased or his affairs. No explanation for the withdrawals has been forthcoming.
[25] The Public Trust met with the plaintiff’s legal adviser on 22 December 2016 and handed over important documentation and keys to the deceased’s property. Mr Pynenburg exhibited to his affidavit a note of the matters discussed with Mr Langford who was acting for the plaintiff. Since that time the Public Trust has awaited evidence of probate so that it could hand over the assets it holds in the way of funds to the executor. However, the Public Trust now suggests it would be inadvisable for it to be appointed due to the hostility from some beneficiaries. I agree with that outcome in this case, particularly where there are other candidates for appointment one of whom also has experience of the deceased and his estate.
[26] David Stuart Vance is a partner in the accountancy firm Deloitte in Wellington. He has consented personally, and on behalf of his firm, to being appointed a temporary administrator of the estate of the deceased and has sworn to faithfully administer the estate.
[27] Mr Vance is currently a joint administrator of an insolvent estate the assets of which include a number of share investments and loans. The principal asset is the largest apartment in a Wellington inner-city apartment building subject to structural and leaky building claims currently being pursued. The estate is one of the parties taking an active role in pursuing the litigation. Mr Vance deposes to the estate acting in concert with a number of other owners of the building via the body corporate, encouraging a change in solicitors to manage the litigation, gaining the support of the estate’s secured creditor and seeking a funder of the legal costs of the estate so that it can take an active part in the litigation.
[28] The particular advantage Mr Vance offers over Mr Downes, a chartered accountant and partner in the firm Grant Thornton Ltd, is that Mr Vance is in Wellington and Mr Downes practices in Auckland. Mr Downes deposed to understanding that his role as a temporary administrator would be to preserve the deceased’s assets. While Mr Vance did not make a similar deposition he has, of course, sworn to faithfully administer the Surridge estate if appointed.
[29] Mr Vance brings to the role his important familiarity with aspects of the Surridge estate. He attended to tasks arising from the settlement deed including valuing the shares which the deceased held in the Surridge companies (taking into account any claims by the first defendant and Ms Pearson in respect of unpaid salary and holiday pay as executive directors).
[30] The property valuations have been completed and distributed although the share valuations were not completed as at 22 June 2017. There are various issues around the preparation of those valuations which Mr Vance has taken up with the relevant family members. In his letter dated 22 June 2017 Mr Vance advised Ms Pearson and others the deceased’s death had impacted on the assignment he was carrying out for the deceased under the direction of the Public Trust. Pending appointment of an executor Mr Vance believed it was appropriate for him to continue with the assignment as required by the settlement deed. Mr Vance considered the deceased’s estate was the Deloitte client and the recipient of Deloitte’s attendances and efforts.
[31] I am quite certain Mr Vance should be appointed to administer the estate.
[32] I am mindful of the family’s concern about unnecessary expense to the estate
as a result of the first defendant’s application. I propose orders to meet that concern.
Result
[33] The first defendant’s application for an order appointing a temporary
administrator is granted.
[34] The plaintiff’s application for appointment of himself as temporary
administrator is declined.
[35] David Stuart Vance, partner, Deloitte, is to be appointed the temporary
administrator of the deceased’s estate.
[36] As to costs, the first defendant has succeeded in her application and has successfully opposed the plaintiff’s application. As costs follow the event the first defendant is prima facie entitled to costs. However, because these applications for temporary administration of the estate are determined against the backdrop of substantive challenges to the validity of the will and challenges to entitlement I
consider it appropriate5 to reserve, until the outcome of the consolidated
proceedings, the issue of costs and whether or not they are to be borne by the estate or the opposing parties personally.
[37] The following orders and directions are made:
(a) Under s 7 of the Administration Act 1969 I appoint David Stuart Vance as temporary administrator of the estate of the late Wilbur George Surridge and to hold that appointment until he is
discharged or removed under s 21 of the Administration Act.
5 As did Venning J in Laery v Grout, above n 1, at [36].
(b)Pursuant to s 7(2) of the Administration Act David Stuart Vance is entitled to deduct from the estate his reasonable remuneration and expenses incurred in administering the estate.
(c) Leave is reserved to the temporary administrator to file in the High Court an application for directions where it appears that the costs of the administration are unreasonably contributed to by any particular party or parties.
(d) Leave is reserved to the parties to apply further.
Karen Clark J
Solicitors:
Langford Law, Wellington for Plaintiff
kplegal Ltd, Auckland for First Defendant
PH Surridge, Wellington for Second Defendant
3
2
0