Jones v Jones

[2023] NZHC 1408

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE

CIV-2022-442-000052

[2023] NZHC 1408

UNDER

the Administration Act 1969

IN THE MATTER

of the ESTATE OF

BASIL RAYMOND JONES

BETWEEN

LAUREL DAWN JONES

Applicant

AND

CINDY MARIA JONES

First Respondent

AND

JASON RAYMOND JONES

Second Respondent

Hearing:

30 May 2023

Counsel:

A M Halloran for Applicant

D R Weatherley for Respondents

Judgment:

7 June 2023

JUDGMENT OF ISAC J

[Application to remove executors]

Introduction

[1]        Mr Basil Jones died on 10 March 2021. This proceeding concerns a dispute between his surviving wife, Laurel, and Mr Jones’ two adult children of a previous relationship, Cindy and Jason.1

1      Given the shared surnames of the deceased, and the parties, I will refer to them throughout this judgment by their first names. I mean them no discourtesy by doing so.

JONES v JONES [2023] NZHC 1408 [7 June 2023]

[2]        Shortly before his death, Basil completed a new will. He appointed Laurel, Cindy and Jason as his executors and, broadly, divided his estate between the three of them.

[3]        Laurel has made an election to pursue a claim against Basil’s estate under the Property (Relationships) Act 1976. She has also brought a claim for provision under the Family Protection Act 1955. The effect of Laurel’s election to pursue a relationship property claim means that she has renounced her entitlement as a beneficiary of Basil’s estate.2

[4]        Laurel accepts that she should no longer serve as an executor given the conflict between her personal interests and her duties as an executor. However, in this proceeding she claims that Jason and Cindy should also be removed under s 21 of the Administration Act 1969. She argues that a combination of factors, including delay in the administration of the estate, the actions of her co-executors and their hostility towards her require the appointment of an independent executor.

[5]        The issue I must determine is whether it is expedient to remove all three executors in terms of s 21.3

Background

[6]        There is very little dispute between the parties about the relevant facts. Where they differed is on their interpretation of those events and their significance, if any, to the exercise of the Court’s discretion.

[7]        According to the evidence, Cindy and Jason’s mother had been married to Basil. However, in 1989 he began a de facto relationship with Laurel and was eventually married to her in 2004. It follows that Laurel and Basil had been in a relationship for 32 years at the time of his death.

2      Property (Relationships) Act 1976, s 76(1).

3      In Vlaar v Van Der Lubbe [2016] NZHC 2398 at [26], Clark J referred to the “significant” discretion the Court holds under s 21.

[8]        Prior to the commencement of his relationship with Laurel, it seems Basil owned a family home in Seaton Street, Nelson, together with virtually all of the shares in a company that operated a motor vehicle sales business, Sun City Motors Limited. By the time of Basil’s death Sun City held the following major assets:

(a)a tenanted commercial building in Collingwood Street, Nelson;

(b)the motor vehicle sales business operating from leased premises in Richmond; and

(c)a classic car collection, held in the Collingwood Street property.

[9]        Basil was  unwell  for some time before this  death.  His  will  was  made  on 1 March 2021. He died nine days later. Probate was granted on 9 June 2021 in favour of Laurel, Cindy and Jason.

[10]Under Basil’s last will he:

(a)gave Cindy and Jason each a classic car, and left Laurel a 2018 Haval SUV;

(b)gave Laurel a life interest in the family home they lived in for 32 years;

(c)purported to give 40 per cent of the commercial property at Collingwood Street to each of Jason and Cindy, with the remaining  20 per cent going to Cindy’s daughter, Danielle;

(d)left the Sun City Motors business and associated vehicles to Jason,

Cindy and Laurel in equal shares; and

(e)left his residuary again to Laurel, Cindy and Jason also in equal shares.

[11]      It seems Basil may have misunderstood the structure of his asset ownership because while he purported to leave the Collingwood commercial property in his will to Cindy, Jason and Danielle, the parties agree that the property is in fact owned by

Sun City Motors Limited. And, as noted, the company also owns the related motor vehicle dealership, the classic car collection and receives an income stream from tenancies within the building.

Events since Basil’s death

[12]      Despite the grant of probate almost two years ago, it seems nothing has really been done by the executors to gather in the assets of the estate, discharge its debts and attend to its distribution to the beneficiaries. Of course, before any distribution can take place the estate will need to resolve Laurel’s claims under the Property (Relationships) Act and Family Protection Act.

[13]      Before the grant of probate, and without notice to Laurel, Cindy transferred all of Basil’s shares in Sun City Motors Limited into her own name. For reasons which are unclear she transferred the very small parcel of shares she previously held (amounting to 0.01 per cent of the total issued shareholding) into Basil’s name. Cindy also appointed herself as the company’s sole director.

[14]      While Cindy has subsequently acknowledged that she holds the shares on behalf of the estate, she has not transferred them into the joint names of all three executors and she has not responded to a request by Laurel, made by her solicitors in a letter of 6 December 2021, to do so. It follows that what may be the most significant asset in Basil’s estate is currently in the sole legal ownership of Cindy, who is one of the three Court appointed executors and one of four beneficiaries identified in Basil’s will.

[15]      On 10 August 2021, Laurel gave notice that she wishes to make an application for the division of relationship property against Basil’s estate rather than receive the bequests left to her under Basil’s will.

[16]      Laurel, Cindy and Jason have also been unable to resolve Laurel’s relationship property or Family Protection Act claims. As a result, Laurel has filed proceedings in the Family Court. In response, Jason and Cindy have filed a notice of intention to appear, in their personal capacity, in which they oppose Laurel’s application for further

provision out of the estate. They also wish to be heard in relation to the Property (Relationships) Act claim.

[17]      The parties were also unable to agree on a range of other matters including the appointment of an independent professional executor to replace all three family members, repairs and maintenance of the family home, or its sale for a more modest home for Laurel. Laurel commenced this proceeding in November 2022. On the evidence filed it appears that no further meaningful progress has been made in the administration of the estate in the intervening six months.

Jurisdiction

[18]      Section 21 of the Administration Act 1969 confers a broad discretion to discharge or remove an administrator where it is “expedient” to do so.

[19]      The broad power reflects the Court’s equitable jurisdiction to supervise the administration of trusts, including estates. The power to remove and replace trustees is a broad one exercisable in a variety of circumstances including where there has been no misconduct or neglect of duty.4 The paramount concern is whether the trust is being properly executed for the benefit of the beneficiaries for whom the trust estate has been created. The main guide is the welfare of the beneficiaries.5 If the continuation of a trustee is detrimental to the execution of a trust, the trustee is expected to stand aside.6

[20]      In terms of the Court’s statutory jurisdiction in s 21, Associate Judge Osborne (as he then was) observed that the term “expedient”:7

… imports considerations of suitability, practicality and efficiency. In the context of estate administration the use of the term “expedient” therefore demands an overarching question – will removal of the administrator be a suitable, practical and efficient means of advancing the interests of the estate and of its beneficiaries?

4      Vlaar v Van Der Lubbe, above n 3, at [22].

5      Letterstedt v Broers [1884] 9 App Cas 371 (PC) at 387; and Frickleton v Frickleton [2016] NZCA 408, [2017] 2 NZLR 154 at [29] at [33].

6      Vlaar v Van Der Lubbe, above n 3, at [22].

7      Crick v McIllraith [2012] NZHC 1290 at [18].

[21]The principles informing the exercise of the Court’s discretion are as follows:8

(a)The starting point is the Court’s duty to see estates properly administered and trusts properly executed.

(b)This jurisdiction involves a large discretion which is heavily fact-dependent.

(c)The wishes of the testator/settlor (evidenced by the appointment of a particular executor or trustee) are to be given consideration, but ultimately the question is as to what is expedient in the interests of the beneficiaries.

(d)Expedience is a lower threshold than necessity, and imports considerations of suitability, practicality and efficiency. Misconduct, breach of trust, dishonesty, or unfitness need not be established.

(e)Hostility as between administrators/trustees and beneficiaries is not of itself a reason for removal, but hostility will assume relevance if and when it risks prejudicing the interests of the beneficiaries.

Overview of the rival contentions

[22]      As noted, Laurel accepts that she is no longer an appropriate person to continue as an executor, and in particular her interests in relation to her Family Court claims against Basil’s estate give rise to an obvious conflict of duty and interest. But she says that Cindy and Jason should also be removed due to a combination of factors:

(a)the executors’ delay in resolving the affairs of the estate;

(b)hostility by Cindy towards Laurel;

(c)Cindy’s conduct, and in particular transferring Sun City Motors shares into her own name and appointing herself as its sole director;

(d)the intransigent and at times frustrating conduct of Cindy and Jason since the grant of probate. I am invited to draw an inference that they have conducted themselves in a manner which belies their assertion that they are able to continue acting appropriately as executors;

8      Farquhar v Nunns [2013] NZHC 1670; Tod v Tod [2015] NZCA 501, [2017] 2 NZLR 145 at [22];

and Frickleton v Frickleton, above n 5, at [29].

(e)a potential conflict of interest involving Cindy personally, who finds herself as a sole director and shareholder of the company owned by the estate and as the individual with control over the operation of the business;

(f)Jason, who now lives in Thailand, is unable to obtain an active role in the administration of the estate; and

(g)the delay in addressing Laurel’s relationship property and Family Protection Act claims, which Laurel argues has been tainted by hostility towards her and self-interest.

[23]      In response, Jason and Cindy say that they have done nothing which warrants their removal as executors, and that they should be permitted to remain as the sole executors. They argue that the estate administration has been delayed not due to anything they have done individually but as a result of the obvious conflict of interest which has arisen given Laurel’s interests as a claimant against the estate and her position as one of its executors. Her removal would clear the way and ensure that proper progress to settle the estate’s affairs can be made.

[24]      In addition, Cindy accepts that she must hold the shares in Sun City Motors for the estate and that the business remains an estate asset. She says she needed to take urgent steps to ensure the business continued to trade and there was nothing improper about her motivation or actions. Jason and Cindy also point to what they say has been reluctance by Laurel to share financial information relevant to settling the estate’s circumstances.

Consideration

[25]      Having considered all of the evidence and counsel’s helpful submissions, I have reached the clear view that it is expedient to remove and replace the current executors. I have reached this view for five reasons.

[26]      First, Laurel is a claimant under the Family Protection Act, and the executors must act out of a duty of even handedness to all of the beneficiaries in that context.9 It follows that the adversarial position Cindy and Jason wish to take in relation to Laurel’s relationship property claim is at odds with their obligations as executors in relation to her Family Protection Act claim.

[27]      Second, all three executors have failed in their first and primary obligation to gather in and secure the estate’s assets,10 and in particular the shareholding in Sun City Motors Limited.

[28]      While I have no reason to doubt Cindy’s explanation for her initial decision to transfer the shares into her own name, and her reasons for appointing herself as the company’s sole director, it is clear that the shareholding ought to have been transferred into the names of all three executors. There is no explanation for her delay in doing so in the intervening two years.

[29]      Equally, Cindy’s appointment as a sole director is problematic given that as director she is able to conduct the company’s affairs without recourse to her co-executors. This situation is unlikely to have arisen had all of the executors been appointed as shareholders and directors.

[30]      I also consider that the undertaking Cindy has given to Laurel not to reduce the value of Sun City Motors is inadequate given the obligation of the executors to gather in and secure the assets of the estate. Laurel and Jason have independent obligations to all the beneficiaries which, in my view, are not met by obtaining an undertaking from a co-executor. Moreover, there is an opaqueness about the assets, trading position and profitability of the company which has subsisted for nearly two years since Basil’s

9      Re Stewart [2003] 1 NZLR 809, (2002) 22 FRNZ 519 (HC) at [25]; Sadler v Public Trust [2009] NZCA 364 at [26]–[35]; Irvine v Public Trustee [1989] 1 NZLR 67 (CA) at 7; and Family Property (online ed, Westlaw) at [TU35.02(4)].

10 Official Assignee v Ashby [2017] NZHC 917; John McGhee and Steven Elliott (eds) Snell’s Equity (34th ed, Thomson Reuters, London, 2020) at [31-001] and [31-013]; Nicky Richardson and Lindsay Breach Nevill’s Law of Trusts, Wills and Administration (12th ed, LexisNexis, Wellington, 2016) at 607 and 610; and Pratley v Courteney [2018] NZCA 436, [2018] NZAR 1787 at [18], affirmed in McCallum v McCallum [2021] NZCA 237 at [28].

death. There should be clarity for the beneficiaries with regard to such matters and to ensure that Cindy’s operation of the business is not affecting their interests.

[31]      Third, while Jason and Cindy have, through their solicitors, agreed to progress Laurel’s relationship property claim, there is no evidence that they have taken any meaningful steps to do so. I am concerned that the position revealed by the correspondence between the parties’ solicitors suggests that there may be a temptation for the respondents to use their position as executors to delay resolution of Laurel’s claims (whether informally or through the Family Court).11 In doing so, they would delay administration of the estate and would not be serving the best interests of all of the beneficiaries, including Laurel.12

[32]      Fourth, while there is no  suggestion  that  Jason  has  been  absent  from  New Zealand for 12 months or more, or will remain so, the fact that he is now residing in Thailand with no indication of a return to live here leaves me with a concern about his ability to take an active part in the administration of Basil’s estate. There is a risk that Jason’s absence could result in a de facto delegation of his responsibilities as executor to Cindy.

[33]      Fifth, and finally, the parties accept that Laurel’s claims must first be resolved before the affairs of the estate can finally be determined. I do not consider it is in the best interests of the beneficiaries, which include Cindy’s daughter, Danielle, to leave the conduct of the defence of Laurel’s claim in the hands of Cindy and Jason alone. Their personal interests are likely to give rise to a risk of decision-making in their own self-interest. An independent executor will ensure that if Laurel’s claims are to be defended, the opposition will be conducted in a way that meets the requirements of the law and is in the best interests of the beneficiaries as a whole. It will also ensure that steps are taken promptly to resolve the estate’s administration.

11 The evidence, Ms Halloran suggests, indicates there is long-standing hostility between the parties caused largely by the circumstances surrounding Laurel and the deceased’s relationship.

12 I agree with Mr Weatherley’s submission that to the extent Laurel now claims against the estate under the Property (Relationships) Act that she has ceased to be a beneficiary under Basil’s will and, therefore, may not be owed a duty of even handedness by the executors who are entitled to protect the estate against Laurel’s claim. But Laurel has also brought a claim under the Family Protection Act, and so her removal as an executor does not resolve the question of the scope of Cindy and Jason’s obligations as executors towards her.

Conclusion and result

[34]The application is granted. I order the removal of the executors from the estate.

[35]      A question remains as to the appropriate replacement executor. Ms Halloran suggested that the Court could appoint the Public Trust without its consent under s 75 of the Public Trust Act 2001. I am not persuaded that s 75 permits the Court to do so. Accordingly, I direct the plaintiff to file a consent to act from the Public Trust within 10 working days of the date of this judgment. Assuming one is forthcoming, I will make an order appointing the Public Trust on the papers. If for any reason the Public Trust is unable or unwilling to accept an appointment as sole executor, the parties are to file memoranda within 15 working days identifying an independent professional executor to be appointed. I encourage them to reach agreement. If they are unable to do so, I will determine the issue following receipt of memoranda on the papers. Any executor nominated by the parties will also need to provide a consent to act.

[36]      Laurel has been successful in this application. I am minded to grant her costs on a 2B basis. If the parties are unable to reach agreement on costs they may file memoranda. If that becomes necessary I may be inclined to order costs against the unsuccessful party.

Isac J

Solicitors:

Pitt & Moore, Nelson for Applicant

Young Hunter, Christchurch for Respondents