Hodgkinson v Holmes
[2012] NZHC 2972
•9 November 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2012-404-3635 [2012] NZHC 2972
IN THE MATTER OF the Estate of the late DAWN DESIREE UNDERWOOD (Deceased)
BETWEEN FENELLA DESIREE HODGKINSON Appellant
ANDROSS WAKEFIELD HOLMES AND ROBERT JOHN HALCROW AS ADMINISTRATIONS OF THE ESTATE OF THE LATE DAWN DESIREE UNDERWOOD
Respondents
Hearing: 31 October 2012
Counsel: M Armstrong for Appellant
T Gore for Respondents
Judgment: 9 November 2012
JUDGMENT OF HEATH J
This judgment was delivered by me on 9 November 2012 at 4.00pm pursuant to Rule
11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Aurere Law, PO Box 1693, RotoruaRoss Holmes Lawyers LP, PO Box 33009, Takapuna, Auckland
HODGKINSON V HOLMES AND HALCROW AS ADMINISTRATIONS OF THE ESTATE OF THE LATE DAWN DESIREE UNDERWOOD HC AK CIV 2012-404-3635 [9 November 2012]
The appeal
[1] Ms Hodgkinson appeals against a judgment given in the Family Court at North Shore on 31 May 2012, by which her proceedings under the Family Protection Act 1955 (the 1955 Act) and s 49 of the Administration Act 1969 (the 1969 Act) were struck out.1 The proceedings had been brought in respect of the estate of Ms Hodgkinson’s late mother, Mrs Dawn Desiree Underwood.
[2] The proceedings were struck out on the grounds that there had been a final distribution of the estate that operated to prevent any claim under the 1955 Act from being pursued. A claim to follow assets, made under s 49 of the 1969 Act, was dismissed on the grounds that it was statute-barred,2 by s 49(4).
Background
[3] The late Mrs Underwood died on 5 May 2010. She left a Will, dated 8 May
1998, which provided that, after payment of all debts, the residuary estate was to be held on trust for the trustee of the Dawn D Underwood Family Trust (the Trust). Initially, the Trust was known as the Leo Underwood Trust. Its name was changed on 14 January 1997.
[4] While the Trust had been settled by Mrs Underwood, Ms Hodgkinson is not a beneficiary of it. She was removed as a named beneficiary by a Deed of Variation of Trust, dated 3 February 2000. The evidence suggests that, for reasons advanced in a Memorandum of Wishes dated 9 February 2000, Ms Hodgkinson was deliberately disinherited by her mother.
[5] On 9 June 2010, Messrs Holmes and Halcrow (the named executors and trustees) obtained a grant of probate in respect of the late Mrs Underwood’s estate. Mr Holmes had acted as Mrs Underwood’s solicitor since early 1994; he had been
the person responsible for drafting her Will and the Deed of Trust, dated 27 February
1 Hodgkinson v Holmes [2012] NZFC 3959 at paras [20] and [21], set out at para [14] below.
2 Ibid, at para [25].
1992; he had also taken instruction on and drafted the February 2000 “Variation of
Trust” that excluded Ms Hodgkinson as a beneficiary of the Trust.
[6] On 20 May 2010, before probate had been granted, the solicitors for Ms Hodgkinson wrote to the solicitors for the named executors to put them on notice that she intended to bring a claim under the 1955 Act. On 9 December 2010, Ms Hodgkinson filed a Statement of Claim under the 1955 Act. It is common ground that the Statement of Claim did not come to the attention of the executors until 22
February 2011. In that proceeding, Ms Hodgkinson claimed that her mother breached the moral duty owed to her to make a provision in her favour out of the estate.3
[7] On 23 March 2011, Messrs Holmes and Halcrow filed a Statement of Defence to that claim. They pleaded that, while Ms Hodgkinson’s solicitors had given notice of an intention to make an application under the 1955 Act in the 20 May
2010 letter, the notice had lapsed and was incapable of being renewed. Further, they averred that they had, on 10 December 2010,4 made a final distribution of the estate to Dawn D Underwood Trustee Ltd, as trustee of the Trust. In consequence, they pleaded, there were no assets on which Ms Hodgkinson’s 1955 Act claim could bite.
[8] On 31 January 2012, Ms Hodgkinson applied, under s 49 of the 1969 Act, to follow the assets of the late Mrs Underwood into the Trust, in order to preserve a sum of $93,154.78 (said to be a debt owing by the Trust to her estate), for the purpose of meeting any successful claim under the 1955 Act. In support of that application, Ms Hodgkinson contended that her claim under the 1955 Act had been made in time, within 12 months from the date of grant of probate.5 Only the executors and trustees were named as defendants to that proceeding. The corporate trustee was not joined.
[9] On 10 December 2010, a minute was signed by the executors which purported to authorise capital payments to the beneficiary named in the Will. The
minute recorded:
3 Family Protection Act 1955, s 3.
4 See para [9] below.
5 Ibid, s 9(2)(b).
Resolved
1After consideration of the overall interests of the Beneficiaries, and after detailed consideration of the relevant provisions of the Estate, the capital payments detailed in the Schedule be made to the beneficiaries detailed in the Schedule for the benefit of those beneficiaries:
Schedule: Date of minute: 10th day of December 2010
Beneficiaries name: The Dawn D Underwood Family Trust
The sum of: i. The sum of $12,032.91 held in Ross
Holmes Lawyers LP Trust account
ii. The remainder of the estate assets including but not limited to the amount owned by the Dawn D Underwood Family Trust to Dawn Desiree Underwood (if any).
iii. All chattels owned by Dawn Desiree
Underwood (if any).
[10] Mr Holmes swore and filed three affidavits in the 1955 Act proceedings, all of which were available to the Judge who determined the strike-out application. While I will refer later to specific aspects of his evidence, I make three points immediately:
(a) No final accounts for the estate have been produced as exhibits by Mr
Holmes.
(b)No reference is made in the minute to a debt owing by the Trust to the late Mrs Underwood. At the time of death, that debt stood at
$96,302.6
(c) The minute is extremely vague in its references to estate assets and chattels owned by the late Mrs Underwood. One of the duties of an
executor is to identify and get in available assets for distribution.
6 See para [39] below.
[11] When the appeal was called, Mr Armstrong, for Ms Hodgkinson, sought leave to adduce additional evidence, in the form of a print-out of entries contained in the Register of Companies for Dawn D Underwood Trustee Ltd. The purpose was to demonstrate that the 1000 shares in that company were held by the executors. That, he suggested, indicated that there had been no distribution of the shares. I mention this only for completeness, as it is unnecessary for me to rely upon it to determine the appeal. Formally, I refuse leave to adduce the print-out as new evidence.
The Family Court judgment
[12] Even though, in his first affidavit, Mr Holmes had deposed that the executors would abide the decision of the Court on the 1955 Act application, he and Mr Halcrow later applied to the Family Court to strike out the proceeding. The issue appears to have been raised by memorandum; no formal application was filed. Reliance was placed on affidavit evidence, including the three affidavits filed by Mr Holmes, that were before the Court on the substantive claim. Whether those
affidavits should have been considered is a point with which I deal separately.7
[13] Judge Lawrence Ryan took the view that the minute of 10 December 2010 evidenced an intention, on the part of the executors and trustees, to distribute all assets of the estate to the corporate trustee of the Trust. In holding also that it had that effect, the Judge said:
[16] It is clear to me that both the intent behind and the effect of the minute of 10 December 2010 was to ensure that whatever sum of money was owed by the Trust to the estate was to be the subject of a capital payment and the effect of the minute was to ensure that the Trust’s liability in respect of the advance was expunged. There is no other reason for the resolution recorded in the minute. The argument that the fact that the word “distribution” was not used indicates some other intention is untenable I am unable to see what other purpose the executors would have had in mind when resolving as they did on 10 December 2010 to deal with the estate in what I am sure they believed was a final way Mr Armstrong eloquently argued in support of the plaintiff that it was not the effect of the decision made by the executors on 10 December 2010 that was important, it was the wording that mattered and that regarding the minute as a “distribution” of the estate, was straining the meaning of the words. I respectfully disagree. It is my view that it is the effect of the resolution that is the central and determining issue.
7 See paras [31] and [46] below.
(Emphasis added)
[14] Dealing with the 1955 Act claim, Judge Ryan said:
[21] The executors were first advised of the filing of the substantive proceedings under the Family Protection Act on 22 February 2011 but they had on 10 December 2010 by virtue of the minute I have referred to above, made a final distribution of the estate. Therefore whilst the substantive proceedings were filed on 9 December 2010, the day before the minute was signed, the administrator had not received any notice that such application had been made to the Court.
[22] That means therefore that the final distribution cannot be disturbed. There are obviously no other assets of the estate undistributed. Therefore the substantive proceedings under the Family Protect Act have absolutely no chance of success . . .
[15] Judge Ryan also held that the s 49 application could not succeed. He considered that had been made out of time. He Judge said:
[23] The plaintiff seeks an order to follow the distribution. At the latest, the plaintiff was well and truly informed of the final distribution by way of the affidavit of Ross Holmes sworn 23 March 2011. Section 49(3) provides that in the case of an application for an order under the Family Protection Act 1955 an application for a following order must be made within 12 months of the date of the grant of probate. Section 49(4) contains a saving provision to the effect that:
The application may be heard by the Court after the expiration of the period prescribed by the said subsection (3) if it is made within six months after the date on which that person first became aware of the distribution.
[24] That means that the plaintiff had in my assessment, until 23
September 2011 to make an application for an order to follow assets under s
49. The application was not made until 31 January 2012, therefore the limitation provision in s 49(3) applies and no such application can be considered.
Competing submissions
[16] Although it is necessary to explain more fully the way in which the statutory scheme applies in this case, the issue on appeal turns on one relatively narrow point.
[17] In support of the appeal, Mr Armstrong, for Ms Hodgkinson, submits that the
Family Court Judge erred in holding that the evidence filed on behalf of the
executors reached the standard required on a strike-out application to prove that a
final “distribution” had been made.
[18] Mr Gore, for the executors, submitted that the evidence was sufficient for the Court to be satisfied that there was no tenable cause of action available in the proceedings issued under the 1955 Act. He submitted that, if there had been a distribution, the claim under the 1969 Act was out of time.
Analysis
(a) The statutory scheme
[19] Section 9(2)(b) of the 1955 Act provides a period of one year “from the date of the grant in New Zealand of administration in the estate” for a claim to be made. Applying s 9(2)(b), Ms Hodgkinson’s claim was brought in time.
[20] Probate was granted on 9 June 2010 and the Statement of Claim filed on 9
December 2010.8 Even if one were to take the date of service of the proceeding, 22
February 2011, the claim would still have been filed within the one year permitted by the statute.
[21] The executors take the point that the letter of 20 May 2010 from Ms Hodgkinson’s solicitors9 was one to which s 48(1) of the 1969 Act applied. That section provides:
48 Notices and distributions
(1) For the purposes of this section and of section 47 of this Act, notice in writing to an administrator or trustee of an intention to make any application to which section 47 of this Act applies shall lapse and shall be incapable of being renewed, so as to impose liability on the administrator or trustee in respect of a distribution thereafter, and the administrator or trustee may act as if he had not received the notice, unless, before the expiration of
3 months after the date on which he first receives notice in writing of the intention to make the application, the administrator or trustee is served with a copy of the application or receives notice in writing that the application has been made to the Court:
8 See paras [3] and [6] above.
9 See para [6] above.
Provided that nothing in this subsection shall prevent the subsequent making of the application within the period allowed by law.
[22] Section 48(1) refers to any application to which s 47 of the 1969 Act applies. A claim under the 1955 Act comes within that provision.10
[23] Once the 20 May 2010 notice lapsed, after three months of the date on which the executors first received it, the executors were entitled to distribute the estate without risking the possibility of an action for personal liability against them if no assets were available against which a subsequent application under the 1955 Act could be enforced.11 Nevertheless, it remained open for Ms Hodgkinson to pursue
her 1955 Act application.12
[24] If a distribution had been made, it is accepted that it was effected in accordance with the terms of the Will that created the trust. As the Trust was the sole beneficiary, a distribution to it would come within s 48(2).
48 Notices and distributions
...
(2) Notwithstanding the provisions of section 8 of the Family Protection Act 1955, for the purposes of sections 47 and 51 of this Act, a distribution by an administrator or trustee of any part of the estate shall be deemed to be properly made if it is made in accordance with any trust, power, or authority which is subsisting when the distribution is made and would justify the distribution if each application to which section 47 of this Act applies in connection with the estate (being an application on which no order had been made before the distribution) were disallowed by the Court:
Provided that nothing in this subsection shall restrict the provisions in subsection (4) of section 47 of this Act requiring that the distribution shall have been made before service on him of a copy of any application and without notice in writing of the matters specified in that subsection.
[25] In order to ensure that a successful claim could be enforced against any distributed assets, it was necessary for Ms Hodgkinson to make an application under s 49(1) of the 1969 Act. The purpose of such an application is to retrieve, for the benefit of the estate, the assets distributed to the beneficiary which might be awarded
in favour of Ms Hodgkinson, if she were to succeed on her 1955 Act application.
10 Administration Act 1969, s 47(1)(a).
11 Ibid, ss 47(2) and 48(2).
12 Ibid, proviso to s 48(1).
[26] A time limit exists for such an application to be made. Section 49(4) of the
1969 Act states:
49 Following of assets etc
(4) Notwithstanding anything to the contrary in subsection (3) of this section, in any case where an administrator or trustee has made a distribution of any assets forming part of the estate of any deceased person or subject to any trust, and any person who is entitled to apply for an order under subsection (1) of this section has, within the time specified in the said subsection (3), made an application to the Court for any order to which section 47 of this Act applies or an order on any claim to which section 35 of the Trustee Act 1956 applies, and that person was not aware of the distribution at the time when he made that application, that person, or any other person on whose behalf that application is deemed to be made, may apply to the Court under the said subsection (1), and the application may be heard by the Court after the expiration of the period prescribed by the said subsection (3) if it is made within 6 months after the date on which that person first became aware of the distribution.
(Emphasis added)
[27] The period of six months to which s 49(4) refers runs from the date on which the 1955 Act claimant first became aware of the distribution. If the evidence were sufficient to establish that a distribution had been made, time would run from 10
December 2010.13 The claim was brought on 31 January 2012. Whether it should be
struck out turns primarily on whether a final distribution has been established.
(b) Has a “distribution” been made?
(i) Test on a strike-out application
[28] The standard to be reached on an application to strike out was set out in Elias CJ’s judgment in Couch v Attorney-General (on appeal from Hobson v Attorney-General).14 On behalf of herself and Anderson J, the Chief Justice said:
[3] We are of the view that the claim is not so clearly untenable as to be suitable for peremptory determination on untested facts. We are unable to agree with the majority in the Court of Appeal that it should be struck out. We consider that strike-out is premature for reasons similar to those that persuaded Hammond J to dissent in the Court of Appeal.
13 See para [9] above.
14 Couch v Attorney-General (on appeal from Hobson v Attorney-General) [2008] 3 NZLR 725 (SC) at [3] and [33] (Elias CJ and Anderson J).
...
[33] It is inappropriate to strike out a claim summarily unless the court can be certain that it cannot succeed. The case must be “so certainly or clearly bad” that it should be precluded from going forward. ...
[29] There was no discussion in the joint judgment of Blanchard, Tipping and McGrath JJ of the test to be applied. However, they did not expressly demur from the propositions enunciated by Elias CJ and Anderson J.
[30] Before Couch, the Court of Appeal, in Attorney-General v Prince and Gardner,15 had held that it was “well settled that before the Court may strike-out proceedings the causes of action must be so clearly untenable that they cannot possibly succeed” and that “the jurisdiction is one to be exercised sparingly, and only in a clear case where the Court is satisfied it has the requisite material.16 The way in which the test was framed by Elias CJ and Anderson J does not depart from those general sentiments. On either view, a high threshold must be met.
[31] The circumstances in which affidavit evidence may be taken into account in determining whether a proceeding should be struck out are limited. In Attorney- General v McVeagh, the Court of Appeal said:17
... The Court is entitled to receive affidavit evidence on a striking-out application, and will do so in a proper case. It will not attempt to resolve genuinely disputed issues of fact and therefore will generally limit evidence to that which is undisputed. Normally it will not consider evidence inconsistent with the pleading, for a striking-out application is dealt with on the footing that the pleaded facts can be proved; see Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641, 645-646, Southern Ocean Trawlers Ltd v Director-General of Agriculture and Fisheries [1993] 2
NZLR 53 at pp 62-63, per Cooke P. But there may be a case where an essential factual allegation is so demonstrably contrary to indisputable fact
that the matter ought not to be allowed to proceed further. ....
[32] Applying the principles to which Couch and McVeagh refer to the present case, the question is whether the evidence received from Mr Holmes was such that
the Court could conclude that Ms Hodgkinson’s allegation that no distribution had
15 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA).
16 Ibid, at 267 (Richardson P, Thomas and Keith JJ), citing R Lucas and Son (Nelson Mail) Ltd v
O’Brien [1998] 2 NZLR 289 (CA) at 294–295, Takaro Properties Ltd (in rec) v Rowling [1978]
2 NZLR 314 (CA) at 316-317 and Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2NZLR 641 (CA).
17 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA), at 566.
been made was “so demonstrably contrary to indisputable fact” that she ought not to
be allowed to proceed further with her claims under the 1955 and 1969 Acts.
(ii) The evidence
[33] Distribution of property of a deceased estate is, when viewed in an abstract way, relatively easy to define. It involves property being transferred in specie to named beneficiaries in a Will, or the payment of proceeds of sale of such property to them. Any distribution must be made after all assets have been identified and (usually) placed in the legal ownership of the executors. Generally, an executor’s role changes to that of a trustee when the distribution is made because all assets have
been identified and control over them has been taken.18
[34] In this particular case, there is no evidence of the executors taking title to all property owned by the late Mrs Underwood before purporting to transfer it to the trustee of the Trust, as beneficiary. The ultimate question is one of fact. Is Ms Hodgkinson’s proposition that no final distribution has been made arguable? If the answer to that question is in the affirmative, then on the authority of Couch and Prince the claim could not be struck out.
[35] I agree with Judge Ryan that the executors’ intention was to distribute the estate to the named beneficiary, through the operation of the 10 December 2010 minute. Why they formed that intention at such an early time might be open for debate, given the existence of notice that a 1955 Act claim was intended to be brought. However, for the purpose of this appeal, the issue is whether the Judge was correct to hold (in my words) that the (inevitable) effect of the minute was to
distribute all assets of the estate to the trustee of the Trust.19
[36] It is necessary to scrutinise the affidavit evidence of Mr Holmes carefully to determine whether the proceedings ought to have been struck out. That is because
Ms Hodgkinson has no direct knowledge of how the executors and trustees have
18 Laws NZ, Administration of Estates, Vol 2, at para 463.
19 Hodgkinson v Holmes [2012] NZFC 3959, at para [16], set out at para [13] above.
dealt with the estate. Whether Mr Holmes’ evidence is sufficiently clear and cogent to justify striking out the claim is central to the appeal.
[37] I start by referring to Mr Holmes’ affidavit of 23 March 2011. In relation to
the alleged distribution, he deposed:
[22] By a minute dated 10 December 2010, a true copy of which is annexed hereto and marked “G”, the Trustees of the Estate distribute the remainder of Dawn’s estate to the Trustees of the Trust. The effect of that minute was that:
a.Any chattels of Dawn’s then in the possession of Colin Paul HODGKINSON as a Director of the Trustee of the Trust were then vested in the Trustee of the Trust.
b.Any debt then owed by the Trust to Dawn was no longer owed to Dawn’s estate. At that time I was aware that my firm had completing gifting the last gift of the loan owed by the Trust to Dawn in 2007, but I had not received accounts for the Trust for the year ended 31 March 2010.
c.I was advised on 2 March 2010 by the Trusts accounts, who are also the Estate’s accounts, that accounts for both Dawn and the Trust for the year ended 31 March 2010 have not yet been prepared, and that nor have accounts for the Estate from 1 April 2010 until the date of her death.
d.As no minute of the Trustee of the Trust was prepared prior to 30 September 2010 allocating income of the Trust for the year ended 31 March 2010 to Dawn, that income is Trustee’s income taxable at 33%, and any amounts withdrawn by Dawn from the Trust during the year ended 31 march 2010 will have to be treated as:
i. Loan repayments (to the extent that there is any loan owed by the Trust to Dawn), and
ii. Loans to Dawn by the Trust (to the extent that these amounts exceed any loan owed by the Trust to Dawn).
e.I was not aware on 10 December 2010 whether there was any amount owed by the Trust to Dawn. The accounts for the Trust for the year ended 31 March 2010 will determine the amount (if any) owed by the Trust to Dawn as at that date. I will file a supplementary affidavit once those accounts have been finalised.
f. All other assets of Dawn’s estate were then vested in the Trustee of the Trust. The assets of Dawn’s which I was aware of on 10 December 2010 were the funds held for the Estate in Ross Holmes Lawyers Trust account (as detailed in
the interim statement of the Estate’s financial position referred to in paragraph 19 hereof) which were in error journaled into the name of the Trust in Ross Holmes Lawyers Trust Account on 19 November 2010 prior to execution of the Trustees minute. Those funds are still held in Ross Holmes Lawyers Trust Account in the name of the Trust.
[38] Salient points arising out of that evidence are:
(a) Mr Holmes confirms that accounts for neither the Trust nor the estate, for the year ended 31 March 2010, had not been prepared. I infer that evidence reflects the known position at the date on which the affidavit was sworn because, although Mr Holmes refers to being advised of this state of affairs by the Trust’s accounts on 2 March 2010, he refers also to the absence of estate accounts for the period from 1 April 2010 to the date of Mrs Underwood’s death, on 5 May 2010.
(b)As at 10 December 2010, when he and Mr Halcrow signed the minute as trustees of the estate, Mr Holmes did not know whether any money was owed by the Trust to Mrs Underwood. Mr Holmes deposed that if any money were owed it would be determined by the accounts for the year ended 31 March 2010.
(c) Mr Holmes acknowledges that funds held to the credit of the estate as at 10 December 2010 had earlier been transferred into the Trust’s name, on 19 November 2010, “in error”. Those funds remained, as at
23 March 2011, in the name of the Trust.
[39] In a further affidavit sworn on 29 June 2011, Mr Holmes annexed a true copy of the financial statements of the Trust, as at 31 March 2010. His evidence is that these accounts establish that:
3. ...
a.The assets owned by the Trust as at that date were as detailed in the Depreciation Schedule and the Non Depreciated Fixed Assets & Investments Schedule which form part of those Financial Statements. These confirm my
understanding that the Trust owned these assets as detailed in my affidavit of 23 March 2011.
b.The liability owed by the Trust to Dawn as at 31 March 2010 was $96,302.00. My analysis of the Trust’s financial statements has established that this debt to Dawn was as a result of income allocated to Dawn by the Trust, which was not paid to her.
c.The financial statements for the Trust record that the loans owed to the Trust by [Ms Hodgkinson] as at 31 March 2010 were $4,400.00 and $4,625.00 (which exclude amounts which Dawn claimed were owed to the Trust by [Ms Hodgkinson] and her partner for arrears of rental and property damage to the Trust’s property at 22 Chartwell Road, Glenfield, Auckland which was at one stage rented by [Ms Hodgkinson] and her partner from the Trust).
d. The financial statements for the Trust record that Fleur
Hodgkinson (one of Dawn’s granddaughters) owed the Trust
$46,976.00 as at 31 March 2010.
4.Annexed hereto and marked “B” is a true copy of the statement prepared at my request by K T Calvert showing that the amount owed by the Trust to Dawn as at the date of her death on 5 May 2010 was $93,154.78.
5.No financial statements or balance sheets were ever prepared for Dawn personally by her accountant K T Calvert, and nor would they have served any useful purpose in view of her limited personal assets.
[40] No accounts for the estate were exhibited to Mr Holmes’ affidavit, even though his affidavit was sworn well after the alleged distribution occurred. One troubling feature is his evidence that:
10. The only other potential asset of the Dawn’s estate is the amount (if any) owed by [Ms Hodgkinson] to Dawn at the date of her death. I have viewed the extensive records kept by Dawn which record loans made by her to [Ms Hodgkinson], and loan repayments made by [Ms Hodgkinson] to Dawn. However these records appear to contain no final loan balance, and would require hours of analysis at considerable cost. I have not carried out this analysis in view of the apparently poor financial position of [Ms Hodgkinson]. The Estate seeks from [Ms Hodgkinson] details of the amount which she owed Dawn at the date of her death (if any).
(Emphasis added)
[41] The accounts of the Trust, on which Mr Holmes relies, were prepared by a taxation consultant, Mr Calvert, who prefaced them with an “Accountants’ Statement”. That statement read:
This is a Special Purpose Report. The financial statements have been prepared for taxation purposes only on the principles contained in the Income Tax Act, which are not in conformity with all acceptable accounting principles. Accordingly, the financial statements should not be relied upon for any other purposes.
A compilation is limited primarily to the collection, classification and summarisation of financial information supplied by our client. We have not audited or reviewed the records, statements and schedules of our client’s affairs. We have accepted the information and explanations provided by our client, but have not sought to verify and accordingly disclaim any responsibility for, the accuracy or the completeness of the information and explanations, the assertions contained in the financial statements and supporting schedules and the existence of relevant events if any occurring after the balance date.
[42] The statement makes it clear that reliance could not be placed on the financial statements for any other purpose than taxation. It also makes it clear that no attempt had been made to verify the financial information supplied. I contrast that with the evidence given by Mr Holmes about assets and liabilities of the estate, in respect of which he appears to have been wholly reliant on the financial statements of the
Trust.20
[43] In a third affidavit, sworn on 4 April 2012, Mr Holmes responded to submissions made on behalf of Ms Hodgkinson to the effect that the estate had not been “fully distributed”. After dealing with issues relating to personal clothing and chattels of the deceased (which, for present purposes, I regard as de minimis), Mr Holmes deposed:
4.The funds held in Ross Holmes Lawyers Trust Account on behalf of the Estate were journaled by me to a Trust Account in the name of the Trust on 19 November 2010.
5.It is correct that as at the date of the minute of 10 December 2010 the Trust’s account K T Kalvert (sic) had not prepared the financial statements for the Trust for the year ended 31 March 2010, and it was not therefore known by me whether the Trust owed Dawn any further amount.
6. I met with [the late Mrs Underwood’s son and a director of Dawn D
Underwood Trustee Ltd] on 15 February 2011 at 10 a.m., and 3
March 2011 at 12.30 p.m. to discuss the finalisation of accounts for the Trust for the year ended 31 March 2010, and the filing of a final
taxation return for Dawn’s Estate.
20 See paras [38]–[40] above.
7. I received the financial accounts for the Trust for the year ended 31
March 2010 dated 18 March 2011 (a true copy of which is annexed
hereto and marked “A”), and early on 28 March 2011 I received from Mr Kalvert a statement of the current account balance owed by the Trust to Dawn as at the date of her death (a true copy of which is annexed hereto and marked “B”). These were supplied to [Ms Hodgkinson’s] lawyers on 7 April 2011.
8.I met with [the late Mrs Underwood’s son and a director of Dawn D Underwood Trustee Ltd] at 9.30am on 28 March 2011 to discuss [Ms Hodgkinson’s]claims, and the accounts and statement which had been received from Mr Kalvert (sic) (annexures A and B). That statement recorded the balance owed by the Trust to Dawn at the date of her death was $93,154.78. [The late Mrs Underwood’s son and a director of Dawn D Underwood Trustee Ltd] was anxious about that loan amount, and whether his mother could claim it. What was discussed at that meeting was as detailed in my email to [the late Mrs Underwood’s son and a director of Dawn D Underwood Trustee Ltd] of 17 May 2011 (a true copy of which is annexed hereto and marked “C”). It was agreed between myself as Executor of the Estate, and [the late Mrs Underwood’s son and a director of Dawn D Underwood Trustee Ltd], that the loan owed by the Trust to Dawn’s Estate did not need to be repaid by an exchange of cheques or bank transfers, that the debt owed to Dawn’s Estate was owned by the Trust, and that as a result the Trust no longer owed Dawn’s Estate any amount. We also discussed the only other Estate asset namely Dawn’s personal clothing and effects which he had uplifted from the Trust’s house which Dawn had occupied. He advised me that the Trust had donated them to the Red Cross and the Salvation Army. [The late Mrs Underwood’s son and a director of Dawn D Underwood Trustee Ltd] also asked me to research the issue of whether [Ms Hodgkinson] could trace the assets which had been distributed from the Estate to the Trust and to advise him on what the legal position was. Due to delays on my part that advice was not given to him until my email of 17 May 2011.
[44] This evidence reveals attempts on the part of Mr Holmes to identify assets and liabilities of the estate at a time after he alleges that a final distribution of all assets of the estate had been made to the sole beneficiary.
[45] I confess to some scepticism about the reasons why such inquiries would be made if Mr Holmes and Mr Halcrow had completed all obligations as executors and trustees as at 10 December 2010, when the alleged distribution was made. Allied to that is my concern about Mr Holmes’ roles: he had been the solicitor for the deceased and the Trust, had prepared the Will and was acting as an executor and trustee. Irrespective of whether the letter of 10 May 2010 (putting the named executors on notice of a 1955 Act claim) had lapsed, this was a case in which it must
have been blindingly obvious to any independent executor that a 1955 Act claim was inevitable. Without casting aspersions on the executors, on the face of it, one might have expected that an independent and impartial trustee would have inquired further whether the claim was to be pursued before purporting to make a final distribution of the estate’s property.
[46] My review of the evidence leads me to two conclusions:
(a) First, there are areas in which cross-examination would be required in order to clarify issues on which Mr Holmes has given conflicting evidence. Therefore, the evidence on which the executors asked the Family Court Judge to consider strike-out did not fall within the categories of permissible evidence identified in Attorney-General v
McVeagh.21
(b)Second, putting to one side impermissible evidence adduced in support of the strike-out application, a Court could not be satisfied, to the required standard, that Ms Hodgkinson’s claim that a final distribution had not been made was unarguable.22
[47] On my reading of the material put before Judge Ryan, it seems unlikely that he had the benefit of hearing argument on the extent to which affidavit evidence was permissible. While differing from him, I can understand the basis on which he reached his decision, having regard to the argument advanced in the Family Court. I do not criticise him for it.
[48] The need to test the evidence on whether a “distribution” has been made also means that the 1969 Act claim cannot be struck out as statute-barred. While there may be a question over whether the correct party has been sued, that could be cured on a joinder application. I am not prepared to strike-out the claim on that basis
alone.
21 See para [31] above.
22 See para [28] above.
Result
[49] The appeal against the orders striking out the 1955 and 1969 Act claims are allowed. The orders made in the Family Court are set aside. Both proceedings are remitted to the Family Court at North Shore for hearing.
[50] Ms Hodgkinson has succeeded on both aspects of the appeal. I award costs in her favour against Mr Holmes and Mr Halcrow (they having personally brought the application to strike-out and supported the judgment on appeal) on a 2B basis together with reasonable disbursements, both to be fixed by the Registrar. Costs in the Family Court are remitted to that Court for reconsideration in light of this
judgment.
P R Heath J
Delivered at 4.00pm on 9 November 2012
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