Garnham v Scott
[2018] NZHC 2536
•28 September 2018
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2018-485-448
[2018] NZHC 2536
UNDER sub-pt 5 of pt 6 of the Property Law Act 2007 and pt 12 of the High Court Rules 2016 IN THE MATTER
of the Estate of Mary Patricia Scott-Smith
AND
IN THE MATTER
of an application for the sale and division of property and other orders
BETWEEN
MICHAEL GARNHAM
Plaintiff
AND
PAUL SCOTT and KESINEE SCOTT
Defendants
Hearing: 21 September 2018 Appearances:
Mr M Garnham for himself (in his capacity as executor of the estate of the late Mrs Mary Patricia Scott-Smith)
Ms K Hoult for Ann Scott
Judgment:
28 September 2018
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
[1] The plaintiff is the executor of the estate of the late Mary Patricia Scott-Smith. In this proceeding he sues the deceased’s son, Mr Paul Scott, and Mr Scott’s estranged wife, Mrs Kesinee Scott. He applies for summary judgment pursuant to pt 12 of the High Court Rules 2016. He seeks orders pursuant to sub pt 5 of pt 6 of the Property Law Act 2007 for the sale of a property in Strathmore, Wellington registered in the names of the deceased, Mr Scott and Mrs Scott as tenants in common in equal
GARNHAM v SCOTT and SCOTT [2018] NZHC 2536 [28 September 2018]
shares, on terms which would enable him, as the executor of the estate, to retain the entire net proceeds of sale.
[2] In my judgement, the plaintiff is entitled to the orders he seeks (with relatively minor adjustments).
[3] The plaintiff commenced this proceeding on 21 June 2018. Service of the originating documentation proved troublesome. Service on Mr Scott was effected by personal service in the usual way on 27 June 2018. However, Mrs Scott lives abroad and the plaintiff had no knowledge of her exact whereabouts. He applied for and obtained an order for substituted service. The Court’s order required him to serve her by three means — first by service on Mr Scott; second by service at her last known address in this country being the property which is the subject of this proceeding; and third by a post on her facebook page. By these methods, substituted service was effected by 1 August 2018. Neither Mr Scott nor Mrs Scott has entered an appearance or taken any other step in the proceeding.
[4] In his submissions, Mr Garnham took the Court through the principles which apply to applications by plaintiffs for summary judgment.
[5] However, this, as I have already said, is a case in which the defendants have not entered appearances. In such circumstances, it is clear, in my view, that it is to be treated as an application for judgment by default pursuant to sub-pt 2 of pt 15 of the Rules.
[6] A question arises as to the category of default judgment being sought. To expand briefly, the Rules distinguish between two categories of default judgment:
(a)where the plaintiff seeks to recover specific land or chattels, and money claims for liquidated amounts (amounts that can be calculated with certainty); and
(b)money claims for unliquidated amounts.
[7] With respect to the former category, a plaintiff need only establish service and the fact that the defendant has not entered an appearance to obtain judgment — generally across the registry counter.
[8] As to the latter category — essentially because, by definition, they involve an element of uncertainty as to quantum — the plaintiff must prove the amount to which he, she or it is entitled, generally by affidavit.
[9] On its face, this is a claim for land. The plaintiff is seeking an order for the sale of a property registered in the names of three parties and the payment of the net proceeds of sale to one of those parties. On that basis, Mr Garnham might have contended that all that was necessary for him to do was to prove service.
[10] However, quite rightly in my view, he has recognised that, behind the prayer for relief in this case, are claims in equity for the imposition of constructive trusts, and that the judgment sought would involve determining that the defendants, as the registered owners of two one third interests in the property, hold those interests in trust for the deceased — and therefore for Mr Garnham as her personal representative. In such circumstances, he has placed before the Court comprehensive affidavit evidence going to the basis upon which those claims are made.
[11] In the circumstances, it is unnecessary to go into detail in describing that evidence.
[12] In summary then, Mrs Scott-Smith and her late husband were astute property investors who bought and sold various properties in Wellington over a number of years commencing in about 1971. On her husband’s death, Mrs Scott-Smith became the owner of their properties either by reason of survivorship or pursuant to her husband’s testamentary dispositions. The evidence is that in 2002 Mrs Scott-Smith realised
$500,000 from the sale of an unencumbered property in Wellington. She utilised
$257,000 of this to buy the Strathmore property that is the subject of this proceeding. This too was unencumbered. Following its acquisition, the Strathmore property was registered in her name. Mrs Scott-Smith had three children, Mr Scott, and two daughters, Ann Scott and Janette Scott. Mr Scott and, following his marriage,
Mrs Scott, lived with Mrs Scott-Smith for significant periods of time after her purchase of the Strathmore Property. There is evidence — including medical evidence
— that during this time Mrs Scott-Smith’s physical and mental health began to deteriorate, and of concerns being expressed — I put it no higher than that — that Mr Scott and Mrs Scott took advantage of Mrs Scott-Smith’s deteriorating health by, for example, living in the property rent free and accepting substantial payments from her.
[13] In January 2008 Mrs Scott-Smith sold the Strathmore property for $453,000. She sold it to the trustees of a trust by the name of the Conway Trust. Together with Mr and Mrs Scott, she moved to Thailand which is apparently Mrs Scott’s birthplace. At this point the evidence indicates that she should have had assets with a value of at least $500,000. There is evidence that while she was in Thailand a significant proportion of her wealth was transferred to accounts in the name of Mr and Mrs Scott. The evidence contains no explanation for why this might have happened. I draw no particular inferences from this. It is conceivable that there is an innocent explanation. But the situation undoubtedly calls for an explanation.
[14] Seemingly, Thailand did not suit Mrs Scott-Smith, and she returned to this country in March 2009.
[15] It appears that, on her return, the Strathmore property became available for her to re-purchase. As I understand it, it was not on the market, but Mrs Scott-Smith became aware of its availability and agreed to re-purchase it from the trustees of the Conway Trust for the same sum she had sold it to them a year earlier. This seems curious in a range of ways — curious that the property should become available on her return to New Zealand; curious that she should have become aware of this when it was not on the market; and curious that in a rising market she was able to acquire it at the price she had sold it for a year earlier.
[16] Given Mrs Scott-Smith’s financial position immediately after having sold the Strathmore property in January 2008, it is also surprising that, when she came to re-purchase the property, she appears to have had only $200,000 with which to do so. That is clear from the fact that she contributed that amount to the purchase price and
the balance was provided by way of a loan from the ANZ Bank who took a first registered mortgage over the property, coupled with the fact that her financial records apparently show that she had no other assets.
[17] On its re-purchase, the property was registered in the names of Mrs Scott-Smith and Mr and Mrs Scott as tenants in common in three equal shares, though there is no evidence to suggest that Mr and Mrs Scott made any financial contribution to the acquisition.
[18] Finally, some months after Mrs Scott-Smith arranged to re-purchase the Strathmore property, the borrowing secured over it was increased by $30,000 apparently to enable Mrs Scott-Smith to pay that amount to Mr Scott.
[19] Against that background, the plaintiff submits that on the balance of probabilities Mrs Scott-Smith’s wealth over and above the $200,000 which she used to re-purchase the Strathmore property was transferred to Mr and Mrs Scott and that as a result they are indebted to her estate for a substantial amount. Moreover, Mr Garnham submits that as Mr and Mrs Scott made no contributions themselves to the re-purchase of the Strathmore property, the cash component of the funds for its acquisition having come from Mrs Scott-Smith alone, Mr and Mrs Scott should be regarded as constructive trustees for Mrs Scott-Smith’s estate of their legal interests in the property.
[20] It must of course be acknowledged that the Court has heard from only one side, and that it may be that Mr and Mrs Scott could have put a different complexion on things had they chosen to defend this proceeding. But they have elected not to do so, and, on the evidence before the Court, I am satisfied that it is open to me to conclude that the plaintiff has made out his claim and that the defendants have no defence.
[21] In her will dated 22 October 2009 Mrs Scott-Smith effectively left all of her property to Ann Scott. Her other daughter, Jannette Scott, has apparently commenced proceedings in the Family Court pursuant to the Family Protection Act 1955 for provision from the estate. That being so, Mr Garnham, as the executor of the estate,
is effectively precluded from distributing the estate until those proceedings are disposed of.
[22] I raised this issue with Mr Garnham during the course of the hearing and I record in this judgment the undertaking that he volunteered to the Court that if the orders sought were made and he received the net proceeds of sale of the Strathmore property, those proceeds would not be distributed except pursuant to an order either of this Court in this proceeding or the Family Court in the Family Protection Act proceeding.
[23] That satisfies me that the orders sought can be made without prejudicing any entitlement which Mr Scott in particular may have to challenge them. I record that in reaching that conclusion I have had regard to the considerations identified in s 342 (a)–(e) of the Property Law Act.
[24]For those reasons, I make the following orders:
(a)an order pursuant to s 339(1)(a) of the Property Law Act 2007 for the sale of the property situated at 22 Monorgan Road, Strathmore, Wellington described in CT WN514/143, Wellington Land Registry;
(b)an order that the Registrar of the High Court at Wellington be authorised to sign a real estate agency contract, agreement for sale and purchase, memorandum of transfer and/or LINZ dealing authority, by executing an authorised nominating authority form to effect the transfer of the property, or other documents so referred to;
(c)an order that the net proceeds of the sale of the property after repayment of the ANZ Bank mortgage, real estate commission and marketing costs and legal costs associated with the sale and conveyancing, are to be paid to the plaintiff in his capacity as the executor of the estate of the late Mary Patricia Scott-Smith, and that the plaintiff is to hold those proceeds in his trust account pending further order of this Court or of the Family Court in the proceedings commenced in that Court by
Jannette Scott under the Family Proceedings Act 1955 against the estate of her late mother.
[25]The plaintiff seeks costs on a 2B basis in respect of this proceeding.
[26] There is an issue in relation to this which I did not raise with Mr Garnham during the course of the hearing.
[27] In McGuire v The Secretary for Justice1 the Court of Appeal determined that a solicitor acting for himself in proceedings cannot recover costs.
[28] It occurs to me that there may be a distinction to be drawn between a situation in which a solicitor is acting for himself in his personal capacity (such as was the case in McGuire) and a situation in which a solicitor happens to be the sole executor of an estate and who acts for the estate in litigation. I do not think it would involve dancing on a pin head to contend that in the latter situation the solicitor is acting in different capacities, one as the executor of the estate and the litigant, and one as the solicitor, and that the McGuire reasoning does not apply.
[29] In any event, if Mr Garnham wishes to pursue his claim for costs, he may file a memorandum addressing the issue that I have highlighted. If so, he is to file that memorandum within fifteen working days. I will deal with it on the papers.
[30] Finally, I mention that Mrs Hoult, counsel for Ann Scott, participated in the hearing by telephone. She did not make submissions, and indicated that her client neither supported nor opposed this summary judgment application.
Associate Judge Johnston
Solicitors:
Mike Garnham, Wellington Neeman Peebles Hoult, Hamilton
1 McGuire v The Secretary for Justice [2018] NZCA 37.