Jackson v Jackson
[2017] NZHC 860
•3 May 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2017-404-84 [2017] NZHC 860
BETWEEN RAYMOND BARRY JACKSON
Plaintiff
AND
STEPHEN JAMES JACKSON First Defendant
INDA MARGARET JACKSON Second Defendant
METRO LAW Third Defendant
IRONBRIDGE REAL ESTATE LIMITED Fourth Defendant
Hearing: 26 April 2017 Appearances:
R Butler and T M Pasley for the Plaintiff
No appearance for the DefendantsJudgment:
3 May 2017
JUDGMENT OF ASSOCIATE JUDGE R M BELL
This judgment was delivered by me on 3 May 2017 at 11:00am
pursuant to Rule 11.5 of the High Court Rules
………………………………………………….
Registrar/Deputy Registrar
Solicitors:
Ross Holmes, Albany, Auckland, for Plaintiff
Counsel:
Rowan Butler, Auckland, for Plaintiff
JACKSON v JACKSON [2017] NZHC 860 [3 May 2017]
[1] This proceeding concerns the estate of Ivy Jackson who died on 6 April 2015 aged 91. Her husband, Fred Jackson, died on 7 October 2014. They had three children: Raymond the plaintiff, Stephen the first defendant, and Andrea, who died on 15 March 2015. Linda Jackson, the second defendant, is Stephen’s wife.
[2] Up until January 2014 Ivy and Fred lived in their home at Forrest Hill, Auckland. Ivy had made a number of wills. In all of them she provided for her children to take equally. On 6 January 2014 she suffered a stroke and went to hospital for treatment. On discharge from hospital she was told that because of her health she could not go back to live in her home with Fred. Instead, they moved to a rest home in Northcote, Auckland. They had enough saved to pay the rest home fees without having to sell their home.
[3] On 13 January 2014, Ivy signed two enduring powers of attorney in favour of Stephen: one for property and the other for welfare. The third defendant law firm acted for her on the powers of attorney. Using the authority given by the property enduring power of attorney, Stephen signed a listing agreement with the fourth defendant, a real estate agent, and the same day also signed an agreement to sell the Forrest Hill property for $670,000.
[4] The sale of the Forrest Hill property settled on 24 January 2014. After all expenses were paid, the proceeds came to $646,507.28 which was paid into a Westpac account held jointly by Ivy, Fred and Stephen. On Ivy’s death, the funds left in the Westpac account were $168,464.05. Some of the funds in the account were used for rest home fees - $59,853.09. There was $586,704.19 for the funds paid into the Westpac account which is not accounted for. Stephen withdrew funds from the account.
[5] Ivy and Fred also had accounts at the ANZ Bank. Stephen used Ivy’s enduring power of attorney to draw funds from those accounts. Up to her death, he drew $338,480.92. The total funds Stephen took using the enduring power of attorney come to $756,721.06.
[6] On 15 January 2014, Ivy signed a new will. She appointed Fred her executor but, if he predeceased her, she appointed Stephen and Linda to be the executors. She left her entire estate to Fred if he survived her for a further 30 days. If he did not survive, she directed that the Forrest Hill property be sold and the proceeds be divided equally among the three children. She left the residue of her estate to Stephen and Linda. She said that she had excluded Raymond and Andrea because she had made provision for them during her lifetime.
[7] As Fred did not survive Ivy, the provisions in his favour did not take effect. The direction for the sale of the Forrest Hill property did not take effect, because Stephen had already arranged the sale of the property two days before Ivy signed her will. Instead, Stephen and Linda are the executors under the will and take everything under it.
[8] Stephen and Linda did not apply for probate. They took funds from the ANZ and Westpac accounts - $89,791.70 from the ANZ accounts and $168,464.05 from the Westpac account, a total of $258,255.75.
[9] These are not the only proceedings that concern Ivy Jackson’s estate. Raymond applied to be appointed administrator of the estate under ss 6 and 19 of the Administration Act 1969. On 27 July 2016, Toogood J made an order under s 19 of the Administration Act appointing Raymond administrator of Ivy’s estate.1 That was the first order appointing any personal representative for Ivy’s estate. Toogood J accepted that Raymond’s purpose in seeking appointment was to carry out an investigation and obtain information with a view to determining whether there were funds that should be brought into the estate. Toogood J did not expressly address
whether Raymond was to administer the will of 15 January 2014 or any other will. There has been no proceeding to have the will of 15 January 2014 admitted to probate. That left a loose end.
[10] Raymond also brought a proceeding under the Family Protection Act 1955 in the Family Court at Auckland. Stephen and Linda, as executors and trustees of the estate, are named as respondents. That has now been transferred to this court.
[a] Raymond seeks a declaration that the will of 15 January 2014 was obtained by undue influence by Stephen.
[b] Raymond, as administrator of Ivy’s estate, sues Stephen for
$756,721.06 for the funds removed from the ANZ and Westpac accounts, using the enduring power of attorney.
[c] As administrator of the estate, he sues Stephen and Linda for
$258,255.75 for funds removed from the ANZ and Westpac accounts after Ivy died.
[d] Raymond sues the third defendant, the lawyers who acted for Ivy on the enduring powers of attorney, the agreements for sale and purchase and the will of 15 January 2014 in negligence.
[e] He also sues the lawyers concurrently for breach of contract for the same matters.
[f] He sues the real estate agency who acted on the sale for breach of contract.
[12] Raymond has applied for summary judgment on the second and third causes of action. Stephen and Linda were served by substituted service. The evidence showed that they had gone to Queensland. There was persuasive evidence that Stephen and Linda were trying to avoid service.
[13] On the summary judgment application I need to be satisfied that Stephen and Linda have no defences to the allegations in the causes of action against them. The burden remains on Raymond throughout to prove his causes of action. In the absence of any opposition from Stephen and Linda, he is not required to overcome unpleaded affirmative defences.
[14] The Court of Appeal’s decision in Vernon v Public Trust is authority that the donee of a power of attorney under the Protection of Personal Property Rights Act
1988 owes fiduciary duties to the donor.2 In this case, that required Stephen to use
the funds in the bank accounts, including the proceeds of sale of the Forrest Hill property, only for the benefit of Ivy. It was a breach of fiduciary duty for Stephen to use the funds in that account for his own purposes. Raymond allowed $59,853.89 for rest home fees. He has also shown that Ivy and Fred were receiving pensions which would provide funds for their ongoing support. At the end of 2013 they had
$24,000 in their joint Westpac account. When those are taken into account, I am satisfied on the evidence and in the absence of any explanation from Stephen that he breached his fiduciary duty to Ivy when he took $756,721.06 from the Westpac account and the ANZ account up to her death.
[15] Raymond also says that the sale of the Forrest Hill property was a breach of fiduciary duty. It was sold with unseemly haste. He has included evidence that it was sold at an undervalue. A registered valuer says that the property was worth
$750,000 at the date of sale. Raymond also says that the property was on-sold on
6 March 2014 for $795,000 and on 20 November 2014 for $913,000. Raymond says that that was also a breach of fiduciary duty. I find that also proved. The damages recoverable under the cause of action for breach of fiduciary duty come to
$836,725.16. There is one procedural aspect. While the statement of claim pleads the sale of the Forrest Hill property at an undervalue, it does not plead the damages claimed for that loss. Notwithstanding that, the claim is allowed under r 5.31(2) of the High Court Rules – relief may be granted even if not specifically claimed.
[16] Those findings do not, however, deal with the matter completely. Raymond needs to show title to sue and that the funds that Stephen took are recoverable as part of the estate. That is required to meet a potential objection by Linda and Stephen: they are executors and sole beneficiaries under Ivy’s will of 15 January 2014, so that any assets of Ivy’s estate, including any proceeds of any cause of action against Stephen as donee of the power of attorney, passed to them on Ivy’s death and there is
therefore nothing left for Raymond to recover for the estate. That argument is potentially also available to Stephen and Linda in the claim against them for the funds they took after Ivy died. Their argument would be that those funds belonged to them as the sole beneficiaries of the estate. These objections might be raised because so far the distribution of Ivy’s estate has not been fixed – there is the loose end of Raymond’s appointment as administrator without a will to administer.
[17] Stephen and Linda might run an argument with an approach similar to that suggested by Turner J in Re Heberley:3
Once an executor-trustee has effectively assented to his own devise or legacy and has finally conveyed to all other beneficiaries everything appropriated to any of them under the transaction in which the assent is given, in my opinion he is functus officio as trustee of the property affected by the trust, and the beneficial and legal estates of the property appropriated to himself vest completely in him. A man cannot be trustee for himself alone. He may be trustee for himself with others, but once his duties to those others have been finally and completely discharged, and he is left with no obligations under the trust but to himself, that trust disappears. …
They might say that the cause of action for breach of fiduciary duty passed to them on Ivy’s death and they were entitled to use the funds in the bank accounts after her death because no-one else had any claim on the estate. These assets vested in them before Raymond became the administrator.
[18] It is no argument for Raymond to say in a summary judgment application based only on the second and third causes of action in his statement of claim that the will of 15 January 2014 is invalid as having been made under undue influence and would never qualify for a grant of probate. That is an argument on which the first cause of action is based, but he has not applied for summary judgment on the first cause of action. A claim that a will was obtained by undue influence is inherently an unlikely topic for a plaintiff’s summary judgment application. Instead, Raymond’s case has to be considered on the basis that his claim as administrator is sound, even if the will of 15 January 2014 were to withstand scrutiny.
[19] The answer to the potential argument for Stephen and Linda lies in understanding the limits on claims by beneficiaries against an estate before
distribution is complete. On death all the property of the deceased (except that ceasing on death) passes to the personal representatives of the deceased. They are responsible for satisfying the debts of the deceased from the whole of the estate. Given this responsibility they should not distribute any portion of the estate until satisfied that debts have been paid or adequately secured or can be paid without recourse to a part of the estate to be distributed. Title to the estate assets remains with the representatives until they make the assets the property of the beneficiary –
by transfer or by assent. Before that stage the beneficiaries’ claims are inchoate.4
On to that general framework Parliament has engrafted special provisions for particular claims against the estate by those who may not be beneficiaries under a will or on intestacy, including family protection claimants.5 These provisions protect distributions by personal representatives if certain conditions are satisfied. Those conditions are directed at giving claimants a limited opportunity to notify the representatives of their intention to claim and then issue proceedings but for the opportunity to lapse if not exercised. Here are ss 47(4) and 48:
47 Protection of administrator against certain claims
…
(4) No action shall lie against the administrator or trustee by reason of his or her having distributed any part of the estate if the distribution was properly made, in accordance with subsection (2) of section 48, by the administrator or trustee after the expiration of 6 months from the date of the grant in New Zealand of administration in the estate of the deceased, and before service on him or her of any application, and without notice in writing of any application or intention to make an application that would affect the estate, being an application to which this section applies.
48 Notices and distributions
(1) For the purposes of this section and of section 47, notice in writing to an administrator or trustee of an intention to make any application to which section 47 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 or she had not received the notice, unless, before the expiration of 3 months after the date on which he or she first receives notice in writing of the intention to make the application, the administrator or trustee is served with a copy of the
4 See the exposition of Somers J in Sullivan v Brett [1981] 2 NZLR 202 (CA) at 206-207.
5 For the full list, see Administration Act 1969, s 47(1).
application or receives notice in writing that the application has been made to the court:
provided that nothing in this subsection shall prevent the subsequent making of the application within the period allowed by law.
(2) Notwithstanding the provisions of section 8 of the Family Protection Act 1955, for the purposes of section 47 and 51, 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 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 requiring that the distribution shall have been made before service on him or her of a copy of any application and without notice in writing of the matters specified in that subsection.
[20] Relevantly for this case, the protection under s 47(4) applies at the earliest only from six months after the grant of administration. In the absence of a grant of administration, time does not start to run under s 47(4). Moreover an executor cannot say that the administration of the estate is complete (so that beneficiaries can take estate assets by assent) if there is no grant of administration and claimants under s 47 have not been given the opportunity to give notices under s 48.
[21] It is accordingly not open to Stephen and Linda to say that they took the estate assets as beneficiaries under the will. Those assets could not be distributed by assent or transfer. The administration of the estate could not be complete until the conditions under ss 47 and 48 of the Administration Act had been satisfied. When Raymond was appointed executor, the cause of action against Stephen, which
remained an estate asset and could not have been distributed, vested in Raymond.6
The claim against Stephen and Linda as executors
[22] Raymond’s evidence shows that Stephen and Linda emptied the ANZ
accounts of $89,791.70 and the Westpac account of $168,464.05, a total of
$258,255.75. They were not entitled to appropriate those funds for themselves until
the condition in s 47(4) of the Administration Act 1969 had been satisfied – that is, they obtained a grant of probate and held the funds for six months. If they were to argue that they kept the funds as executors only, they would still be required to account for those funds to Raymond as the administrator appointed to replace them. They are answerable for the funds they took from the estate bank accounts after Ivy’s death. I find for Raymond on the third cause of action.
[23] When I directed substituted service, I asked whether any relief in favour of Raymond should be adjusted under the rule in Cherry v Boultbee.7 That would be a matter of affirmative defence for Stephen and Linda to raise. In the absence of the point being taken by them, it is unnecessary for me to consider it.
[24] Overall, I am satisfied that Raymond has shown that Stephen has no defence to the second cause of action and Stephen and Linda have no defence to the third cause of action. I note as a matter for further attention the current absence of any grant of probate for any will, although Ivy had made several. Case management directions are required for the other causes of action.
Outcome
[25] Raymond has judgment against Stephen on the second cause of action for
$836,725.16 plus interest on that sum at five per cent per annum from 6 April 2015 to the date of judgment.
[26] Raymond has judgment against Stephen and Linda on the third cause of action for $258,255.75 plus interest on that sum at five per cent per annum from
6 April 2015 to the date of judgment.
[27] Raymond has an order for costs against the first and second defendants for
$15,876.00 inclusive of disbursements.
……………………………….
Associate Judge R M Bell
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