Jurisich v Harris
[2016] NZHC 525
•24 March 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-485-605889 [2016] NZHC 525
IN THE ESTATE OF IHAIA GILLMAN-HARRIS IN THE MATTER
of the Administration Act 1969
BETWEEN
JEANA JURISICH
Caveator
AND
DESMOND HARRIS
Respondent
Hearing: 18 February 2016 (last submission 4 March 2016) Counsel
A G Rowe for caveator
A W Johnson for respondentJudgment:
24 March 2016
JUDGMENT OF KATZ J
This judgment was delivered by me on 24 March 2016 at 11:00am
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Wells & Co, Auckland
Martelli McKegg, Auckland
Copy to: Public Trust
JURISICH v HARRIS [2016] NZHC 525 [24 March 2016]
Introduction
[1] Ihaia Gillman-Harris died in tragic circumstances on 27 December 2014. Two men have been charged with his murder. They face trial in the High Court at Auckland later this year.
[2] Mr Gillman-Harris died intestate. He was survived by ten siblings, who are entitled to share equally in his estate. One of the deceased’s brothers, Desmond Harris, applied for letters of administration to enable him to administer the estate. One of the deceased’s sisters, Jeana Jurisich, does not believe that Mr Harris is a suitable person to administer their brother’s estate. She has filed a caveat, objecting to his appointment as administrator.1
[3] As is the usual practice in such circumstances, on 12 August 2015 an order nisi was made in respect of Mr Harris’s application. This enables the deceased’s estate to be administered on an interim basis, pending the determination of Ms Jurisich’s objection to the appointment of Mr Harris as administrator. An order was also made requiring Ms Jurisich to “show cause” why the order nisi in favour of Mr Harris should not be made absolute.2 Having now heard from the parties on that
issue, I must determine whether to:3
(a) make the order nisi absolute; (b) discharge the order nisi; or
(c) order that the application for administration be made in solemn form.
[4] Mr Harris submits that I should either make the order nisi absolute
(his preferred option) or order that his application be made in solemn form. Ms Jurisich submits, on the other hand, that I should either discharge the order nisi
1 Pursuant to ss 60 and 61 of the Administration Act 1969 (“Act”).
2 Pursuant to s 61(d) of the Act.
3 These are the three options under s 61(d) of the Act
and appoint a temporary administrator (her preferred option), or order that the application be made in solemn form.
[5] If I order Mr Harris to make his application for letters of administration in solemn form, the application would then need to proceed to a full contested hearing. Such a hearing would most likely require the cross-examination of most or all of the witnesses who have sworn affidavits to date.
Relevant legal principles
[6] If a caveator does not raise sufficient grounds at a s 61(d) “show cause” hearing to establish that a full inquiry should be made into the matters raised by the caveator, then the order nisi will usually be made absolute (final).
[7] On the other hand, if the caveator does raise sufficient grounds to establish that a full inquiry is appropriate, the usual course will be an order that the application for letters of administration be made in solemn form. It is well established that the “show cause” hearing under s 61 will not generally be the appropriate forum for
resolving disputed factual issues.4 Rather, if a caveator meets the fairly low
threshold5 of satisfying the court that there are sufficient grounds for a full inquiry into the matters that have been raised, the appropriate order is that the application proceed by way of solemn form.6 Such a process requires formal pleadings and a full contested hearing.
[8] In at least one case, however, disputed factual issues have been resolved at a s 61 hearing, rather than an order being made that the application proceed by way of solemn form. In Re van der Kaap Rodney Hansen J made an order nisi absolute following a s 61 hearing at which he had heard contested evidence.7 He concluded
that such a course was appropriate in that case, on the basis that he had all the same
4 van der Kapp v Wilson CA 97/04, 14 June 2005 at [34] and [35]. See also John Earles and others Dobbie’s Probate and Administration Practice (6th ed, Wellington, LexisNexis, 2014) at [49.4.5].
5 Re van der Kaap HC Whangarei CIV-2003-488-579, 21 April 2004;Re Payne (1989) 2 PRNZ
432 (HC).
6 Earles and others, above n 4, at [49.4.4], citing Re Nissenbaum (Deceased) [1939] NZLR
94 (SC); Re Payne (1989) 2 PRNZ 432 (HC); see also Re Sweeney (deceased) HC Auckland
P2120/88, 9 July 1991.
7 Re van der Kaap, above n 5.
information that would have been before the Court on an application for the grant of probate in solemn form. I note that, unlike in this case, the witnesses who had sworn affidavits in that case were cross-examined at the s 61 hearing.
[9] Unfortunately there is little guidance in the case law on when it might be appropriate to discharge an order nisi at a s 61 hearing. Most of the cases under s 61 have involved a contest between the other two options in s 61, namely whether the order nisi should be made absolute, or whether the Court should order that the application proceed by way of solemn form. The Act clearly envisages, however, that there will be cases where it is appropriate to discharge an order nisi at a s 61 hearing.
[10] In Re Harbord an order nisi was discharged and letters of administration granted to another person.8 That case did not, however, concern the administrator’s competency or ability to carry out their duties. In Re McGarry (Deceased) administration was granted to the Public Trustee, who had intervened, because the brother and sister in the case were quarrelling.9
[11] One of the situations where a discharge of an order nisi may be appropriate is if it is clear on the evidence available at the time of the s 61 hearing that the Court would not grant letters of administration if the application were heard in solemn form.10 This will likely require the Court to focus on evidence that is undisputed, given that it is not usually appropriate to resolve disputed factual issues at a s 61 hearing. If, however, based on undisputed evidence it is clear that the order nisi should be discharged, then there can be little justification for the additional delay and
expense of proceeding to a solemn form hearing.
8 Re Harbord HC Napier CIV-2003-441-292, 20 July 2007.
9 Re McGarry (Deceased) (1902) 21 NZLR 531 (SC). See also Re Dickens (1912) 32NZLR 374 (CA); Re Robinson [1936] NZLR s 3 (CA); Re Craig (1911) 30 NZLR 1212 (SC): in these cases the Public Trust was considered the best administrator for the good of the estate.
10 See Re Harbord, above n 8, at [15].
What is the appropriate order under s 61 in this case?
The relevant facts as set out in the affidavit evidence filed prior to the hearing
[12] Ms Jurisich swore a number of affidavits in support of her application to show cause. In addition she filed affidavits from her elder brother, Maungarangi Hoori Harris and a distant relative, Mrs Skerret-White, who has had some business dealings with Mr Harris. Mr Harris filed a number of affidavits in response. These include affidavits from two of his siblings, as well as his former accountant. Many of the allegations made by Ms Jurisich are disputed.
[13] The affidavit evidence indicates that there is some division of support between the siblings. Although the majority favour the appointment of Mr Harris there is not unanimity on the issue.
[14] Ms Jurisich’s position is that she does not believe that Mr Harris is capable of properly carrying out his duties as administrator. Her evidence is that he has failed in previous ventures in which he has had significant financial, commercial and administrative responsibility. He has also been declared bankrupt. Ms Jurisich expressed concerns about Mr Harris’s trustworthiness and whether he can be relied upon to be fair. She expressed concern that he will be motivated by self interest. Amongst other things she deposed that:
I firmly believe that Desmond has a record of mismanagement of former business activities, and in my view he has demonstrated an inability to show due diligence, prudence or honesty with regards to administering his own affairs and business affairs of others. Past history is usually an indicator for current or future behaviour. For these reasons I am opposed to Desmond being appointed administrator.
[15] Many of the matters referred to by Ms Jurisich in her evidence are disputed. There are, however, several undisputed matters that raise some concerns regarding Mr Harris’s financial management skills. They include that:
(a) he was adjudicated bankrupt on 10 June 2009 on the petition of the
Inland Revenue Department;
(b)a number of companies he has been closely associated with, as shareholder or director, appear to have had serious financial difficulties and have been liquidated or struck off the Companies Register; and
(c) a property owned by his family trust was sold at mortgagee sale.
[16] There is also largely undisputed evidence of a $30,000 loan from a distant family member that was not repaid. That evidence adds relatively little to the overall picture, however, as the impact of Mr Harris’s bankruptcy (and his subsequent discharge from bankruptcy) is that the loan is no longer payable.
[17] Turning to more heavily disputed matters, Maungarangi Harris, the eldest sibling in the family, deposed that both he and Mr Harris were convicted of failing to file income tax returns in their capacity as trustees of Mr Harris’s family trust (the Desmond Edward Family Trust). That evidence is challenged as Mr Harris says that Maungarangi Harris was the only trustee actually prosecuted in relation to Mr Harris’s family trust. However, even assuming that Mr Harris is correct, that does not appear to be a complete answer to the concerns raised by Maungarangi Harris regarding Mr Harris’s business and financial acumen. Maungarangi Harris lays the blame for his own conviction squarely at the door of Mr Harris, who he says was the principal trustee of the Desmond Edward Family Trust, and responsible for its financial affairs.
[18] Ms Jurisich also expresses concern that Mr Harris has indicated to her an intention to ensure a particular sister would not receive part of the estate, contrary to her legal entitlement. Mr Harris denies this allegation, and says he is aware of his legal responsibilities in terms of the distribution of the estate and will comply with them.
[19] As I have noted above, it is generally not for the Court to attempt to resolve disputed factual issues at a s 61 hearing. Rather, the issue is simply whether the caveator has raised sufficient grounds to show that a full inquiry should be made into
the issues raised, in circumstances where the threshold she has to meet is well recognised as being a low one.
[20] In this case, in the absence of any further evidence, I would not have been satisfied, based on the undisputed evidence alone (for example that Mr Harris has been declared bankrupt) that he was unsuitable for appointment as an administrator and that the order nisi should be discharged. I would have been satisfied, however, based on a combination of both the disputed evidence and the undisputed evidence, that sufficient grounds of concern had been raised so as to justify a full inquiry into Mr Harris’s suitability for appointment as administrator. I would have therefore directed that Mr Harris’s application for letters of administration be made in solemn form.
The relevance of the additional information that emerged during the hearing and subsequently
[21] Matters do not end there, however, due to the fact that new information came to light during the course of the hearing that raised further issues regarding Mr Harris’s suitability for appointment as an administrator.
[22] The s 61 hearing was originally scheduled to take place on Tuesday,
16 February 2016. At the outset of the hearing I encouraged the parties to explore whether a resolution (for example by the appointment of an independent administrator) might be possible. At the request of the parties the hearing was adjourned until Thursday 18 February 2016 to enable the possibility of resolution to be explored. Ultimately, however, an agreed position could not be reached.
[23] On Wednesday 17 February 2016 Ms Jurisich filed an affidavit in which she expressed concern that the previous Friday (12 February 2016) Mr Harris had emailed the beneficiaries of the estate requesting bank account details. Ms Jurisich was concerned that Mr Harris may have been intending to distribute the estate prior to her objection to his appointment as administrator being heard and determined.
[24] At the outset of the resumed hearing on Thursday 18 February 2016 counsel
for Ms Jurisich, Mr Rowe, referred me to Ms Jurisich’s affidavit of the previous day
and expressed concern that Mr Harris may be intending to distribute the estate imminently. Mr Harris’s counsel, Mr Johnson, disputed that Mr Harris intended to distribute the estate. (In fairness, I note that he had not had an opportunity to take instructions at the time). He pointed out that merely circulating a request for bank account details did not evidence an imminent intention to distribute the estate.
[25] Mr Johnson accepted that it would be improper for Mr Harris to distribute the estate when he only had an order nisi in his favour. I note that there are good reasons for this, including that in many cases an order nisi will have been made in circumstances where matters such as testamentary capacity or undue influence are in issue, resulting in considerable uncertainty over issues such as the correct beneficiaries. The role of an administrator acting pursuant to an order nisi is analogous in many respects to the position in relation to a temporary administrator under s 7(1) of the Act. Such a person does not have the power of distribution and is under the immediate control of the Court.
[26] I requested Mr Johnson to take instructions over the morning adjournment as to whether Mr Harris would be willing to provide a formal undertaking not to make any distributions pending the delivery of my judgment in respect of the caveat application.
[27] When Court resumed after the adjournment, Mr Johnson informed me that Mr Harris had indeed made a number of distributions following his email the previous Friday. In particular, he had distributed approximately $14,000 to each of the six beneficiaries who had provided him with bank account details. Distributions of that amount to all ten beneficiaries would have comprised the majority of the estate, and almost all of its cash assets.
[28] The distributions had taken place the day before the scheduled s 61 hearing. It was apparent that Mr Harris had not sought advice from Mr Johnson in relation to the distributions, or even informed him that they had occurred. Rather, he told Mr Johnson during the morning adjournment that, on the basis of advice from his previous lawyers, he had understood that he was entitled to distribute the estate six
months after the making of the order nisi. That six month period apparently expired on 12 February 2016.
[29] Prior to disclosure of the fact that Mr Harris had made significant distributions to beneficiaries the day before the hearing, argument had focused solely on whether the order nisi should be made absolute or whether the application should proceed by way of solemn form. As a result of the new information that had emerged, however, it became necessary to also consider the third alternative in s 61, namely whether the order nisi should be discharged.
[30] Before a final decision could be made on that issue it was necessary to first give Mr Harris an opportunity to fully explain, in affidavit form, the circumstances in which he came to make the distributions. Further, counsel for both parties needed time to consider the implications of this information. Timetable orders were made accordingly.
[31] Mr Harris subsequently filed two further affidavits, on 24 and 25 February
2015. He deposed that he acted quickly and accepted the role as kaitiaki (guardian) after Mr Gillman-Harris’s death in order to protect the deceased’s mana and estate. He also gave evidence of the extensive work he has undertaken to locate, secure and protect the assets of the estate. Mr Harris says that he applied for letters of administration on legal advice, because the appointment of the Public Trust as administrator was seen as being too expensive for a relatively modest estate.
[32] Mr Harris states that his original lawyer, Mr Griffin (who was no longer acting by the time of the hearing before me), provided him with verbal legal advice and gave him a copy of a case, Solicitor-General v Keefe,11 that explained the practical implications of the order nisi that had been obtained in his favour.
[33] In Keefe Wild J notes that s 61 is “opaque and bereft of helpful authority”. He interpreted the effect of an order nisi, however, as being that the person is appointed administrator unless the order nisi is discharged or the Court orders that
the application for administration be made in solemn form. An order nisi is not
11 Solicitor General v Keefe HC Napier CIV-2009-441-0608, 18 December 2009.
absolute, however, which means “free from restriction, qualification or condition…[or] Conclusive and not liable to revision”.12 Wild J summed up the effect of an order nisi as follows:
In practical terms, I consider Mr Keefe’s duty since the order nisi was made has been to gather in and protect the Estate’s assets.
[34] In what I suspect is fairly carefully worded evidence, Mr Harris states that:
I later received from Mr Griffin verbal legal advice together with case law, The Solicitor General of New Zealand v Keefe and The Executors of the Estate of Molenaar (2009), explaining the practical implications of the Order Nisi and referring to paragraphs 14 to 16. Annexed at page 7 of the exhibit is a true copy of the judgment provided to me by Mr Griffin.
My understanding of the term “gathering in and protecting the assets of the estate” was that this encompasses all of those actions which should be taken to ensure that the interests of the beneficiaries are maximised, and that this includes the making of distributions to the beneficiaries upon the expiry of a six month period from the date of the Order Nisi which appointed me administrator.
[35] Mr Harris does not specifically say what Mr Griffin’s “verbal legal advice” was. This is despite my Minute of 18 February 2016 stating that, if Mr Harris intended to assert that he relied on legal advice in making the distributions, it would be necessary to waive privilege in such advice and provide a copy of it, if in writing. Nor is there any supporting affidavit from Mr Griffin.
[36] Mr Harris’s evidence is that he received verbal legal advice from Mr Griffin together with a copy of the Keefe decision. He then goes on to say what he “understood” Keefe to mean. The reasonable inference from this evidence is that Mr Harris’s decision to make the distributions was largely based on his own personal interpretation of the Keefe decision, rather than any specific advice that Mr Griffin gave him. Mr Harris subsequently elected not to consult his current lawyer as to whether his personal interpretation (as a non-lawyer) of the Keefe decision was correct, despite the fact that a court hearing regarding his continued role as
administrator was imminent.
12 At [15] citing Bryan A Garner (ed) Black’s Law Dictionary (9th ed, Thomson Reuters, St Paul,
2009) at 1144.
[37] The interpretation that Mr Harris seeks to place on the relevant passage in Keefe contradicts the plain meaning of the words in the passage he relies on. The phrase “to gather in and protect the Estate’s assets” cannot readily be interpreted as meaning (or including) “to distribute the Estate’s assets”. Distributing or disposing of the estate’s assets is essentially the opposite of gathering them in.
[38] Mr Harris’s evidence is that he understood, despite only having an order nisi, that he could distribute the estate after six months. There is no evidence, however, that Mr Griffin gave him legal advice to that effect. Nor can such a conclusion be drawn from Keefe. It is obviously possible that Mr Harris may have misunderstood the legal advice he was given and acted erroneously as a result. Given, however, that Mr Harris’s evidence as to precisely what legal advice he received is unclear and somewhat evasive, I am not prepared to draw such an inference.
[39] At worst, Mr Harris’s actions may have been deliberately intended to thwart the caveat proceedings and render them largely moot. At best, his actions demonstrate poor judgment and suggest that Mr Harris does not understand his obligations, misunderstands or misinterprets advice received and/or fails to seek advice when it is clearly necessary and appropriate. In this context I note that the general tenor of much of the evidence filed by the caveator is that Mr Harris lacks judgment when it comes to financial matters, fails to consult, and can behave arrogantly. His conduct in distributing (or attempting to distribute) almost the entirety of the deceased’s then available estate the day before the court hearing lends significant weight to such concerns.
[40] At the request of the Court, Mr Harris has written to the beneficiaries seeking repayment of the distributions pending resolution of these proceedings. Three of the distributions were recovered as at the time that Mr Harris swore his 24 February
2016 affidavit. Mr Harris anticipated that all but one would be recovered. The funds from one of the beneficiaries cannot be recovered because it was used to pay a creditor.
[41] Based on the information disclosed in Mr Harris’s further affidavits,
Ms Jurisich raised a number of additional concerns about Mr Harris’s administration
of the estate to date. These include allegations of assets being sold at an undervalue; incomplete documentation; assets not mentioned (including two vehicles); Mr Harris using the deceased’s Range Rover for his own use for an extended period; and Mr Harris paying himself a previously undisclosed “administrator fee” of $9,550.
[42] In respect of the “administrator’s fee” I note that the general principle is that a personal representative (including an administrator) must act gratuitously and is not entitled to any remuneration or profit from their office, subject to three exceptions: where the will itself directs remuneration, where the Court allows it, and where there is agreement between the representative and the beneficiaries. There is no evidence that Mr Harris falls into any of those exceptions.
What orders should be made?
[43] As I have noted at [20] above, based solely on the evidence filed prior to the hearing I would have ordered Mr Harris to make his application for letters of administration in solemn form. The difficulty with proceeding down that route, however, is that Mr Harris would necessarily remain as administrator, pursuant to the order nisi, until that application is determined. That is likely to be many months away.
[44] Based on the additional evidence now before the Court, however, it is my view that it is no longer appropriate for Mr Harris to continue in the role of administrator, even on a provisional or interim basis. It is not necessary for me to resolve any disputed factual issues in order to reach that conclusion, as it is based on undisputed evidence including in particular that set out in Mr Harris’s affidavits of
24 and 25 February 2016.
[45] I do not doubt that Mr Harris has undertaken extensive work as administrator and for that he is to be commended. He has, however, also shown (at best) poor judgment in relation to the distributions he made and also in apparently paying himself an “administrator fee” without the approval of the Court or his fellow beneficiaries. He appears to have a somewhat limited understanding of aspects of his role and his legal obligations and has failed to seek legal advice when such advice was clearly called for.
[46] There is also the broader factual context of Mr Harris having previously been bankrupted, the fact that a number of companies he has been closely associated with have been liquidated or struck off, and the fact that a property owned by his family trust was sold at mortgagee sale. These matters on their own would not, however, have rendered Mr Harris unsuitable for appointment as administrator in the absence of a full inquiry. Rather, the specific matters that are fatal to his remaining as administrator are his attempts to distribute the estate the day before the s 61 hearing and, to a lesser extent, the payment of a fee to himself without either the approval of the Court or his fellow beneficiaries.
[47] The appropriate order is accordingly that the order nisi be discharged. It is therefore necessary to consider what ancillary orders should be made in order to preserve the assets of the estate in the interim, pending the appointment of a final administrator.
[48] Although the only formal application for letters of administration currently before the Court is Mr Harris’s, Ms Jurisich also seeks (by way of affidavit) to be appointed as administrator. In the alternative she seeks the appointment of a neutral third party administrator. Ms Jurisich has provided extensive affidavit evidence in support of her position and Mr Harris has filed opposing evidence. Mr Rowe indicated at the s 61 hearing that a formal application would be filed, if necessary.
[49] Prior to the new evidence coming to light during the hearing, Ms Jurisich was not seeking a discharge of the order nisi, but simply an order that Mr Harris’s application be made in solemn form. If such an order had been made, Ms Jurisich intended to counterclaim in the solemn form proceedings for an order that either she or a neutral administrator be appointed.
[50] I also note under s 6(2) of the Act the Court has an overriding discretion to appoint someone other than the applicant as administrator where there are “special circumstances” and it is necessary and expedient to do so. Accordingly it was always open to Ms Jurisich to seek appointment for either herself or a third party at a solemn form hearing, without the need for a separate application. Given, however,
my decision to discharge Mr Harris’s order nisi, Ms Jurisich will now need to
formalise her position.
[51] The parties were broadly in agreement that, if I discharged the order nisi, the appropriate course would be to appoint a temporary administrator under s 7 of the Act, which enables such an appointment to be made where there are “pending” legal proceedings. Given that Ms Jurisich seeks (albeit currently by way of affidavit) to be appointed as administrator or, in the alternative, seeks the appointment of a neutral administrator, I am satisfied that there are “pending” proceedings. As I have noted, however, Ms Jurisich will now need to take the appropriate procedural steps to formalise her position.
[52] To protect the position pending the determination of Ms Jurisich’s foreshadowed application, I propose to appoint the Public Trust as temporary administrator under s 7. This is, of course, subject to receiving confirmation from the Public Trust that it is willing to accept such appointment.
Result
[53] I make the following orders:
(a) The order nisi in favour of Mr Harris, dated 12 August 2015, is discharged.
(b)The Public Trust is appointed temporary administrator, subject to it confirming to the Registrar that it is willing to accept such appointment. The Public Trust (if it accepts appointment) is entitled to recover reasonable remuneration for its services from the deceased’s estate, at its usual rates.
(c) Mr Harris is to fully co-operate in the provision of all relevant information and documentation regarding the estate to the Public Trust, once the Public Trust has confirmed its acceptance of appointment.
[54] If costs cannot be agreed between counsel then leave is reserved to file memoranda. Any memorandum from Ms Jurisich is to be filed by 4 April 2016. Any memorandum in response from Mr Harris is to be filed by 11 April 2016. A decision will then be made on the papers. For the avoidance of doubt I note that any payment in respect of the costs of these proceedings is not to be met from the estate
without the approval of the Court.
Katz J
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