Estate of Carson

[2017] NZHC 3144

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2016-442-78 [2017] NZHC 3144

IN THE MATTER OF

the Trustee Act 1956, section 53 of the

Administration Act 1969 and the Family
Protection Act 1955

AND

IN THE MATTER OF

an originating application by ROBERT ALAN LANE and ANISSAS JEAN BAIN in their capacity as trustees and executors of the estate of the late DAVID WAYDE CARSON

Trustees

Hearing:

15 November 2017

Telephone conference: 13 December 2017

Appearances:

J V Ormsby for the Applicant

G F Kelly and K H Lawrence for the Trustees of the Carson estate

P F Whiteside QC to assist the Court
R J Buchanan for M Sutherland
N Laing for Mr Kremmer

Judgment:

14 December 2017

JUDGMENT OF CULL J

[1]      This case concerns the estate of a father, who made no provision for his four natural children, with whom he had no contact since his separation from their mother in 1974. The deceased’s estate is substantial, due to a lotto win during the deceased’s

life time.   His four children had not been told about his death, at the deceased’s

Estate of DW Carson [2017] NZHC 3144 [14 December 2017]

instructions, but the deceased established a trust, into which the residue of his estate is to be transferred.

[2]      The executors of the late Mr Carson’s (the deceased) estate filed an originating application, seeking the Court’s directions as to their obligations to locate the whereabouts of Mr Carson’s natural children.  They seek the Court’s directions as to the information they are required to provide to them. This case brings into sharp relief the obligations of executor/trustees to notify potential claimants under the Family Protection Act 1955, when those potential claimants are discretionary beneficiaries as part of a larger class of beneficiaries, under a family trust.

[3]      Mr Carson had four children by his first marriage but did not make any provision for them in his will. Further, he instructed his executors and trustees that he did not want his siblings nor his natural children to be told about his death.  Prior to his death, Mr Carson settled the Carson Family Trust (the Trust), under which his children, together with his stepchildren and grandchildren are discretionary beneficiaries.  Under his will, and after specific gifts are paid, the residuary estate passes to the Trust.

[4]      This matter came to a hearing, at which counsel for the trustees of the Trust, Mr Kelly and counsel appointed to assist the Court, Mr Whiteside QC, addressed the Court on the implications of Sadler v Public Trust1  and whether s 44 of the Family Protection Act applies.

[5]      Subsequent to the hearing and prior to the release of a judgment, there were further developments. These are addressed below as part of the background facts. As a result of these developments, further submissions were filed and a telephone conference was convened with counsel, enabling consent orders to be made.

Background facts

[6]      Mr Carson and his wife separated in 1974. Mr Carson’s wife was left with the care of the four children.  It appears there followed little contact between Mr Carson

1      Sadler v Public Trust [2009] NZCA 364, (2009) 28 FRNZ 474.

and  his  children.    No  details  are  available  as  to  any maintenance  provided  by

Mr Carson or the extent of contact between him and the children.

[7]      The children are all now adults. At the time of the hearing, the following was known about the children:

(1)Toni Toomey lives in Perth with her partner and has two boys in their early 20s.

(2)      Keri Lea Crossan moved to the Gold Coast with her mother after the

Christchurch earthquakes. There was no other information.

(3)Wayde Carson Jnr moved to live on the Gold Coast with his mother after the earthquakes.

(4)Melanie Brown also went to the Gold Coast.  She has two children, a girl and a boy.   Both their ages, and whether she has a spouse, are unknown.

[8]      Mr Carson established the Trust on 18 November 2014.  The children are not beneficiaries of Mr Carson’s will but are among the discretionary beneficiaries of the Trust.2   On 28 June 2015 Mr Carson died.  Probate was granted on 22 July 2015.

[9]      Mr Carson specifically requested that no death notice be published and through his  older  brother,  the  trustees  were  informed  that  Mr Carson  had  given  strict instructions that other family members were not to be contacted about his death.  In particular, he did not want his brother and sister nor his natural children to be told about his death. The trustees published a notice to creditors in the New Zealand Herald

and Nelson Mail on 23 September 2016, however, the children were not formally

2      The Trust has a number of discretionary beneficiaries, including Lincoln University, his children, stepchildren, grandchildren, great grandchildren, spouses or partners of children or grandchildren, nephews and nieces, trustees of other trusts for the beneficiaries, any nominated charity and any other persons, trusts or entities as determined by the trustees. A memorandum of guidance for trustees of the Trust records the Trust was “set up for the general purpose of ensuring that members of [Mr Carson’s] family are able to benefit from the capital and income of the Trust from time to time.” In addition, it was Mr Carson’s wish that for so long as possible “the Trust assets be retained and used in the furtherance of research and development of the Galloway breed of cattle”.

notified of Mr Carson’s death. However, the executors attempted to contact one of his children, Toni, for whom they had email contact details on 7 July 2016 but received no reply.

[10]     No funds have yet been distributed from the estate.  The children are eligible to claim against Mr Carson’s estate under the Family Protection Act.  The Family Protection Act allows claims by family members who consider the terms of the will do not provide adequate provision for the proper maintenance and support of the family members.3   In the absence of hearing from the four natural children, who are potential claimants or of receiving notice of any Family Protection Act claims, the executors will transfer the estate residue to the Trust, under which the natural children are part of the wider class of discretionary beneficiaries.  On the transfer of the estate residue to the Trust, the rights of the four natural children under the Family Protection Act will be extinguished.

[11]     This proceeding commenced by the trustees making this application to the Court for directions under s 66 of the Trustee Act 1956, asking whether they are required to notify the children of Mr Carson’s death.

Subsequent developments

[12]     Before a judgment from the 15 November 2017 hearing was issued, the executors advised the Court’s registrar that one of the deceased’s daughters had made contact with them on 7 December 2017.   Keri Lea Crossan contacted Mr Lane by telephone and subsequently by email, as a result of which, she learnt of her father’s death and advised Mr Lane of the contact emails of her three siblings.

[13]     The executor/trustees, through their solicitor, have advised the Court that the executors’ position has changed since the hearing. They accept that, now category (b) outlined in Sadler applies: the duty of even-handedness extends to ensuring that an executor does not actively and dishonestly conceal relevant material about the estate

from potential claimants who seek information about the estate.4     The executors

3      Family Protection Act 1955, s 4(1).

4      Sadler, above n 1, at [41(b)].

acknowledge that they will answer any queries openly that arise in relation to the estate. They have already confirmed the fact of her father’s death to Keri Lea and with the  other  contact  information  now  available,  they  will  notify the  other  siblings accordingly.

[14]     The  executors  still  seek  the  urgent  assistance  of  this  Court,  as  to  their obligations in these changed circumstances, and the extent of the terms of directions originally sought.

[15]     As a result of Keri Lea’s contact with Mr Lane, she has informed him that the eldest of the deceased’s children, Toni, has been diagnosed with cancer. This diagnosis prompted Keri Lea to attempt to contact her late father and her inquiry led to the identification of Mr Lane as an executor of his estate.

The changed positions

The executors and trustees of the Trust

[16]     The positions  of the executor/trustees  and the  trustees  of the Trust  have changed, in light of Keri Lea’s contact with Mr Lane.   Mr Lane and Ms Bain are trustees/executors of the deceased’s estate, as well as trustees of the Trust (by virtue of P & M Trustee (Carson) Ltd), along with Ms Sutherland.

[17]     At the hearing, the trustees of the Trust submitted that category (d) in the Court of Appeal’s decision of Sadler applied to the executor/trustees and that there was no duty to notify beneficiaries.  Further, it was the trustees’ position that s 4(4) of the Family Protection Act did not apply, because there were no minor or disabled potential claimants.

[18]     Now that the children of the deceased have been notified, the trustees quite properly accept that category (b) of Sadler applies.  Further, adopting Mr Whiteside’s submission at the hearing, the trustees provided a list of the items of information and documents, which should be disclosed to the deceased’s natural children.

[19]     The trustees  also seek  a direction that  six  months after the provision of information to the children, the trustees can transfer the estate residue to the Trust, provided no Family Protection Act proceedings have been filed.

Toni’s health

[20]     Mr Ormsby for the executors raises concerns about Toni’s health.  Noting that Toni is currently a discretionary beneficiary of the Trust, the executors have expressed a wish to make inquiries as to her position.   If funds would assist, they seek a distribution of approximately $1 million to the Trust, some of which may then be able to be used, at the Trustee’s discretion, to alleviate Toni’s circumstances.  They note that Toni may well elect in the future to make a claim against the estate, but in the meantime, funds should be expended to assist her, if required.

The potential claimants (the natural children)

[21]     Mr Whiteside QC was appointed by the Court to assist. He undertook his role in assisting the Court, by presenting submissions, supporting the proposition that the executors needed to take steps to locate the deceased’s natural children, so as to notify them of his death. The reason for this, as he submitted, is that:

That would have the consequence that the children could consider whether they wished to make a claim under the Family Protection Act.

[22]     His position at the hearing had been that category (c) in Sadler was the appropriate category, for the imposition of a duty on the trustees to inform the natural children as potential claimants, of the fact of their father’s death.  He also submitted that s 4(4) of the Family Protection Act applied, to ensure the deceased’s grandchildren were protected.

[23]     With the subsequent developments in this case, he advanced three matters:

(1)The information supplied to the children should include a copy of this judgment.

(2)As he had submitted at the hearing, s 4(4) of the Family Protection Act now comes into play, in relation to the protection of any of the deceased’s grandchildren.  For that reason, he seeks a direction to the executors, to ascertain:

(a)      the dates of birth of any grandchildren of the deceased;

(b)      where they are living and what they are currently doing;

(c)      whether there are any special needs of any grandchild; and

(d)to make inquiry of their parents so as to ascertain whether the trustees should exercise their discretion under s 4(4) and make any application on the grandchildren’s behalf.

(3)At the hearing, name suppression had been sought by the trustees of the Trust and given the recent developments, this issue is now redundant, because contact has been made with the natural children.

The legal principles

[24]     It is appropriate to set out the relevant legislation and principles from the

Sadler decision, as they now are the focus of this decision.5

[25]     A person may make a claim under the Family Protection Act where:6

4(1)   If any person (referred to in this Act as the deceased) dies, whether testate or intestate, and in terms of his or her will or as a result of his or her intestacy adequate provision is not available from his or her estate for the proper maintenance and support of the persons by whom or on whose behalf application may be made under this Act, the court may, at its discretion on application so made, order that any provision the court thinks fit be made out of the deceased’s estate for all or any of those persons.

[26]     Under s 4(4) of the Family Protection Act 1955, an administrator of an estate may apply on behalf of particular classes of people.  In this case, the relevant class is the grandchildren  of the deceased  and/or  any of them  who  are minors or have disabilities:

4(4)   An administrator of the estate of the deceased may apply on behalf of any person who is not of full age or mental capacity in any case where the person might apply, or may apply to the court for advice or directions as to whether he ought so to apply; and, in the latter case, the court may treat the application as an application on behalf of the person for the purpose of avoiding the effect of limitation.

[27]     The reference throughout this decision to Sadler requires explanation.7     In Sadler, the Public Trust was the executor of an estate, where the testator had left his entire estate to his partner.   Probate was granted and the estate was distributed.

Ms Sadler was the testator’s estranged daughter and she did not learn of his death until after the time limit prescribed by the Family Protection Act had expired.  She brought proceedings against the Public Trust alleging breach of the fiduciary duty of even- handedness because she had not been notified of his death.  Similar to this case, the testator had given instructions he did not want Ms Sadler or her sister informed on his death and no death notice was placed in newspapers but an advertisement to creditors was published.

[28]     The Court of Appeal held the current law in New Zealand prescribes a number of categories:8

(a)      A duty of even-handedness extends to potential claimants against an estate where an executor is aware that they wish to make a claim.

(b)The duty extends to ensuring that an executor does not actively and dishonestly conceal relevant material about the estate from potential claimants who seek information about the estate.

(c)      The questions of whether the duty might extend to those of whose claim the executor ought to be aware and also whether that duty would extend to informing them of the fact of death are left open.

(d)There was no general duty on an executor to advertise the fact of death or to inform all potential claimants of the fact of death.  That applied even where there might be a suspicion (but not sufficient to bring the potential claimant within category (c) above) that a potential claimant might wish to make a claim.

[29]     The  Court  of Appeal  concluded  there  were  only  grounds  for  suspicion

Ms Sadler might make a claim. She did not come within categories (a) or (c) and there was no concealment in terms of (b).  The duty of even-handedness therefore did not arise.

[30]     In this case, particularly with contact having now been made by the deceased’s daughter, who was specifically making inquiry of the executors about her father, the issue of whether the executors should make contact with the deceased’s natural children is redundant.  The executors and trustees of the Trust properly accept that category (b) now applies and are fully committed to providing the information, as suggested by Mr Whiteside at the hearing and with the suggestions subsequently made at the telephone conference.

The issues

[31]     The issues at the hearing concerned which of the Sadler categories did the deceased’s children fall within and  whether s 4(4) of the Family Protection Act applied, requiring the executors to give notice to the children.

[32]     As a consequence of the subsequent developments, the two issues now alive in these proceedings are:

(1)      What information should the executors supply to the children?

(2)How long, after this information has been supplied, must they wait before distributing the estate?

Decision

[33]     The subsequent events have overtaken the hearing, with all parties accepting that the Sadler category (b) applies and that the executors should supply information to the deceased’s natural children now they know of their father’s death.

[34]     There has also been agreement by the parties on the following information to be supplied to the deceased’s children.

(1)      a copy of the deceased’s death certificate;

(2)      copies of his will and probate;

(3)      a list summarising the estate assets and liabilities;

(4)a copy of the Deed establishing the Trust, the memorandum of guidance and the names of the trustees; and

(5)      advice that the children take independent legal advice.

[35]     During the telephone conference Mr Whiteside sought one further addition and that was his initial recommendation that the children should be provided with a copy of this judgment, which the parties also accepted.  I also consider that the children should be advised that they are entitled to make inquiries of the trustees about the Trust.

[36]     All parties also accepted Mr Whiteside’s submission, that the executors should make inquiries about the deceased’s grandchildren, to enable the executors to make their assessment under s 4(4) of the Family Protection Act.   The nature of those inquiries form part of the directions to the executors at the end of this judgment.

[37]     There are two further remaining questions.  The first is how long should the trustees wait before distributing the estate to the Trust.   Mr Kelly submits, as did

Mr Whiteside at the hearing, that once the information is provided to the four natural children, the executors can transfer the residuary estate to the Trust, after the expiration of six months, providing that no Family Protection Act claim has been filed.  All parties were in agreement.

[38]     The second question was whether, in light of Toni’s health needs, the executors could safely distribute $1 million to the Trust, enabling the trustees to exercise their discretion to make such distributions as are appropriate, to alleviate Toni’s circumstances if required. The executors considered that Toni’s circumstances would constitute a highly relevant consideration for the trustees of the Trust.  Again, all parties were in agreement that this would be appropriate, given the size of the estate and the health needs of Toni at the present time.

Result

[39]     By consent I make the following orders:

(1)The trustee/executors of the deceased’s estate shall disclose to the four natural children of the deceased, the following information:

(a)      a copy of the deceased’s death certificate;

(b)      copies of his will and probate;

(c)      a list summarising the estate assets and liabilities;

(d)a copy of the deed establishing the Carson Family Trust, the memorandum of guidance and the names of the trustees; and

(e)      advice that the children take independent legal advice urgently;

(f)       advice that they are entitled to make inquiries of the trustees about the trust; and

(g)      a copy of this judgment.

(2)      The executors are directed to:

(a)      ascertain the following information:

(i)       the dates of birth of any grandchildren of the deceased;

(ii)      where they are living and what they are currently doing;

(iii)     whether there are any special needs of any grandchild;

and

(iv)to  make  inquiry  of  their  parents  so  as  to  ascertain whether the trustees should exercise their discretion under   s 4(4)   and   make   any   application   on   the grandchildren’s behalf.

(b)hold the residue of the deceased’s estate for six months, after the above information  has been provided to the deceased’s natural children, at the expiration of which, the executors can transfer the estate residue to the Trust, provided that no Family Protection Act claim has been filed; and

(c)      transfer a sum of money, the amount to be at their discretion but no more than $1 million, to the Trust, to enable the trustees of the Trust  to  exercise  their  discretion  as  to  any  appropriate distributions to be made, to meet the immediate needs of any of the deceased’s natural children.

Cull J

Solicitors:

Pitt & Moore, Nelson

Greg Kelly Law Limited, Wellington
Buchanan Gray Lawyers, Wellington

Duncan Cotterill, Nelson