Hamilton v Kirwan

[2020] NZHC 2149

NOTE: PURSUANT TO S 169 OF THE FAMILY PROCEEDINGS ACT 1980, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B, 11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-000322

[2020] NZHC 2149

UNDER

AND

the Family Protection Act 1955 and the Law Reform (Testamentary Promises) Act 1949

IN THE MATTER OF

AND

The Estate of DESMOND WAYNE HETHERINGTON

IN THE MATTER OF

the COVE ROAD TRUST

BETWEEN

KEELEY FLEUR HAMILTON

Plaintiff

AND

DESMOND MICHAEL KIRWAN

First Defendant

CRAIG DESMOND HETHERINGTON

Second Defendant

Hearing:

25 – 29 May 2020 (Further submissions received 5, 12, 16, 23, 24

and 25 June 2020)

Appearances:

L Kearns and J S Langston for the Plaintiff P Moodley for the First Defendant

G C Jenkin for the Second Defendant

Judgment:

24 August 2020

JUDGMENT OF WOOLFORD J

This judgment was delivered by me on Monday, 24 August 2020 at 3:30 pm pursuant to r 11.5 of the High Court Rules.

HAMILTON v KIRWAN & ANOR [2020] NZHC 2149 [24 August 2020]

Introduction

[1]    The plaintiff, Keeley Fleur Hamilton, is contesting the lack of sufficient provision for her in the will of her late father, Desmond Wayne Hetherington (the deceased), dated 30 May 2016, and her exclusion as a beneficiary of the Cove Road Trust (the Trust), which the deceased settled on the same day.

[2]    In about 1984, the deceased purchased, in his own name, a 58.9450 hectare rural block of land at 1758 Cove Road, Mangawhai (the property). There is a small bach on the top of the  property  which  the  deceased  used  as  a  holiday  home.  Ms Hamilton has lived on the property since 1997, initially in the deceased’s bach. Since about 2000, she and her partners have made improvements to the property, including building a dwelling house near the bach and three cabins near the road at the bottom of the property, from which she operates a small hairdressing business and garden centre. Ms Hamilton says she only expended money to build the house and cabins and to make other improvements to the property on assurances from the deceased that he would leave her a one-third share in the property when he died.

[3]    In an earlier will dated 1 September 2015, the deceased had directed that after his death the property was to be transferred to Ms Hamilton and her two brothers as tenants in common in equal shares. He also directed that his residuary estate be divided equally between the three children.

[4]    However, eight months later, on 30 May 2016, the deceased settled the Trust, under which Ms Hamilton’s two brothers (but not Ms Hamilton) were beneficiaries together with the deceased’s grandchildren. The deceased transferred the property to the Trust thereby taking it out of his estate. In a will, also dated 30 May 2016, the deceased again directed that his residuary estate be divided equally between the three children.

[5]    The deceased died on 1 January 2017. Before his death, he resigned as sole trustee of the Trust and appointed one of his two sons, Craig Desmond Hetherington, as sole trustee.

[6]    On 26 April 2017, Ms Hamilton filed proceedings in the Family Court challenging the 2016 will and the Trust. They were later transferred to the High Court.

Parties

[7]    The plaintiff, Ms Hamilton, is one of three adopted children of the deceased, who died on 1 January 2017, and his former wife, Pamela Gail Bockett (formerly Hetherington). The first defendant, Desmond Michael Kirwan, is the executor of the deceased’s will dated 30 May 2016. He is a childhood friend of the deceased, living near Levin. The second defendant, Mr Craig Hetherington, is one of two sons of the deceased and Ms Bockett. He is the sole trustee of the Trust and lives in Auckland. The other son of the deceased and Ms Bockett is Kane Michael Hetherington, who lives in Australia. The deceased was survived by his second wife, Marlena Burkall Hetherington (formerly Cook). The deceased’s long-time lawyer was Murray Lawrence (Tim) Schnauer of the law firm Brookfields.

Factual background

[8]    On 28 February 1966, the deceased married Ms Bockett. Together they adopted three children — Mr Craig Hetherington (the second defendant), Mr Kane Hetherington and Ms Hamilton (the plaintiff).

[9]    On 28 October 1982, the deceased executed a will whereby he left his estate to his then wife, Ms Bockett.  Under the terms of the 1982 will and in the event that  Ms Bockett predeceased him, the residuary of the deceased’s estate was left equally to his three children with a substitutionary gift over to the children of any child who predeceased him.

[10]   In about 1984, the deceased purchased, in his own name, a 58.9450 hectare fee simple property at 1758 Cove Road, Mangawhai.

[11]   On 18 May 1992, the deceased separated from Ms Bockett. On 2 May 1994, the deceased and Ms Bockett entered into a separation and matrimonial property agreement in terms of which the deceased retained sole ownership of the property.

Sometime afterwards, they recommenced their relationship before finally separating in about 2000. Their marriage was subsequently dissolved on 23 June 2003.

[12]   On 11 October 1996, the deceased revoked his 1982 will by making a new will whereby he left the residuary of his estate equally to his three children with a substitutionary gift over to the children of any child who predeceased him.

[13]   In December 1997, Ms Hamilton commenced residing on the property. Since that time, she  has continuously resided  on the property, with  the  exception of a  six month stay at Ruakaka in 1999. In about 2000, Ms Hamilton built a dwelling house on the property in which she resided with her then husband, Glenn William McConchie. Ms Hamilton borrowed $20,000 from the deceased to assist with construction of the dwelling house. The deceased in turn borrowed the money from Brookfields’ nominee company.

[14]   At about the same time, the deceased commenced a de facto relationship with Ms Marlena Hetherington (formerly Cook).

[15]   In about 2002, Ms Hamilton and her then partner, Craig Allen Pickering, carried out renovations to the dwelling house. The deceased helped out by building a fireplace.

[16]   In February 2007, Ms Bockett issued proceedings against the deceased in the Family Court in which she applied to set aside the earlier agreement dated 2 May 1994. In particular, she wanted the deceased to transfer the property into a trust of which he, the children and grandchildren were beneficiaries. However, the deceased refused to do so, and Ms Bockett dropped the proceedings by signing a settlement agreement dated 14 May 2010.

[17]   On 24 November 2010, the  deceased’s  lawyer,  Mr  Schnauer,  wrote  to  Ms Hamilton and asked her to pay an occupation fee of $50 per week. Mr Schnauer said that the deceased would apply the funds in the first instance to the monies still owing under the $20,000 loan. Then on 23 December 2010, Mr Schnauer wrote again to Ms Hamilton and asked her to leave the property and remove all structures and

buildings installed by her as she had failed to pay the occupation fee. It does not, however, appear that Ms Hamilton received Mr Schnauer’s second letter. No action was ever taken by the deceased to evict Ms Hamilton from the property.

[18]   In April 2011, the deceased entered into a pre-nuptial relationship property agreement with Ms Marlena Hetherington in which she agreed she would have no interest in the property. They were then married in Las Vegas on 22 June 2011.

[19]   In 2013, Ms Hamilton and her then partner, Shane Mathew Hamilton, commenced building a hairdressing salon and gift shop, a garden centre and spiritual centre on the property. The deceased helped Ms Hamilton with some of the work, including tiling one of the cabins.

[20]   On  23  April  2015,  the  deceased  was  diagnosed  with  liver  cancer.   On  1 September 2015 he made a new will (the 1996 will having been revoked by his marriage to Ms Marlena Hetherington) whereby he left a legacy of $125,000 to his second wife, Ms Marlena Hetherington. He directed that the property was to be transferred to Ms Hamilton and her two brothers as tenants in common in equal shares. He also directed that the residuary of his estate be divided equally between the three children with a substitutionary gift over to the children of any child who predeceased him.

[21]   On 30 May 2016, the deceased revoked the 2015 will by making a new will whereby he gave a legacy of $100,000 and a quarter share of any monies held in KiwiBank accounts to his second wife, Ms Marlena Hetherington. He also gifted the property to the trustee of the Trust in the event that he still, at the time of his death, remained an owner of the property and left the residuary of his estate equally to the three children with a substitutionary gift over to the children of any child who predeceased him. On the same day, he also settled the Trust by executing a Trust Deed dated 30 May 2016. As sole trustee, he (or his successor) had the power to appoint and remove beneficiaries. Also on 30 May 2016, the deceased executed a Deed of Gift whereby he gifted the property to the Trust.

[22]   On 14 June 2016, the deceased transferred the land from himself (in his personal capacity) to himself (in his capacity as trustee of the Trust). On 6 July 2016, he executed a Deed whereby he retired as trustee of the Trust and appointed Mr Craig Hetherington as the new trustee.

[23]   On 1 January 2017, the deceased passed away. On 6 March 2017, the High Court granted probate of the 2016 will to Mr Kirwan.

Preliminary issue

[24]   Mr Pickering, Ms Hamilton’s de facto partner from 2000–2009, swore an affidavit in support of Ms Hamilton’s claim on 4 August 2019. Counsel for the first and second defendants served a notice requiring Mr Pickering’s attendance for cross- examination on Ms Hamilton’s counsel pursuant to r 9.74 of the High Court Rules 2016. Mr Pickering was, however, unable to attend court.  Counsel explained that  Mr Pickering is a site foreman for Ross Insulation Ltd. One of their major clients is the Marsden Point oil refinery, where Mr Pickering is based. At the time, there was a well-publicised backlog of tankers waiting to unload at Marsden Point. The storage facilities there were almost full due to a significant decline in consumer demand during the COVID-19 pandemic. Mr Pickering was site foreman for a project that began under Alert Level 2 to build more storage tanks to relieve the tanker backlog. A reduced demand for oil had also resulted in employment uncertainty at the refinery and also for contracting companies such as Ross Insulation Ltd. Because of the employment uncertainty, Mr Pickering felt unable to take time off to attend court for cross-examination. Counsel for Ms Hamilton sought a ruling that Mr Pickering’s affidavit should, nonetheless, be admitted as evidence in the trial.

[25]   The test for admission of Mr Pickering’s affidavit is contained in r 9.74(3) of the High Court Rules, which provides:

9.74     Cross-examination of person who has sworn affidavit

…

(3) The affidavit of a person who is not produced must not be used as evidence unless the evidence is routine, or there are exceptional circumstances, and in either case the court grants leave.

[26]   Mr Pickering’s evidence is not routine. He states that he had a good relationship with the deceased and that whenever they discussed the future of the property or what would happen if he died, the deceased would always say “Don’t worry, Keeley will get her share”, or words to that effect. What the deceased may or may not have said about the plaintiff’s position is a crucial issue in this case. The defendants’ case would be significantly hampered by its inability to cross-examine Mr Pickering on such an important issue. I therefore refuse leave to use Mr Pickering’s affidavit.

[27]   Likewise, I have not taken into account the affidavit dated 16 October 2018 affirmed by the deceased’s third child, Mr Kane Hetherington, in Australia where he lives, in which he says that his father always told him the property would be shared equally between himself and his two siblings when he died. Mr Kane Hetherington also did not attend court for the purposes of cross-examination.

Proprietary estoppel

[28]   The first cause of action in the statement of claim is against both Mr Kirwan, as executor, and Mr Craig  Hetherington.  It  alleges  that  both  the  deceased  and Mr Craig Hetherington was, or is, estopped from dealing with the property in any manner that is contrary to Ms Hamilton’s equitable interest. Ms Hamilton’s equitable interest is said to arise because the deceased had created the expectation, on her part, that on the deceased’s death she would inherit the property equally with her brothers.

[29]   A proprietary estoppel is a species of equitable estoppel. In Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd, the Court of Appeal set out the four elements required to establish equitable estoppel as follows:1

(a)A belief or expectation by the claimant created or encouraged by words or conduct of the respondent;

(b)To the extent an express representation is relied upon, it is clearly and unequivocally expressed;

1      Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] NZLR 567 at [44].

(c)The claimant reasonably relied to his or her detriment on the representation; and

(d)It would be unconscionable for the respondent to depart from the belief or expectation.

[30]   On the balance of probabilities, I am, firstly, satisfied that the deceased created a belief or expectation on the part of Ms Hamilton that she would in due course receive a share of the property sufficient to provide some form of security for her plans to build a dwelling house and later some cabins on the property.

[31]   I accept that Ms Hamilton commenced residing on the property in about 1997 at the deceased’s suggestion. The crucial evidence of the deceased’s creation of a belief or expectation on the part of Ms Hamilton comes from a meeting between the deceased, the deceased’s then wife, Ms Bockett, Ms Hamilton and Ms Hamilton’s partner, Mr McConchie, at Mr McConchie’s rented property at Ruakaka in about 1999. Ms Hamilton and Mr McConchie were hoping to build a dwelling house on the land separate from the deceased’s bach, in which Ms Hamilton had been residing. They needed some assurance of security before spending time and money on building on the property owned solely by the deceased.

[32]   Ms Bockett, Ms Hamilton and Mr McConchie all gave evidence of what was agreed at the meeting. Their evidence was both credible and consistent. Ms Bockett states:

The four of us had a discussion about Keeley and Glenn building a permanent home at the Cove Road property. Des and I were both keen for this to happen and I remember Des saying he would “carve off some land” for Keeley to build on.

[33]   Ms Bockett says she remembers it clearly because she was “pissed off” that the deceased, Ms Hamilton and Mr McConchie went off to the pub afterwards, leaving her with the kids.

[34]   Ms Hamilton was also adamant that the deceased promised to gift her some land so that she could have security for the dwelling house she and Mr McConchie were hoping to build on the property.

[35]Mr McConchie also states:

The discussion centred on what security of tenure we would have if we built a house on the Cove Road property. Desmond Hetherington assured me at the time that Keeley would be gifted some of the land for herself and her children.

[36]   I  also  accept  that  over  the  years  the  deceased  continued  to  reassure   Ms Hamilton that she would have an equal share of the land (with her two brothers) and that she would be “looked after” and not to worry. Otherwise she would not have proceeded with an extension to the dwelling house in 2002 and the erection of the cabins in 2013.

[37]   In this regard, I do not accord any real weight to Mr Schnauer’s letter dated 23 December 2010 giving notice to Ms Hamilton to vacate the property. First, I accept Ms Hamilton’s evidence that she did not receive it — it does have an incorrect postal code on it. Secondly, Mr Schnauer made no file note of the deceased’s instructions, so the background to the letter and the motivation of the deceased to send it are unknown. The motivation may well have been just to put pressure on Ms Hamilton to contribute towards the rates and other outgoings on the property without any intention of ever evicting her.

[38]   Mr Schnauer did make a file note on 20 April 2016, when he drafted documentation to transfer the property to the Trust. He has recorded:

I told Des it was important he had not promised or agreed to sell or pass to Keeley or any other person the land, or a substantial portion of it (otherwise inappropriate to transfer land to the trust) he was definite that he had not so promised or agreed to sell or gift.

[39]   Mr Schnauer said he was satisfied with a simple no, even though he knew that Ms Hamilton had resided on the property for 20 years and had borrowed money through his firm’s nominee company (via the deceased) to build a dwelling house on the property. The deceased may have denied that Ms Hamilton had any interest in the property, but, again, I cannot accord any real weight to a denial in those circumstances.

[40]   It is also quite possible that the deceased said one thing to Mr Schnauer and another thing to Ms Hamilton. The deceased’s ex-wife, Ms Bockett, characterised him as a liar.

[41]   Secondly, I am satisfied that the express representation by the deceased was clearly and unequivocally expressed. It was put to Ms Bockett that “carved off” meant something less than gifting a share of the property:

I put it to you that in allowing Keeley to build a two bedroom dwelling, to extend that dwelling, to put in a play area for her children, build a horse corral and three commercial buildings, he has in fact done precisely what he promised, which is to carve out, allow her land, on which to build.

[42]   Ms Bockett was adamant that that was not the meaning of “carved off”. “Carved off” was to cut something off. She said she knew what the deceased meant having been married to him for 34 years.

[43]   Thirdly, I am satisfied that Ms Hamilton reasonably relied to her detriment on the representation. In 2000, Ms Hamilton and Mr McConchie cleared a house site at the property with the deceased’s approval and installed a power connection, put in a septic tank, water tanks and built a two-bedroom home costing about $70,000. Of this,

$20,000 was borrowed from Brookfields’ nominee company. Then in 2002, again with the deceased’s approval, Ms Hamilton and her new partner, Mr Pickering, extended the dwelling house, adding two more bedrooms, a bigger bathroom and a fireplace. In addition, they built an American-style barn, spending about $80,000 in total.

[44]   In 2013, Ms Hamilton and her then husband, Mr Hamilton, built a small hairdressing salon and gift shop, a garden centre and spiritual centre, which required extensive earthworks, road construction, septic tank, water tanks, power, landscaping, business and establishment fees. Ms Hamilton estimates the cost to have been around

$50,000.

[45]   At no time did the deceased forbid Ms Hamilton to make those improvements or ask her to remove them, although after she built the hairdressing salon and gift shop, garden centre and spiritual centre, he asked her not to put any more buildings on the property. It is evident that over 14 or 15 years, Ms Hamilton has spent considerable

time, effort and money in reliance on the deceased’s representations as to a future share of the property.

[46]   Finally, I am also satisfied it was unconscionable for the deceased to depart from the belief or expectation he had created on the part of Ms Hamilton. The deceased initially invited her to live on the property and consented to the many improvements made to it. Ms Hamilton has established a life for herself and her family on the property. She has four children, all of whom have lived on the property with her at some stage. She cares deeply for the property and believes herself to be a guardian of the land. She now finds herself without any interest in the land either as owner or beneficiary of the Trust. She would be devastated if she had to leave the property. All her hard work and expenditure over the years would be wasted. It would not be practical for her to take all the buildings away, as has been suggested by others.

[47]   Ms Hamilton seeks an order requiring the property be subdivided at the Trust’s expense, with a third-share of the property vesting in her. She has presented the Court with a plan prepared by Pacific Coast Surveys, which subdivides the property into three lots of 19.0158 hectares, 19.3650 hectares, and 20.5643 hectares. There is an immediate practical difficulty because the dwelling house is in the proposed Lot 1 and the three cabins are in the proposed Lot 3. There is a further difficulty because the property is now owned by the Trust. The statement of claim does assert that, upon his appointment as trustee, Mr Craig Hetherington took title to the property “subject to the plaintiff’s antecedent equitable interest”, but it does not contain a plea of knowing receipt on the part of Mr Craig Hetherington, which is a prerequisite for a tracing claim and orders to be made against the Trust.

[48]   In the circumstances, I am of the view that the “minimum equity” needed to do justice to Ms Hamilton is to declare that the transfer of the property from the deceased in his personal capacity to the deceased in his capacity as a trustee of the Trust on   14 June 2016 is null and void, such that the deceased remained the owner of the property. Further, I direct that the whole of the land and buildings of 1758 Cove Road, Mangawhai, being 58.9450 hectares and being Lot 2 DP 104506 be transferred to Craig Desmond Hetherington, Kane Michael Hetherington and Keeley Fleur Hamilton as tenants in common in equal shares under s 89 of the Land Transfer Act 2017 to give

effect to the deceased’s representations relied upon by Ms Hamilton. This also accords with the direction of the deceased in his latest will that the residuary of his estate be left to the three children equally.

Constructive trust

[49]   The second cause of action in the statement of claim is again against both   Mr Kirwan, as executor, and Mr Craig Hetherington. It alleges that the deceased and Mr Hetherington held, or holds, the property on constructive trust for Ms Hamilton as to a one-third share. It is said to be reasonable to expect Mr Craig Hetherington to yield to the plaintiff’s interest in the property.

[50]   The law relating to constructive trusts was clarified by the Court of Appeal in Lankow v Rose.2 Tipping J set out the four elements required to establish a constructive trust as follows:

(a)Contributions, direct or indirect, to the property in question;

(b)The expectation of an interest therein;

(c)That such expectation is a reasonable one; and

(d)That the defendant should reasonably expect to yield the claimant an interest.

[51]   The contributions must be shown to be more than minor and must manifestly exceed the benefits enjoyed. A causal link must also be shown between the contributions and the enhancement of the defendant’s property.

[52]   Ms Hamilton undoubtedly made contributions, direct and indirect, to the property, but I am not satisfied that those contributions manifestly exceed the benefits enjoyed by her.   Ms Hamilton says that she and her partner spent approximately

$70,000 to build the dwelling house, $80,000 to extend it and $50,000 to erect the

2      Lankow v Rose [1995] 1 NZLR 277 (CA).

three cabins. In addition, she refers to the building or a horse corral, fencing and clearing scrub and gorse, together costing approximately $32,000, a total sum of

$232,000 over a period of about 23 years ($10,000 per annum). She has also made a contribution of $50 per week ($2,600 per annum) towards the rates for the property since late 2010.

[53]   As against these contributions, Ms Hamilton has lived on the property for about 23 years without paying ground rent. There is no evidence of what a fair ground rental would be, but it would be more than nominal over many years, especially in circumstances where Ms Hamilton is using the property to produce an income from her hairdressing and garden centre businesses. Ms Hamilton said that she may have a weekly turnover of $400–$600 from hairdressing, but she did not disclose the turnover of the garden centre.

[54]   As to the value of improvements to the property, the only valuation obtained (by Ms Hamilton) stated that the dwelling house constructed by her provided base level accommodation. It required significant deferred maintenance and it was debatable whether or not it should be demolished. In its current form it has a limited useful life. The report valued the structural improvements, including the dwelling house and cabins, at $50,000. Other improvements, including access, were valued at

$50,000. Access to the top of the property is by way of a two kilometre access road, which was already in place when Ms Hamilton commenced construction of the dwelling house in around 2000. Ms Hamilton has, however, built a horse corral and some fencing. The valuation of the property is $1,300,000. Virtually all of the value is, therefore, in the land and not in the improvements. None of the buildings have code compliance certificates and the cost to bring them up to building code standards is unknown.

[55]   It is, therefore, unnecessary for me to consider the other elements of a constructive trust as I am not satisfied that Ms Hamilton’s contributions manifestly exceed the benefits enjoyed by her. This cause of action fails.

Undue influence

[56]   The third cause of action in the  statement  of claim is  again  against  both Mr Kirwan, as executor, and Mr Craig Hetherington. It is an allegation of undue influence. No allegation of undue influence is, however, made against Mr Kirwan personally. Ms Hamilton alleges that it was Mr Craig Hetherington and Ms Marlena Hetherington (who is not a party to this proceeding) who either singularly or in combination exerted influence over the deceased to execute the Cove Road Trust Deed, the Deed of Gift and the 2016 will. Ms Hamilton alleges that had the deceased not been influenced, he would not have executed the Cove Road Trust Deed, the Deed of Gift and the 2016 will. No particulars are pleaded. Ms Hamilton seeks an order revoking the Cove Road Trust Deed, the Deed of Gift and the 2016 will.

[57]   Although direct evidence of undue influence is often not available, there has to be some evidential foundation for the drawing of an inference that undue influence has been exerted on the deceased. Ms Hamilton has, however, not meet the burden of proving such an evidential foundation. In her affidavit dated 21 August 2017, the plaintiff states:

I believe the last will my father made at a time when he knew he was seriously ill, in constant pain from cancer, and only had a few months to live, does not reflect his true wishes. It was clearly not a good time for him to be making such decisions and I question the influence of people around him such as Marlena and my brother Craig influencing the decisions of a dying man, but which had the result of effectively denying me a legitimate expectation and which I had acted upon by investing many tens of thousands of dollars and countless hours of work and labour building a permanent home for myself and my children.

[58]Further, in her affidavit dated 9 October 2017, the plaintiff states:

I believe my brother Craig took advantage of my father’s failing health and sickness and while in a vulnerable state in the last few months of his life convinced him to place the property in a trust that would exclude me as a beneficiary. The trust was formed in secret so I would not know about it and complain until my father’s death.

…

During the course of my father’s marriage to [Marlena], it was very clear to me that she disliked, even hated, my presence and I believe also she did what she could to influence [the deceased] against me in the last few months of his life when he was in a vulnerable state. I would describe her and my brother

Craig as always being “as thick as thieves” and there is no doubt of my father’s three children, she favoured Craig the most and therefore I believe the evidence she has adduced is deliberately biased in his favour and is not objective or impartial.

[59]   There is some support for the plaintiff’s suspicions in the affidavit evidence of the plaintiff’s son, Liam Desmond Winslow. In an affidavit dated 18 October 2018, he states:

In about October 2016 I heard Marlena speaking very negatively about my mother while she was on the phone to her sister Ali and they were talking about the Cove Road property. Marlena said something like “I hope she doesn’t think she’s going get that property and that she’ll be living there”. It was clear to me from what she was saying that she wanted my mother to be excluded from the Cove Road property.

…

On too many occasions to count, I overheard [Uncle Craig] speaking very badly about my mother during my grandfather’s illness. I recall one time at my grandfather’s house Uncle Craig talking to my grandfather about my mother’s occupancy of the Cove Road property and saying “Why is the cunt still living there?”. It seemed to me that he was trying to poison my grandfather against her and her right to be on the property.

…

Because of their hostility to my mother I didn’t see either my Uncle Craig or Marlena encourage my grandfather to speak to my mother or to patch things up with her. In fact, I observed quite the opposite. They appeared to be going out of their way at a time when my grandfather was fatally ill, in trying to influence him to ignore my mother and favour them with their intentions for the Cove Road property.

[60]   However, I am of the view that in the end Ms Hamilton’s beliefs do not have a sufficient evidential foundation to inferentially prove undue influence on the balance of probabilities.

[61]   First, the Cove Road Trust Deed, the Deed of Gift and the 2016 will were all drafted by  the  deceased’s  long-time  lawyer,  Mr  Schnauer.  The  deceased  and  Mr Schnauer had been discussing what to do with the property for quite some time. Eight years earlier, in 2008, Mr Schnauer had drafted a trust deed for the deceased entitled the DW Hetherington Trust, but the deceased did not proceed with it at that time. In 2010, Mr Schnauer had made demand on Ms Hamilton, presumably on

instructions from the deceased, that she contribute $50 a week for occupying the property.

[62]   Mr Schnauer also recorded the deceased’s instructions on 20 April 2016 as follows:

Des wants to put the Cove Road ppty in to a family trust – we need to sort out legal detail – object to preserve Cove Road for the benefit of two of his children and his grandchildren – and to rein in Keeley who he felt had had enough cheap rent or whatever at the property over many years.

I told Des it was important he had not promised or agreed to sell or pass to Keeley or any other person the land or a substantial portion of it (otherwise inappropriate to transfer land to trust) he was definite that he had not so promised or agreed to sell or gift.

So put Keeley’s children in his beneficiaries, but leave her out – but make it possible to add her in later if she came into line. Des wanted to remain in control of the trust as sole trustee until his health deteriorated – and then for Craig to be appointed as trustee.

So for a start get the trust up and running and in a form which incorporates what Des wants – see separate list of names of family members.

Des saw as an added benefit of putting property into trust protection of his children against future spousal claims – particularly Keeley who seemed to have trouble keeping husbands and was, he thought, currently on husband No. three.

[63]   The two reasons given by the deceased for omitting Ms Hamilton as a beneficiary of the Trust (enough cheap rent over many years and protection against future spousal claims) as recorded by Mr Schnauer do not have an obvious connection to undue influence by others but are rational explanations in themselves.

[64]   Secondly, there is no sufficient evidence of any cognitive impairment on the part of the deceased. Ms Hamilton says the deceased was taking medium to heavy doses of the drugs prednisone and oxycodone. She submits that prednisone causes patients to experience anger and rage issues, while oxycodone causes similar effects as those caused by heroin and morphine. The medical records provided do not, however, support any suggestion of cognitive impairment. The deceased’s doctor says that to the best of her knowledge the deceased did not have any problems with his cognition in May 2016. He was fully mentally capable to make rational decisions.

[65]   Thirdly, I accept the evidence of Mr Craig Hetherington that he had no prior knowledge of his father’s wills or his intention to form the Trust and gift the property to it. Although he signed the deed dated 6 July 2016 appointing him trustee of the Trust, Mr Craig Hetherington did not attend the meetings when the deceased gave instructions to Mr Schnauer. I also accept his evidence that he had no specific discussion with his father about each of the children having a third-share in the property. He did, however, know of the deceased’s intention to preserve the land for the current and future generations of the family. He has made it clear that as far as he is concerned, Ms Hamilton is able to remain living on the property as he says he wishes to comply with his father’s wishes. Ms Hamilton does not, however, accept these assurances given in Mr Craig Hetherington’s affidavits. This cause of action also fails.

Breach of moral duty

[66]   The fourth cause of action is against Mr Kirwan, as executor, only. It is under the Family Protection Act 1955. It alleges that by leaving the residuary of his estate equally to his three children in circumstances where the property had been transferred from his estate to the Trust, the deceased breached his moral duty to Ms Hamilton by failing to adequately provide for her.

[67]Section 4 of the Family Protection Act provides:

4        Claims against estate of deceased person for maintenance

(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.

[68]   The question is therefore whether or not the deceased has made adequate provision for the proper  maintenance  and  support  of  Ms  Hamilton.  Although  Ms Hamilton is treated equally with her two brothers in terms of the residuary of the deceased’s estate, she says that because the property was transferred by the deceased prior to his death to the Trust (of which her brothers are beneficiaries, but she is not), she has not been treated equally. The deceased has therefore breached his moral duty

by failing to adequately provide for her. I have, however, found that the deceased was estopped from transferring the property to the Trust because of representations made to Ms Hamilton over the years.

[69]   Ms Hamilton seeks an order requiring an (unspecified) increase in her share of the residuary of the deceased’s estate to compensate for the deceased’s breach of moral duty on the basis that the property has been lawfully transferred to the Trust. As at  24 March 2020, the cash assets of the estate were $447,231.67. From this is to be taken the sum of approximately $125,000 (being a legacy to Ms Hetherington of one- quarter share of all monies in any KiwiBank accounts of the deceased at the time of his death) leaving the sum of approximately $322,231.67. The residuary estate will, however, have to bear the costs of the legal proceedings against the executor, but at this stage the plaintiff and her two brothers are to receive cash of just over $100,000 each. However, in addition, they are now to share the property valued at $1.3 million as tenants in common in equal shares because I have found that the property was not lawfully transferred to the Trust.

[70]   Mr Kirwan submits that Ms Hamilton’s claim under the Family Protection Act is fatally flawed because there is no evidence as to her income, her liabilities and the value of her assets or any other financial interests. In addition, regard should be had to the support provided by the deceased during his lifetime in relation to his obligations, both as to maintenance and support.

[71]   While I accept that a breach of moral duty should not be tested only be reference to the economic position and needs of a claimant, it still remains relevant in an overall assessment by the Court. Unfortunately, there is no such evidence. Furthermore, Ms Hamilton has received considerably more financial support from the deceased than her two brothers. She has lived on the property since 1997 rent free, although she has contributed $50 a week towards rates since the end of 2010 (which is about half the full rates payable on the property). The deceased also repaid the amount outstanding  on  the  loan  from  Brookfields’  nominee  company,  which  Ms Hamilton used to build a dwelling house on the property in about 2000 as well as paying off her debts, at one stage.

[72]   Even if the property had been lawfully transferred to the Trust, I am not satisfied that a third-share in a residuary estate of modest proportion breaches the deceased’s moral duty to Ms Hamilton.3 This cause of action also fails.

Testamentary promise

[73]   The fifth cause of action is also against Mr Kirwan as executor. It is under the Law Reform (Testamentary Promises) Act 1949. It alleges that the deceased gave assurances to Ms Hamilton that he would leave a one-third share of the property to her, as a result of which she made direct contributions to the property. It is said that the deceased then failed to leave the plaintiff a one-third share of the property or adequately remunerate her for the work and services conducted on the property.

[74]Section 3 of the Law Reform (Testamentary Promises) Act provides:

3Estate of deceased person liable to remunerate persons for work done under promise of testamentary provision

(1)Where in the administration of the estate of any deceased person a   claim is made against the estate founded upon the rendering of services to or the performance of work for the deceased in his lifetime, and the claimant proves an express or implied promise by the deceased to reward him for the services or work by making some testamentary provision for the claimant, whether or not the provision was to be of a specified amount or was to relate to specified real or personal property, then, subject to the provisions of this Act, the claim shall, to the extent to which the deceased has failed to make that testamentary provision or otherwise remunerate the claimant (whether or not a claim for such remuneration could have been enforced in the lifetime of the deceased), be enforceable against the personal representatives of the deceased in the same manner and to the same extent as if the promise of the deceased were a promise for payment by the deceased in his lifetime of such amount as may be reasonable, having regard to all the circumstances of the case, including in particular the circumstances in which the promise was made and the services were rendered or the work was performed, the value of the services or work, the value of the testamentary provision promised, the amount of the estate, and the nature and amounts of the claims of other persons in respect of the estate, whether as creditors, beneficiaries, wife, husband, civil union partner, children, next-of-kin, or otherwise.

…

3      There is no power under the Family Protection Act 1955 to make any order in relation to property which does not form part of the deceased’s estate.

(3)Where the promise relates to any real or personal property which forms part of the estate of the deceased on his death, the court may in its discretion, instead of awarding to the claimant a reasonable sum as aforesaid,—

(a)make an order vesting the property in the claimant or directing any person to transfer or assign the property to him; or

(b)make an order vesting any part of the property in the claimant or directing any person to transfer or assign any part of the property to him, and awarding to the claimant such amount (if any) as in its opinion is reasonable in the circumstances.

…

[75]   The question therefore is what services have been rendered to or were performed for the deceased, and if such services have been rendered or were performed, what promises were made by the deceased to reward Ms Hamilton for those services.

[76]   Ms Hamilton says that she made direct contributions to the property. She built a dwelling house, business and maintained parts of the property. She says that her services to the deceased went beyond what would normally be considered incidental to a usual loving relationship between a father and daughter. She spent over 20 years and $200,000 on the property. This allowed the deceased to be close to his grandchildren. She also provided a measure of security for the property.

[77]   Ms Hamilton says the deceased promised that she would inherit a one-third share of the property before she made any substantial contribution to it. She says there is a clear link between that promise and her subsequent contributions.

[78]   Ms Hamilton therefore seeks an order requiring the property to be subdivided at the expense of the Trust with a third-share of the property vesting in her on the basis that the property has been lawfully transferred to the Trust. Such an order is, however, not available if the property has been lawfully transferred to the Trust as s 3 makes it clear that any relief granted under the Act is only available from the deceased’s estate, including real or personal property if such property forms part of the deceased’s estate. I have, however, found that the deceased was estopped from transferring the property to the Trust because of representations made to Ms Hamilton over the years. The property therefore forms part of the deceased’s estate.

[79]   I am, however, not satisfied that Ms Hamilton rendered services to or performed work for the deceased beyond that normally found in a father/daughter relationship. The overwhelming majority of the work on the property was done by Ms Hamilton for the immediate benefit of herself and her family. The deceased never resided in the dwelling house built by Ms Hamilton. The three cabins erected at the bottom of the property by Ms Hamilton are commercial endeavours from which    Ms Hamilton receives an income.

[80]   As to the improvements to the property, the only valuation obtained (by     Ms Hamilton) stated that the dwelling house constructed by her provided base level accommodation. It required significant deferred maintenance and it was debatable whether or not it should be demolished. In its current form it had a limited useful life. The report valued the structural improvements, including the dwelling house and cabins, at $50,000. Other improvements, including access, were valued at $50,000. Access to the top of the property is by way of a two kilometre access road, which was already in place when Ms Hamilton commenced construction of the dwelling house in around 2000. Ms Hamilton has, however, built some fencing and a horse corral.

[81]   There is no evidence that the deceased recognised the benefit of any work undertaken by Ms Hamilton to himself and made a connection between the benefit and any promise to leave one-third of the property to Ms Hamilton in his will. Any work done by Ms Hamilton in facilitating access by the deceased to his grandchildren and in providing a measure of security on the property is only what would be expected from normal familial love and affection. In fact, the deceased contributed to the building work himself by constructing a fireplace for Ms Hamilton in the dwelling house and tiling one of the cabins for her. This cause of action also fails.

Executor’s failure to account

[82]   The sixth cause of action is also against Mr Kirwan as executor. It alleges that Mr Kirwan has failed to account to Ms Hamilton as a beneficiary of the deceased’s estate by failing or refusing to provide information requested. It is said to be a breach of his duty to account for the assets and liabilities of the estate.

[83]   In Re Stewart, Laurenson J explained the relationship between the executor and beneficiaries as follows:4

[24]      An executor is the person appointed by a testator or testatrix to administer his or her property and carry out the provisions of the will. To this end the executor has certain specific statutory and common law duties and powers, namely to:

·Bury the deceased;

·Make an inventory of assets;

·Pay all duties, testamentary expenses and debts;

·Pay legacies;

·Distribute the residue to the persons entitled; and

·Keep accounts.

…

[25]      The obligation to perform these duties arises within the special fiduciary relationship which exists between a trustee as a fiduciary to whom property is entrusted, and the beneficiaries entitled to that property. The most obvious element of that relationship is the requirement imposed in equity that the trustee will deal with those assets with the utmost probity which, in turn, requires that the trustee will not on any account allow him or her to have or acquire any personal interest in those assets without the express and informed consent of the beneficiary. There is, in addition, a further aspect to an executor’s fiduciary responsibilities, namely a duty to act even-handedly between the beneficiary. It is within this area of responsibility that the obligation not to unwarrantedly thwart claims arises.

[84]The statement of claim alleges that Mr Kirwan has:

(a)Failed  to  provide  the  deceased’s  bank  account  statements  from   1 January 2015 to 31 December 2018;

(b)Failed to file an accurate inventory of the estate and an account of the estate under r 27.32 of the High Court Rules;

(c)Refused to provide information about cash withdrawals from the deceased’s bank account subsequent to his death; and

4      Re Stewart [2003] 1 NZLR 809 (HC).

(d)Failed to pursue a claim against Mr Craig Hetherington for taking the deceased’s Dodge Ram motor vehicle without his permission and damaging it, causing approximately $56,000 loss to the estate.

[85]   Although the statement of claim only seeks orders requiring Mr Kirwan to provide the bank statements and a statement of assets and liabilities, counsel in her closing submissions submits that Mr Kirwan should not remain as executor and that the Court should order his removal and appoint an independent executor. She also seeks an order requiring Brookfields to reimburse fees paid by the estate for their costs.

[86]   The additional orders sought in the plaintiff’s closing submissions are significant. They should have been fully pleaded in the statement of claim with particulars provided to enable Mr Kirwan to provide affidavit evidence to expressly address the new allegations made. In any event, the Court is unable to make orders against a non-party such as Brookfields. It would be unjust for the Court to now make a finding on any new allegations made or orders sought not contained in the statement of claim.

[87]   As to the allegations in the statement of claim, the bank account statements sought cover a four-year period, being two years prior to the deceased’s death and two years after the deceased’s death. On 27 March 2017, three months after the deceased’s death, Brookfields, the lawyers acting for Mr Kirwan, closed the deceased’s bank accounts and arranged for the outstanding balance of $508,739.29 to be transferred to their trust account. Brookfields have disclosed their estate file, together with the trust account statements. It is however unclear to me whether the deceased’s bank account statements from  1  January  2015  to  his  date  of  death  have  been  supplied  to  Ms Hamilton. The statement of claim refers to “limited disclosure”. It appears that Ms Hamilton was concerned about what happened to money from the sale of two Auckland properties owned by the deceased prior to his death.   In an email to      Ms Hamilton’s counsel dated 16 October 2019, Mr Schnauer advised as follows:

1014 Great North Road was sold in May 2009 for $440,000 and 1014A was sold in May 2015 for $680,000. Significant mortgage debt had to be cleared from the proceeds of the first sale, but the second sale had no mortgage debt to clear and is believed to have generated the KiwiBank deposit referred to earlier. We note that these transactions were approximately six to two years

prior to the death of the deceased and, accordingly, not matters required to be addressed by the executor.

[88]   I agree that these were not matters required to be addressed by Mr Kirwan, as executor.

[89]   As to a statement of assets and liabilities of the estate, in addition to an initial affidavit dated 28 June 2017, Mr Kirwan has sworn two further affidavits relating to the assets and liabilities of the estate dated 6 September 2018 and 24 March 2020.

[90]   Ms Hamilton challenged the following withdrawals from the deceased’s bank accounts subsequent to his death:

(a)A cash withdrawal of $100 on 2 January 2017;

(b)A cash withdrawal of $500 on 2 January 2017; and

(c)A payment of $9,250 to the ASB Visa Mastercard of Ms Marlena Hetherington on 3 January 2017.

[91]   The two smaller cash withdrawals were in relation to expenses incurred at the time of the deceased’s death, while the larger sum of $9,250 was to reimburse       Ms Marlena Hetherington for the costs of a trip to Perth in October 2016. Ms Marlena Hetherington says that this was the deceased’s usual practice and that the deceased had always approved her actions in this regard.

[92]   In response to a query from the solicitors acting for Ms Hamilton, Mr Schnauer stated:

We consider that all relevant documents have been disclosed. The first defendant (Mr Kirwan) has complete confidence in the honesty and integrity of the deceased’s widow, who organised most receipts and payments for the deceased prior to his death and subsequent to his death until his online account was closed. The executor was particularly unconcerned with payments of a minor nature although he did obtain, and we do hold, a number of verifying chits and printouts. These can be provided if required.

[93]   Ms Hamilton has not been able to provide any evidence which would call into question   Mr    Kirwan’s    confidence    in    the    honesty    and    integrity    of    Ms Marlena Hetherington.

[94]   Finally, the Dodge Ram now in the possession of Mr Craig Hetherington was used as a work vehicle by the deceased. It is a 2005 model, which has travelled 250,000 kilometres. Mr Craig Hetherington’s evidence was that he was given the car by his father when he was no longer able to drive. Brookfields obtained a valuation of the vehicle provided by Discount City Cars of $9,000–$10,500. Ms Hamilton has formed the view that the vehicle had a value of $35,000 from advertisements of similar vehicles on TradeMe. However, no independent evidence has been adduced to corroborate her view. Nor is there any credible evidence that Mr Craig Hetherington damaged the vehicle such that its value has been severely impacted.

[95]   As part of the division of chattels between the three children, Ms Hamilton has received a 1972 Buick Skylark convertible motor vehicle, which has been valued at between $12,000–$14,000 by Bunce Motor Company Ltd.

[96]   I am not satisfied that Mr Kirwan as executor has failed to account to the plaintiff as a beneficiary of the deceased’s estate by failing or refusing to provide information requested. He has accounted for the assets and liabilities of the estate. The actions complained of do not, either singularly or in combination, cause any concern for this Court. Although Mr Kirwan has largely left matters to Mr Schnauer, in many cases, those appointed executors will not have had any previous experience in these roles or have an understanding of formalities and duties required. For this reason, a lawyer will frequently be required to guide them on all aspects of the administration and, in many cases, will have to attend to the financial transactions and record keeping of the estate. This is no different. This cause of action also fails.

Expedient to replace trustee

[97]   Finally, the seventh cause of action is against Mr Craig Hetherington only. It is under s 51 of the Trustee Act 1956. It is alleged that Mr Craig Hetherington has breached his fiduciary obligations and it is inappropriate for him to remain as trustee

of  the  Trust.    An order is sought removing him as trustee and appointing an independent trustee.

[98]Section 51 relevantly provides:

51 Power of court to appoint new trustees

(1)The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.

(2)In particular and without prejudice to the generality of the foregoing provision, the court may make an order appointing a new trustee in substitution for a trustee who—

(a)has been held by the court to have misconducted himself in the administration of the trust; or

(b)is convicted of a crime involving dishonesty as defined by section 2 of the Crimes Act 1961; or

(c)is a mentally disordered person within the meaning of the Mental Health (Compulsory Assessment and Treatment) Act 1992, or whose estate or any part thereof is subject to a property order made under the Protection of Personal and Property Rights Act 1988; or

(d)is a bankrupt; or

(e)is a corporation which has ceased to carry on business, or is in liquidation, or has been dissolved.

[99]   The statement of claim alleges that the following acts by Mr Craig Hetherington make it inappropriate for him to remain as a trustee of the Trust:

(a)In February 2017, he threatened Ms Hamilton in front of a customer at her hairdressing salon;

(b)He failed to pay rates on the property from the deceased’s death to May 2019;

(c)He left substantial rubbish on the property just after the deceased’s death; and

(d)He is not on speaking terms with Ms Hamilton (the mother of four discretionary beneficiaries under the Trust) or Mr Kane Hetherington.

[100]   While Mr  Craig  Hetherington  acknowledges  an  incident  did  occur  in  Ms Hamilton’s hairdressing salon, he has exculpatory explanations for the omission to pay rates and the rubbish on the property. He also denies that there is any hostility between himself and any of the beneficiaries of the Trust.

[101]   I am not satisfied that the alleged incidents, either singularly or in combination, make it expedient to appoint a new trustee in substitution for Mr Craig Hetherington. There is no evidence of misconduct in the administration of the Trust. Nor is there any threat to the property, being the sole asset owned by the Trust. Ms Hamilton is not a beneficiary of the Trust and there is no evidence that the beneficiaries support the removal of Mr Craig Hetherington as trustee. This cause of action also fails.

Result

[102]   I have found Ms Hamilton to be successful on the first cause of action — that of proprietary estoppel. The deceased was estopped from dealing with the property contrary to Ms Hamilton’s equitable interest, which arose because the deceased had created the expectation on her part that on his death she would inherit the property equally with her brothers. There will be orders in terms of [48] above.

[103]   Costs normally follow the event. Ms Hamilton has been successful against the estate, but not against Mr Craig Hetherington. If parties cannot agree, they are to file memoranda within a month of the date of this judgment.

Woolford J

Solicitors:Shieff Angland (S Langston/Kalev Crossland), Auckland, for the Plaintiff McElroys (P Moodley), Auckland, for the First Defendant

Keil & Associates (K Stirling), Auckland, for the Second Defendant

Counsel:            L J Kearns, Auckland, for the Plaintiff

G C Jenkin, Auckland, for the Second Defendant