Johns v Lord
[2021] NZHC 281
•25 February 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-2218
[2021] NZHC 281
IN THE MATTER of the Family Proceedings Act 1980 and the Property (Relationships) Act 1976 BETWEEN
STEPHEN HENRY CYRIL JOHNS
Appellant
AND
CHRISTOPHER NORMAN LORD AND COLIN CLIVE HOLLOWAY
First Respondents
GAIL PATRICIA JOHNS
Second Respondent
Hearing: 18 February 2020 Appearances:
SRJ Hamilton for the Appellant DRI Gay for the First Respondents
G C Jenkin for the Second Respondent
Judgment:
25 February 2021
JUDGMENT OF GORDON J
This judgment was delivered by me
on 25 February 2021 at 3.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Conveyancing Centre, Auckland
Craig Griffin & Lord, Auckland
Counsel:S Mitchell, Auckland DRI Gay, Auckland
JOHNS v LORD [2021] NZHC 281 [25 February 2021]
[1] This is an appeal against a decision of Judge Burns in the Family Court at Auckland1 refusing an application by the appellant, Stephen Johns, for further provision from the estate of his late father, Lewis Johns.2
[2] The first respondents, Christopher Lord and Colin Holloway, are the executors of the estate of the late Mr Johns (the executors). They oppose the appeal. The third respondent, Gail Johns, is Mr Johns’ widow. Mrs Johns also opposes the appeal.
Factual background
[3] Mr Johns was a cabinet maker and operated a successful cabinet making and kitchen fitting business, Johns Kitchenmakers Ltd, for many years. He and Mrs Johns married on 21 July 1979. It was a second marriage for both of them. Their relationship had started in approximately 1973 and they first lived together in 1976. They were still together when Mr Johns died on 26 September 2017, aged 87 years, although Mr Johns had been a permanent resident of a residential care home since late 2014. This was a consequence of two severe strokes he suffered in early 2006 and Mrs Johns’ inability to continue to care for him at home as she had done for around eight years after the strokes. Mrs Johns is now aged 77 years. She and Mr Johns had no children together.
[4] Stephen is one of three children of Mr Johns’ first marriage. He is now aged 60.
[5] Probate of Mr Johns’ last will dated 15 May 2002 was granted on 1 November 2017 in favour of Mr Lord, a solicitor, and Mr Holloway, an accountant, as executors and trustees named in the last will. Under the will, Mrs Johns received gifts of chattels. They were of modest value. The will also provided for a bequest of $20,000 to Stephen; $30,000 to one of his sisters; $40,000 to the other sister; an annuity of $4,000 to Mr Johns’ brother; and residuary estate to the trustees of the Lewis Richard Trust (the Trust). That trust was settled by Mr Johns by deed on 14 December 1995 for the benefit of himself, Mrs Johns, her two children and their children.
1 Johns v Lord [2020] NZFC 8974.
2 Given the common surname, I will refer to the appellant by his first name and his father as either Mr Johns, the late Mr Johns or the deceased.
[6] The executors advised Stephen (and his two sisters) by letter dated 21 February 2018 that there were insufficient net assets in the estate available to pay his legacy of
$20,000 or to pay the other legacies in favour of Stephen’s two sisters or the annuity in favour of Mr Johns’ brother. The value of the estate at the time comprised of cash of a net sum of $710. The executors noted that there would be further debts relating to the cost of administration and that there may be further costs if the estate was to be involved in litigation.
[7] Other assets referred to in the evidence did not form part of Mr Johns’ estate. In July 1996, as part of estate planning (and at the time a matrimonial property agreement was signed) the shareholding in Johns Kitchenmakers Ltd was adjusted so that Mr and Mrs Johns held an equal number of shares. At the same time they sold all the shares (except for one share which Mrs Johns held) to the Lewis Richard Trust. An annual gifting process followed until the debt was extinguished.
[8]Mr Johns and Mrs Johns owned a home which had been sold for the sum of
$2.8 million. That home had been settled under the Joint Family Homes Act 1994 in March 1996. The net proceeds of sale therefore passed by survivorship to Mrs Johns.
[9] Then there was an inheritance received by Mr Johns and his brother from their father in the form of a residential property. That property was sold in April 2014. In an affidavit sworn 6 August 2019 in opposition to discovery orders, Mrs Johns says that her husband’s half share of the net sale proceeds of $394,142 was paid into their joint bank account in April 2014. She says the deposit was made by her under an Enduring Power of Attorney (EPA) granted to her by Mr Johns on 10 November 2005.3 She says the deposit was made with her husband’s full knowledge and consent. Mrs Johns says that her husband did not operate a bank account in his sole name at that time. She said his personal financial affairs were conducted through two joint accounts with her, with two different banks. She says that when her husband went to live at the rest home the $394,142 was used to pay rest home fees and other living
3 The enduring power of attorney contained a clause that it should not be revoked if Mr Johns were to become mentally incapable. The enduring power of attorney had immediate effect upon its execution on 11 November 2005.
expenses. She said what was left of the proceeds (and if there was anything she did not know) passed to her by way of survivorship when her husband passed away.
[10] What was said by Mrs Johns in her affidavit is confirmed by the executors’ letter of 21 February 2018 to Stephen and his two sisters. The letter stated that upon receipt of the $394,142 Mr Johns gave specific instructions to Mrs Johns to pay the sum into the bank account held in their joint names and that Mr Johns held no bank account solely in his own name. The letter stated that the rest home fees from September/October 2014 until his death in September 2017 totalled approximately
$170,000. They further stated that all bank accounts that were jointly held by Mr and Mrs Johns vested in Mrs Johns as the survivor, upon the death of Mr Johns pursuant to the doctrine of survivorship. They stated that in their considered assessment, after taking the advice of senior counsel, neither the sum of $394,142 nor any balance remaining of that sum, fell into Mr Johns’ estate.
[11] In his judgment, Judge Burns refers to the inherited residential property being sold prior to Mr Johns’ death but at a time when he no longer had capacity.4 It would appear that the evidence on which the Judge relied for that statement was a Speech and Language and Occupational Therapy report dated 30 May 2006 under the letterhead of the Waitemata District Health Board. The report is signed by a community occupational therapist and a speech and language therapist. In the report they state that:
Mr Johns has cognitive impairment which affects his ability to understand, problem solve, plan and process information and be aware of what it indicates or means. His memory is poor, which impacts upon this. His ability with higher level thinking, reasoning/judgment are all impaired.
[12] That report was prepared three months after Mr Johns’ strokes. There does not seem to be any further reporting of either any improvement or regression since that time. I note that Mrs Johns does not accept her husband lacked capacity at the time of the transaction when the $394,142 was paid into the joint account.5
4 Johns v Lord, above n 1, at [5].
5 In a memorandum of 10 June 2019 in the Family Court, counsel for Stephen suggested that Mrs Johns had previously said in other proceedings that Mr Johns did not have capacity after his second stroke in February 2006.
District Court proceedings
[13] On 31 October 2018, Stephen filed an application under ss 3 and 4 of the Family Protection Act 1955 (FPA) seeking further provision out of his late father’s estate on the grounds that his father had failed to make provision out of his estate for Stephen’s proper maintenance and support.
[14] The executors filed a notice of defence dated 29 January 2019. They accepted that Stephen was a person who, under s 3 of the FPA was among the class of persons who are entitled to make an application under s 4 of that Act seeking further and better provision for his proper maintenance and support. However, the notice stated that there were insufficient net assets in the estate available to pay Stephen the legacy of
$20,000 (nor to pay the other legacies in Mr Johns’ last will). They stated that the inability of the estate to meet the legacy in full or any of the other bequests was advised in writing by letter dated 21 February 2018. They refer to the interim statement showing the net assets of the estate at $710, which was attached to the 21 February 2018 letter. The position of the executors was therefore that there were insufficient assets in the estate to meet the claim, even if the Court in its discretion considered the application meritorious.
[15] Mrs Johns also filed a notice of defence, dated 12 February 2019, noting that Stephen had not expressly claimed relief with respect to the items that she had been gifted by her husband.
[16] Stephen then filed an interlocutory application for discovery dated 10 June 2019. He sought details of the disposition of property during his father’s lifetime, documents in relation to the EPA and the payment and disbursement of the funds from the inherited property.
[17] The application for discovery was opposed by Mrs Johns and the executors. But notwithstanding that opposition, they filed and served full affidavits sworn 6 August 2019 and 20 August 2019 respectively, addressing the issues raised in Stephen’s application for discovery and explaining the circumstances around the disposition of property during Mr Johns’ lifetime.
[18] The application for discovery was set down for a teleconference on 26 November 2019. As at that date Mr Mitchell had only very recently been instructed. (I note that Mr Mitchell has continued to act for Stephen since that date, both in the Family Court and High Court. Mr Hamilton was instructed to appear at the hearing in this court in the week before the hearing).
[19] Mr Mitchell filed a memorandum dated 25 November 2019 seeking not to proceed with the application on 26 November 2019. In his memorandum he stated that Stephen considered that the executors should be addressing more fully whether all of the assets of the estate had been properly accounted for.
[20]The minute of Judge Druce of 26 November 2019 includes the following:
[6] Mr Mitchell, understandably, asks for more time to get to grips with the whole case. He has proposed that the discovery application be withdrawn by leave rather than dismissed. Mr Jenkin [for Mrs Johns] has made significant oral submissions asking for dismissal. He wants finality of this area of discovery. He argues that the executors have gone out of their way to provide evidence on the matters for which discovery was being sought notwithstanding the matters for which discovery sought were actually irrelevant to the Family Protection Act claim itself but provided to assist the applicant understand what had occurred to the proceeds of various assets which he knew about and was troubled may have somehow or other, for whatever reason, been disposed of outside the estate prior to death. As Mr Jenkin argues, those matters are not a matter of relevance to these proceedings.
[7] Mr Mitchell to his credit accepts the logic of that submission. He, however wants time to consider the full file, consider what other causes of action may be open to the applicant before finally determining whether this substantive application and related discovery areas are to be taken further.
…
[9] In my view the issue falls squarely on the applicant’s lack of progression of his case. I am satisfied that there is insufficient merit in the application to allow it to continue. It is a weak application. Secondly, there is no adequately explained reason for the more than two and half month delay between being put on notice of the fixture and his instructing Mr Mitchell. That is an unacceptable abuse of process. …
…
[12] … The proceedings are now adjourned to a CMR on 31 January 2020, for Mr Mitchell to advise whether these proceedings are to be advanced or whether he is seeking leave to withdrawn [sic] the substantive applications.
[21] I interpolate to add that at no time from that date to the date of the hearing of this appeal did Stephen take any steps in this court against the executors nor has he brought an application under s 103 of the Protection of Personal and Property Rights Act 1988 (PPPRA) to review Mrs Johns’ payment of the $394,142 into a joint bank account under the EPA.
[22] On 7 February 2020, the Registrar provided a Directions Notice which referred to the minute of Judge Druce. It stated:
On 26 November 2019, His Honour Judge Druce directed that this matter be adjourned to a case review for Mr Mitchell, as lawyer for the applicant, “to advise whether these proceedings are to be advanced or whether he is seeking leave to withdrawn [sic] the substantive applications”. …
The applicant has instructed his counsel to proceed.
[23] The Registrar also noted that the respondents had sought timetabling directions to enable Mrs Johns to file a strike out application.
[24] In response to the Notice of Directions from the Registrar, the respondents filed a joint memorandum dated 13 February 2020. Counsel noted that rather than seeking a date for a strike out application they sought a fixture for a half day hearing for the substantive matter to be dealt with. Their memorandum noted that there was voluminous evidential material already before the Court which showed that the estate was insolvent.
[25] On 14 May 2020, a minute of Judge Fleming following a judicial telephone conference on that date directed that there be a half day submissions only hearing. The minute also recorded that Mr Gay’s appearance at the hearing was excused as there were no funds in the estate. The substantive application was then set down for a half day fixture in the Family Court on 14 July 2020.
[26] On 9 July 2020, Mr Gay filed a memorandum on behalf of the executors for the half day hearing. He again noted that the estate had been insolvent since 21 February 2018, when the executors wrote to Stephen and his two siblings. The memorandum also noted that Mrs Johns had offered to pay the legacies of the three
children out of her own funds in final settlement of any claims.6 The memorandum further noted that Judge Fleming had excused the executors from appearing and that the purpose of the memorandum was to advise that the executors would abide the decision of the Court and that Mr Jenkin, for Mrs Johns, was authorised to speak on behalf of the executors if any issue should arise.
[27] Also, on 9 July 2020, Mr Mitchell sought an adjournment of the 20 July 2020 hearing on the basis that he had been unwell and unable to prepare. His application was granted, and a new hearing date was set for 31 July 2020 if counsel were available. It seems that Mr Mitchell was not available, and a further new date of 1 October 2020 was set for the substantive hearing.
[28] On 25 September 2020, Mr Mitchell filed submissions in support of an application for an adjournment of the 1 October 2020 hearing. He submitted that the proceeding should not be determined until the issue of whether the inherited funds should be part of the estate was resolved. He submitted that if the executors had failed to take action to pursue those funds then it would be open to Stephen to make application to the High Court.
[29] Mr Gay filed a memorandum of submissions in opposition dated 28 September 2020. The submissions noted that as early as their 21 February 2018 letter the executors had stated the value of the estate was then only $710. There was also reference to the executors’ assessment, after taking the advice of senior counsel, that neither the sum of $394,142 nor any balance remaining, fell into the deceased’s estate. The submissions referred to the statement of Judge Druce on 26 November 2019 that Mr Mitchell wanted time to consider what other causes of action may be open to Stephen before finally determining whether his substantive application and related discovery areas were to be taken further. Stephen had then indicated he wished to proceed with the substantive application.
[30] The submissions referred to Mr Mitchell’s advice to the Court again on 14 May 2020 that he wished to consider what further application to make on behalf of Stephen and that it would take a couple of weeks in which to do that. On that date, Mr Mitchell
6 Stephen refused the offer but his two sisters accepted.
was advised by the Court that he was not prevented from making further applications to the Court but the present proceeding would be set down for a half day hearing. In response to the assertion in Mr Mitchell’s memorandum that the executors should engage in litigation against Mrs Johns, the submissions on behalf of the executors referred to their having stated on numerous occasions that they had no intention of doing so because, in their opinion, there was no valid claim against Mrs Johns.
[31] Mrs Johns also opposed the application for an adjournment with submissions contained in a memorandum dated 28 September 2020. The submissions noted that Mrs Johns was bearing the cost of the proceedings which had dragged on for two years. Counsel asked that the application for the adjournment be dismissed and that the substantive application also be dismissed.
[32] Judge Burns reserved his decision on both the application for an adjournment and the substantive application. He delivered judgment on 16 October 2020. The Judge declined to adjourn the proceeding for reasons including:7
(a)the proceeding had been before the Court for some time and there had been considerable delays;
(b)that there was little or no prospect of success if Stephen were to seek to set aside or review the transaction (relating to the $394,142);
(c)the economics of proceeding further were highly questionable;
(d)the amendment to s 107 of the PPPRA came into force after the EPA was signed and that weakened the argument by Mr Mitchell that there was inappropriate self-dealing;
(e)it was likely that there was an intermingling of funds under s 10(2) of the Property (Relationships) Act 1976; and
7 Johns v Lord, above n 1, at [20].
(f)even on the merits, if Stephen was to succeed in clawing back the amount under the FPA, he was unlikely to obtain significantly more than the specific legacy.
[33] The Judge then stated that the FPA claim must fail because there were no assets in the estate (there was no evidence to the contrary). He therefore dismissed the substantive application.
The appeal
[34] Stephen’s appeal is brought against Judge Burn’s decision to dismiss the substantive application. The grounds of appeal are as follows:
(a)The Court was wrong to find that a claim against Mrs Johns to recover funds for the estate would not succeed;
(b)The Court was wrong to find that other beneficiaries had been paid from Mrs Johns’ own resources;
(c)The Court was wrong to determine that he would not receive significantly more than the specific legacy, and further to take this into account in declining an adjournment; and
(d)The Court was wrong to reserve its decision on the adjournment application, then provide him with no opportunity to proceed with his family protection claim.
[35] The relief sought is an order finding that Stephen’s claim should proceed in the Family Court.
Approach on appeal
[36] This is a general appeal and accordingly proceeds by way of rehearing.8 The High Court must form its own view of the merits, including as to matters of evaluation
8 Family Proceedings Act 1980, s 174(1B); and Property (Relationships) Act 1976, s 39(3)
and degree, although an appellant bears the onus of satisfying the Court that the decision under appeal is wrong and should be departed from.9
Analysis
[37] Before I turn to the grounds of appeal, I make a preliminary observation. The purpose of this proceeding is not for this Court to determine the rights and wrongs of the decision on the application for an adjournment. The purpose is to determine whether or not adequate provision has been made for the proper maintenance and support of Stephen from the estate. That is the inquiry required under s 4(1) of the FPA. It is Judge Burns’ decision on that issue that is the subject of the appeal. That is clear from the notice of appeal. It states that “The appellant appeals against Part B of the judgment …”. I note there was no part of the judgment under appeal specifically identified as Part B, but the notice of appeal goes on to say:
The part of the judgment appealed against is the part declining the claim for an award pursuant to Section 15.
[38] As is apparent from the decision of Judge Burns, the first three grounds in the notice of appeal go to parts of the supporting reasons given by Judge Burns to refuse to grant the adjournment (the factual finding referred to in ground (b) is arguably irrelevant to either the adjournment or the substantive application, although the finding was made on the basis of evidence before the Court).
[39] In broad terms, the adjournment was refused on the grounds of delay and that any application under s 103 of the PPPRA to review the decision of Mrs Johns regarding payment of the $394,142 into a joint account was unlikely to succeed. If there were any errors in the Judge’s analysis on that latter issue, it is not necessary for this Court to decide that. They go to the Judge’s decision on the adjournment, which, as I have noted, is not under appeal.
[40] In any event, it seems to me that the delay argument in opposition was a strong one. Stephen had knowledge of the executors’ position regarding the payment of
$394,142 into the joint bank account since 21 February 2018; he received further
9 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [3]–[4].
details in the two affidavits of August 2019; he was considering the possibility of bringing applications as referred to by Judge Druce in November 2019; and he was told by Judge Fleming on 14 May 2020 if he proposed to make a separate application for assets to be transferred to the estate, he would need to get on and do that. He did not do so and still, as the date of the hearing of the appeal in this court, he had not done so. I put all the matters relating to the adjournment to one side. The appeal is in relation to the decision on the substantive application.
[41] Ground (d), which relates to the substantive application, requires consideration. I was initially somewhat concerned that in his reserved decision the Judge not only refused the application for an adjournment but also went on to dismiss the substantive application. The memoranda of submissions filed prior to the 1 October 2020 hearing did not refer in any real way to the substantive application. The submissions for the executors noted the lack of assets in the estate. The submissions for Mrs Johns asked that the substantive application be dismissed.
[42] I asked counsel what they had anticipated at the time would happen with the substantive application if in the reserved decision the Judge refused the application for an adjournment. Both Mr Gay and Mr Jenkin were very clear that it was accepted by all that the Judge would give a decision on the substantive application as part of the same reserved decision. Mr Jenkin said that as far as he understood the application would be dismissed if the adjournment was refused because of the lack of funds in the estate.
[43] Mr Gay accepted, in response to a question from me, that with the adjournment having been refused, Stephen could still have advanced an argument that there was a breach of moral duty even though the practical outcome would be that he would not receive any money. But he further submitted that the law does not deal with trifles and that this would be an argument over nothing and for no benefit. He submitted the whole purpose of the FPA was, as it was first envisaged in the 19th century, to protect family members from penury and also from falling on the public welfare and the state, on the basis that their own family members ought to protect them following death. He submitted that taking into account that purpose and approach to the legislation, there would be no purpose in the Court inquiring into whether there was a breach of moral
duty if in fact there was no money in the estate. But in any event, Mr Gay submitted
—as I have noted above —that it was accepted that the substantive application would be dismissed if the adjournment application was refused. I note that Mr Hamilton was not able to make submissions on this issue having only recently been instructed.
[44] I accept the submissions of Mr Jenkin and Mr Gay. There was no evidence to contradict the evidence of the executors as to the assets in the estate. The disposition of assets to third parties during the deceased’s lifetime and the benefit of joint assets under the rules of survivorship are not issues that can be determined in a proceeding brought in the Family Court by an applicant seeking further provision from an estate under s 4(1) of the FPA. As noted in his text, Bill Patterson says:10
5.3 Gifts, transfers of assets and jointly owned assets
The Family Protection Act 1955 does not contain any provision that prevents a person from so dealing with his or her assets during his or her lifetime that no effective order in respect of those assets can be made under the Act after his or her death. Any gift, other than a donation mortis causa, and any effective transfer of assets with or without valuable consideration made by the testator during his or her lifetime is immune from the operation of the Act.
The question is discussed in re Thomson. The growth and the use of family trusts has had the effect that significant assets may not be subject to the operation of the Act.
[45] As I have noted, the Family Court does have power to review dealings under s 107 of the PPPRA regarding the holders of powers of attorney if an application is made under s 103 of the PPPRA. But as I have also noted no such application has ever been filed even though the possibility of doing so was flagged by counsel for the appellant in the middle of 2019.
[46] There being no assets in the estate, the Judge’s decision refusing the substantive application was inevitable.
Result
[47]For all the above reasons, the appeal is dismissed.
10 Bill Patterson Law of Family Protection and Testamentary Promises (4th ed, LexisNexis, Wellington, 2013) at [5.3].
Costs
[48] The legal aid position for Stephen is not entirely clear. It seems he has had the benefit of legal aid for at least part of the District Court proceeding. That may impact on the question of costs in this Court. I will reserve costs.
[49] If there is agreement as regards costs, the parties may file a joint memorandum within 20 working days of the date of this judgment. In the absence of agreement, counsel for the executors and Mrs Johns are to file their memoranda within five working days of the date for the joint memorandum. Counsel for Stephen is to file any memorandum in opposition within a further five working days. Memoranda are not to exceed five pages (excluding attachments). I will determine costs on the papers.
Gordon J
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