Kinney v Pardington
[2015] NZHC 725
•17 April 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-443-000058 [2015] NZHC 725
BETWEEN ERIN MAUREEN KINNEY
Plaintiff
AND
MARGARET MYRTLE PARDINGTON First Defendant
AND
DAVID JOHN PARDINGTON Second Defendant
AND
KENNETH MARK PARDINGTON Third Defendant
AND
MARGARET MYRTLE PARDINGTON, DAVID JOHN PARDINGTON AND KENNETH MARK PARDINGTON Interested Parties
Hearing: 18 November 2015 Appearances:
S C Herbert for the Plaintiff
K A McKenzie for the Defendants
S Hughes QC for the Interested PartiesJudgment:
17 April 2015
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 17 April 2015 at 9.45 a.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors / Counsel:
Govett Quilliam, New Plymouth
S Herbert, New Plymouth
S Hughes QC, New Plymouth
ERIN MAUREEN KINNEY v MARGARET MYRTLE PARDINGTON [2015] NZHC 725 [17 April 2015]
Summary
[1] This is an interlocutory application by the intending plaintiff, Ms Kinney, for an order for particular discovery before she commences a proceeding to seek orders:
(a) Replacing the executors of her father’s estate and appointing in their
place the Public Trust;
(b)Declaring that assets that were jointly owned by her father and his wife (not her mother) are relationship property and that a half share of such assets belongs to her father’s estate;1
(c) Requiring the executors of her father’s estate to gather in the relationship property assets and hold them on the trusts set out in her father’s will. 2
Background
[2] Ms Kinney has already commenced a proceeding against the executors of her father’s estate under the Family Protection Act 1955 to seek provision from the estate in addition to that already made for her in his will. She proposes to bring a “companion” proceeding for the purposes of which she has made the discovery application.
[3] There has been a hearing in that proceeding before Toogood J to determine preliminary questions of law. In his judgment of 24 February 2014 he helpfully set out the background which is pertinent to this application. I refer to it briefly.
[4] Erin Maureen Kinney was born on 31 July 1990 from an extramarital relationship which her father, Kenneth John Pardington, had with her mother. Mr Pardington’s widow, Myrtle, and their two adult sons, Mark and John, did not know
of Ms Kinney’s existence until just over three months after Mr Pardington’s death.
1 Property (Relationships) Act 1976 s 88; Family Protection Act 1955.
2 Administration Act 1969, s 21.
[5] Mr Pardington died on 1 September 2011, leaving a will dated
13 September 1989. Probate of the will was granted on 29 September 2011, the executors and trustees of the estate being Mr Pardington’s widow and sons. According to an affidavit of the executors as to assets and liabilities sworn in September 2013, the total value of the assets in Mr Pardington’s estate is
$940,908.78. Liabilities total $536,782.54. The net value of the estate as at 25 June
2013 is therefore said to be $178,759.93.
[6] Following Mr Pardington’s death, Mrs Pardington made no election under s 61 of the Property (Relationships) Act (PRA) for the division of relationship property. As a consequence, she was treated under s 68 as having elected Option B of that section, i.e. as taking under Mr Pardington’s will, and she became entitled to receive her husband’s chattels and a life interest in the balance of the estate. On Mrs Pardington’s death, the residue of the estate is to be divided equally among Mr Pardington’s children, including Ms Kinney, with a gift over to his grandchildren.
[7] Thus far, the estate’s liabilities and assets have been addressed according to the will, except to any extent that Ms Kinney’s interests in any relationship property may not have been taken into account. Mrs Pardington and the sons of herself and Mr Pardington, in their capacities as executors and trustees and as beneficiaries, do not dispute that according to the will, Ms Kinney is entitled to share in the residue of the estate. They accept that assets of an undisclosed nature and value were transmitted to Mrs Pardington after her husband’s death on the basis that she owned them with him as a joint tenant, but they are unwilling to say what those assets are or how many there are (if indeed more there is more than one).
[8] Ms Kinney is seeking further provision from such assets. She argues that such assets as have passed to Mrs Pardington by survivorship can and should have become part of the estate by survivorship, and divided among the children.
[9] To reach this conclusion, counsel for Ms Kinney relies on the argument that the executors have a fiduciary duty to Ms Kinney (and the other beneficiaries) to maximise the estate such that, if there are assets that they could bring into the estate using s 88 of the PRA, then they must do so. Additionally, she argues that, if the
executors gain (in their capacity as beneficiaries) from not seeking a division of relationship property in order to do so, that amounts to a conflict of interest and duty.
[10] At a hearing on 24 February 2014, whose purpose was to determine preliminary questions of law, Toogood J made the following findings:
(a) There are circumstances in which property that was previously jointly owned by a deceased and another or others, and has passed to the other joint owner or owners (and hence currently is not considered by the administrators to be part of the estate) can form part of the deceased’s estate; and
(b)Though s 4(3) of the PRA does not operate to retain jointly held assets in, or bring such assets back into, an estate, other provisions of the PRA might operate in that way, depending on the circumstances.
The application
[11] Ms Kinney now seeks orders (as an intending plaintiff) under High Court Rule 8.20 against Mrs Pardington and her sons (the intended defendants) in their capacities as administrators and in their personal capacities requiring them to file and serve on her affidavits stating:
(a) Whether they have or have had in their control documents touching on the extent of assets now owned by Myrtle Margaret Pardington which could have been or might be the subject of orders for division of relationship property pursuant to s 25(1) of the PRA; and
(b)If documents of this kind have been but are no longer in their control, their best knowledge and belief, when the documents ceased to be in their control and who now has control of them.
[12] Ms Kinney also seeks an order that, if such documents are in the intended
defendants’ control, they make them available to her for inspection.
[13] Rule 8.20 provides:
8.20 Order for particular discovery before proceeding commenced
(1) This rule applies if it appears to a Judge that—
(a) a person (the intending plaintiff) is or may be entitled to claim in the court relief against another person (the intended defendant)
but that it is impossible or impracticable for the intending plaintiff
to formulate the intending plaintiff's claim without reference to 1 or more documents or a group of documents; and
(b) there are grounds to believe that the documents may be or may
have been in the control of a person (the person) who may or may not be the intended defendant.
[…]
(4) The Judge may not make an order under this rule unless satisfied that the order is necessary at the time when the order is made.
[Emphasis added]
[14] The application is opposed on the bases essentially that it is not impossible or impracticable for Ms Kinney to formulate her claim for the relief she intends to seek without reference to the documents sought, and that the order for pre- commencement discovery is unnecessary. The respondents argue that it is not impracticable because Ms Kinney could simply bring another limb to her existing claim. Additionally, they argue the order is not necessary because any application Ms Kinney makes must meet the test prescribed by s 88 of the PRA, i.e. that refusing leave would cause serious injustice. They say that she will be unable to meet this test, and in any case does not require the discovery sought to enable her to mount an argument based on s 88.
[15] It is noteworthy that express reliance is not placed on whether Ms Kinney is (or is not) entitled to claim in the court the relief that she proposes to seek against the intended defendants. Nonetheless she has the onus of showing she is entitled to claim the relief she proposes to seek.
[16] This is because under r 8.20 in order for an order for discovery to be made, an applicant must show that she is or may be entitled to claim relief against an intended defendant. She must also show that:
(a) it is impossible or impracticable for her to formulate the claim for that relief without the documents sought; and
(b)there are grounds for belief that the documents may be or have been in the possession of the person concerned.3
[17] Necessity is likely to be obvious if ground (b) is shown. There is no particular dispute as to (c). I therefore deal with grounds (a) and (b).
[18] As this is an interlocutory application, I shall interpret the case law broadly. I need only decide this is a genuine attempt to establish a claim, rather than a fishing expedition.
Is or may be entitled to claim
[19] I begin with the question whether Ms Kinney is entitled to claim the several forms of relief she has identified under r 8.20. It is trite that she must not be prevented by any statutory limitation from seeking the intended relief. Provided she is not confronted by any such limitation she must show she may be a person that may be entitled to relief in the sense that term is generally understood to mean.
[20] In Hetherington v Carpenter, the Court of Appeal emphasised that the plaintiff need not be likely to succeed, only that she must have a real, rather than a speculative claim. The emphasis was on discouraging illegitimate or mis-motivated fishing expeditions:4
… discovery will not be available merely because it is possible that it may disclose a claim. Rule 299 is not a mechanism to encourage fishing expeditions. ... The Court cannot be intended, at the stage of precommencement discovery, to reach any conclusion as to the likelihood of ultimate success at trial. As McGechan J said the essential concern in cases such as Kerr v Haydon [1981] 1 NZLR 449, to which Somers J referred, was to sort out the real from the fishing, rather than to prejudge the merits of a case at a preliminary stage.
If the proposed claim, even if particularised, would be struck out as having no basis in law, then clearly discovery should not be granted. There must be more, however, than the mere ability to make allegations which avoid being struck out. Counsel's duty to the Court requires some basis before allegations are made and proceedings issued, although the evidence at that stage may be insufficient to establish the case.
3 Welgas Holdings Ltd v Petroleum Corp of NZ Ltd (1991) 3 PRNZ 33 (HC) at 40.
4 Hetherington Ltd v Carpenter [1997] 1 NZLR 699 (CA) at 704-5.
[…]
This reinforces the view that it is not necessary to establish that there is in fact a good claim, but there must be established more than a mere speculative possibility.
[21] Section 88 of the PRA provides:
88 Who can apply
[…]
(2) The personal representative of the deceased spouse or partner may, with the leave of the court, apply for an order under section 25(1)(a) [dividing
shares in relationship property]. The court may grant leave only if it is satisfied that refusing leave would cause serious injustice.
[Emphasis added.]
[22] Ms Kinney is not a personal representative of the deceased spouse or partner. On that basis, she is not entitled to claim under s 88 of the PRA, and she cannot therefore have discovery for the purpose of such a claim. If her application to replace the executors is approved, it will be for the Public Trust to make that claim. Whether or not the Public Trust will wish to do so is not something I need to be concerned with, because Ms Kinney is clearly ineligible.
[23] I turn then to whether Ms Kinney is or may be entitled to claim relief substituting the Public Trust as executor. Relevantly, s 21 of the Administration Act
1969 reads as follows:
21 Discharge or removal of administrator
(1) Where an administrator is absent from New Zealand for 12 months without leaving a lawful attorney, or desires to be discharged from the office of administrator, or becomes incapable of acting as administrator or unfit to so act, or where it becomes expedient to discharge or remove an administrator, the court may discharge or remove that administrator, and may if it thinks fit appoint any person to be administrator in his or her place, on such terms and conditions in all respects as the court thinks fit.
[24] Where an application is made under s 21, the Court will consider the interests of the beneficiaries. That would include Ms Kinney. A conflict of interest alone will not justify removing administrators, but it may well be expedient to remove administrators if that conflict of interest means they are actually preferring the
interests of the class of beneficiaries to which they belong over another.5 That is exactly what Ms Kinney argues they are doing by refusing to apply under s 88. It is not for me at this stage to prejudge the merits of that claim, only to be satisfied that Ms Kinney has established that there is some basis for the intended claim. Plainly, Ms Kinney is entitled to apply to replace the executors under the Administration Act, s 21, and she may be entitled such relief.
[25] The question, then, is whether it would be impossible or impractical for Ms Kinney to formulate the claim for relief (replacement of the executors) without the documents sought.
Impossible or impracticable to formulate claim without documents sought
[26] The question is not what is necessary to make out the claim, but what is necessary to formulate a statement of claim.6 If a statement of claim can be formulated without the discovery sought, then discovery may be able to wait until the claim is actually brought. The meaning of “impossible or impracticable” was discussed in Exchange Commerce Corporation Ltd & Grovit v New Zealand News Ltd:7
Then there are the words “impossible or impracticable”. There is some, but not much, difference between these words in ordinary parlance. A thing is said to be impracticable when it cannot be done, when it is practically impossible to do it. The words “impossible or impractical” are used in r 299 with reference to an inability to formulate a claim without resort to the document or class of documents sought to be discovered; that is to say an inability to plead the claim in accordance with the requirements of the rules. If without reference to the document that is impossible or not practicable then the condition will be satisfied.
[27] In making this application for pre-commencement discovery, counsel for Ms Kinney has relied on three documents which are said to disclose the existence of an unidentified but significant asset or assets. Those are two letters from the defendant’s solicitors to Ms Kinney’s solicitor, and the affidavit of Myrtle Pardington in which
she acknowledges the existence of jointly owned assets. The administration
5 See Crick v McIlraith [2012] NZHC 1290, Hinde v Cranwell [2012] NZHC 63.
6 See for example Truck Master Ltd v Mastagard Waste Ltd [2014] NZHC 1676 at [50].
7 Exchange Commerce Corporation Ltd v New Zealand News Ltd (1987) 1 PRNZ 230, at 234, approved in Hetherington, above n 4, at 705-6.
statement prepared by the administrators also discloses debts of around $500,000 owed by the estate to the Pardingtons’ family trust, which Ms Kinney’s solicitor says should be matched by assets transferred to the estate. In my judgment, these documents coupled with the refusal to disclose details of the assets are sufficient to formulate the claim. If discovery is required, it can be done in accordance with usual practice after the claim is formulated. Whether or not that will provide her with the incentive she seeks to continue with the claim will be something she will no doubt need to consider, but that does not (in my assessment) warrant a discovery order under r 8.20.
Result
[28] The claim that Ms Kinney is entitled to make can be formulated without pre- commencement discovery. The application is therefore denied. Ms Kinney can make her claim to replace the executors according to the ordinary process, with discovery to occur after the claim is filed.
[29] Costs are reserved. If costs are in issue, any application for costs is to be made by brief memorandum to be filed and served within 10 working days.
Associate Judge Sargisson
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