Kinney v Pardington

[2014] NZHC 289

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

CIV-2013-443-058 [2014] NZHC 289

UNDER	The Family Protection Act 1955
IN THE MATTER	of the Estate of KENNETH JOHN PARDINGTON
BETWEEN	ERIN MAUREEN KINNEY Plaintiff
AND	MARGARET MYRTLE PARDINGTON, DAVID JOHN PARDINGTON and KENNETH MARK PARDINGTON Defendants
AND	DAVID JOHN PARDINGTON and KENNETH MARK PARDINGTON Interested Parties

Hearing:	24 February 2014
Appearances:	S Herbert for Plaintiff K McKenzie for Defendant S Hughes QC for Interested Parties
Judgment:	26 February 2014

JUDGMENT OF TOOGOOD J [Preliminary questions of law]

This judgment was delivered by me on 26 February 2014 at 3:00 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

KINNEY v PARDINGTON [2014] NZHC 289 [26 February 2014]

[1]      The plaintiff, Erin Maureen Kinney, was born on 31 July 1990.  She is the child of an extramarital  relationship which her father, Kenneth John Pardington (“Mr Pardington”), had with her mother.  Mr Pardington’s widow and their two adult sons, Mark and John, did not know of Erin’s existence until just over three months after Mr Pardington’s death on 1 September 2011.

[2]      This  proceeding  concerns  a claim  made  by Erin  against  Mr Pardington’s estate (“the Estate”) under the Family Protection Act 1955.  The judgment deals with these preliminary questions of law posed by Associate Judge Abbott, at [11] of a Minute dated 8 October 2013:

Are there circumstances in which property that was previously jointly owned by the 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?  In particular, does s 4(3) or other provisions of the Property (Relationships) Act operate to retain jointly held assets in, or bring such assets back into, the estate?

[3]      Counsel filed helpful written submissions and the matter was called for a hearing before me on the preliminary questions only.   As will appear from the discussion below, counsel were agreed on the answers but they were also agreed that the answers did not materially advance resolution of the real issues between the parties because the case as pleaded addresses only some of them.

Answers

[4]      I answer the questions as follows:

(a)      Yes, 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.

(b)While s 4(3) of the Property (Relationships) Act 1976 (“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.

Timetable orders

[5]      Counsel agree that continued uncertainty about the contents of the Estate and Erin’s claims to share in it is not in the parties’ interests and that all issues should be addressed and disposed of as soon as is reasonably possible.  As requested, I make the following timetable and associated orders:

(a)      By  1 April  2014,  the  plaintiff  shall  file  and  serve  any  amended statement of claim she may wish to file, including the addition of any further  causes  of  action  against  the  defendants  as  executors  and trustees of the Estate.

(b)By 1 May 2014, the defendants shall file and serve a statement of defence to any such amended statement of claim.

(c)      By  2  June  2014,  the  parties,  including  Mark  and  John  in  their capacities as interested parties, shall file and serve any interlocutory applications, including any further or amended application by Erin for discovery.

(d)By 16 June 2014, the parties shall file any Notices of Opposition to any interlocutory applications filed.

(e)      As  soon  as  is  reasonably  possible,  the  Registrar  shall  arrange  a telephone conference with an Associate Judge, to be scheduled for the first available date after 16 June 2014, for the purpose of setting a timetable for submissions and a hearing date for any interlocutory applications which are opposed.

[6]      The usual requirement is that costs on interlocutory applications should be fixed when the application is determined.1    Any application for costs in relation to the preliminary questions hearing shall be made by memorandum filed and served no later than 24 March 2014.  Any memorandum in reply shall be filed and served by

14 April 2014 and the matter shall be dealt with on the papers, unless the Court directs otherwise.

Reasons

Background facts

[7]      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 his sons, Mark and John.

[8]      According to an affidavit of the executors as to assets and liabilities sworn in September 2013, the Estate comprised two residential properties in New Plymouth; a marina berth in Whitianga; tax refunds owed to Mr Pardington at the date of his death; the proceeds of a $10,000 life assurance policy; around $5,000 held in a cheque account; and a loan of $61,250 made to a family trust.  The total value of the assets was said to be $940,908.78.   Liabilities totalled $536,782.54, being funeral costs; an advance from the family trust of $246,069; and a half-share of an advance of $560,281 (described as “House advance”) by Mr and Mrs Pardington.  The net value of the Estate as at 25 June 2013 is said to be $178,759.93.

[9]     Following her husband’s death, Mrs Pardington elected not to make an application under s 61 of the Property (Relationships) Act 1976 (“the PRA”) for the division of relationship property.  As a consequence, she became entitled to receive, in terms of the will, her late 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, with a gift over to his grandchildren.

[10]     To date, the Estate’s liabilities have been addressed and the assets applied in accordance with the will, except to any extent that Erin’s interests as a beneficiary may not have been taken into account.

What is agreed between the parties

[11]     I understood from the affidavits filed, and it was confirmed to me from the Bar, that the defendants, in their capacities as executors and trustees and as beneficiaries, do not dispute that Erin is entitled to share in the Estate in terms of the will.   However,  it  appears to  be common  ground  that  an  asset  or assets  of an undisclosed nature and value were transmitted to Mrs Pardington after her husband’s death on the basis that she was an owner of them as a joint tenant.   Mr Herbert asserts on Erin’s behalf that the defendant trustees have a fiduciary duty to take such steps as may be reasonably necessary to bring into the Estate such of the assets owned  by Erin’s  late father at  the time of his  death,  whether jointly with  Mrs Pardington or not, as might properly be treated as Estate assets as a matter of fact and law.

The answers to the questions for preliminary determination

[12]     In the course of discussing whether the answers to the preliminary questions stated  by Associate  Judge Abbott  for  determination  were  in  dispute,  it  became apparent that counsel agree, first, on the answers to the questions and, second, that the answers would not materially assist the parties in the resolution of the real issues between them, giving the limited scope of the present case.

[13]     It is agreed that the first of the questions stated should be answered ‘Yes’:  the trustees  have  the  power  under  ss 88(2)  and  88(3)(a)  of  the  PRA to  apply  for appropriate  orders  under  ss 25(1)(a),  25(1)(b),  or  25(3)  of  that  Act  for  the determination and division of relationship property owned by the deceased, notwithstanding that Mrs Pardington elected not to make an application under s 61 of

the Act for the division of relationship property.  It is agreed also, in accordance with the judgment of the Court of Appeal in Public Trust v Whyman,2 that an application for an order under s 25(1)(a) of the PRA could be made only with leave of the Court under s 88(2), and that the trustees would need to satisfy the Court that refusing such leave would cause serious injustice.

[14]     The parties were also agreed that the answer to the second question is that while 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 such as those just referred to might operate in that way, depending on the circumstances.

The limited scope of the present pleadings

[15]     It is now accepted by all parties that the plaintiff’s claim in the pleadings as presently constituted is limited to further provision from the Estate for her maintenance and support, and that the full extent of her claims, and the real issues between the parties, are more extensive than would properly be addressed in the present proceeding.

The real issues between the parties

[16]     The real issues dividing the parties appear to be these:

(a)      Whether the executors and trustees of the Estate have a fiduciary duty to the beneficiaries, particularly the deceased’s children and grandchildren, to “maximise” the Estate by taking such steps as may be necessary to bring into the Estate all assets that can be brought in.

(b)In that regard, whether the executors and trustees are under a duty to identify all of the property owned by the late Mr Pardington at the time of his death, whether solely or jointly with others, and to take such steps as may reasonably be required to ensure that all such assets are treated as assets of the Estate so far as that is appropriate in law.

(c)      Specifically, whether the trustees are under a duty to exercise their power under ss 88(2) or 88(3)(a) of the PRA to apply for appropriate orders  under  ss 25(1)(a),  25(1)(b),  or  25(3)  of  that  Act  for  the determination and division of relationship property owned by the deceased, notwithstanding that Mrs Pardington elected not to make an application  under  s 61  of  the Act  for  the  division  of  relationship property.

(d)Whether  circumstances  exist  which  would  entitle  the  Court  to consider under s 88(2) that serious injustice would occur if leave to apply for an order under s 25(1)(a) of the PRA is not granted.

(e)      Whether, in the context of any proceeding to enforce the carrying out of any duty to apply under the PRA, the defendants should be required to disclose all of the assets owned by the deceased at the time of his death.

Amended pleadings and timetable orders required

[17]     Mr Herbert conceded, and Ms Hughes QC and Ms McKenzie agreed, that the present pleadings would need to be amended to include other causes of action before the  real  issues  between  the  parties  could  be  addressed  by  the  Court,  and  that timetable  orders  should  be  made  to  facilitate  any  such  amendments  and  the responses to them.

............................................

Toogood J