Lai v Huang
[2019] NZHC 1822
•30 July 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2016-404-001535
[2019] NZHC 1822
BETWEEN SOPHIE LAI
First Plaintiff
RICHARD HUANG
Second PlaintiffGINI HUANG
Third PlaintiffAND
LIU SHUN-MEI HUANG
First Defendant
CHUN-CHING HUANG
Second Defendant
CHUN-TA HUANG
Third DefendantLIU SHUN-MEI HUANG and CHUN-CHING HUANG
Fourth Defendants
Hearing: 11–13, 15 March and 13–14 May 2019 Counsel:
R Reed and A Manuson for the Plaintiffs
J R Robertson and C Jiang for the Defendants
Judgment:
30 July 2019
JUDGMENT OF EDWARDS J
This judgment was delivered by me on 30 July 2019 at 3.00 pm pursuant to r 11.5 of the High Court Rules.
Deputy Registrar
LAI v HUANG [2019] NZHC 1822 [30 July 2019]
[1] This proceeding concerns a family dispute following the death of Mr Huang Snr in 2012. His widow, Mrs Huang, is the first defendant and executrix of the Will. The second defendant, Chun-Ching Huang, is their eldest son and the third defendant, Chun-Ta Huang, is their second eldest son. Mrs Huang and Chun-Ching Huang are trustees of the Song-Lin Family Trust (Trust) and are joined in that capacity as the fourth defendants to the claim.
[2] Ms Sophie Lai, the first plaintiff, is Chun-Ta Huang’s ex-wife. The second and third plaintiffs, Richard and Gini Huang, are their children. For ease of reference I shall refer to the plaintiffs and the children of Mr and Mrs Huang by their first names.
[3] The plaintiffs claim that they, and Chun-Ta, worked for many years on a farm in the reasonable expectation that it would belong to them. They claim an interest in that farm by reason of proprietary estoppel and by means of a constructive trust. Sophie also claims an interest in it via the Property (Relationships) Act 1976. In addition, the plaintiffs claim that Mrs Huang and Chun-Ching have breached their fiduciary duties, owed to them as both the executors of Mr Huang’s estate and as trustees of the Trust.
[4] The defendants deny all these claims. The farm has been in Trust ownership since 1996 and does not form part of Mr Huang’s estate. Chun-Ta, and the other defendants, deny that the plaintiffs worked as farmers on the land in the expectation that the farm would belong to them. Any contributions they made to the farm did not exceed the benefits Chun-Ta and the plaintiffs received by living on the farm rent-free and having their expenses paid by Mr and Mrs Huang. Finally, Mrs Huang and Chun- Ching deny owing fiduciary duties to Richard and Gini and deny the breach of Trust claims.
The background to the dispute
[5] Mr and Mrs Huang are Taiwanese. They were married in 1963, and by all accounts worked extremely hard to accumulate their wealth. When they were young, they grew rice, and later on they grew other crops including blood oranges and orchids.
[6] Mr and Mrs Huang have five children. The oldest three are their sons: Chun- Ching, Chun-Ta, and Chun-Chieh. The fourth child is a daughter, Chiung-Ying, and the youngest is another son, Chun-Chia. Mrs Huang has nine grandchildren and one great-grandchild.
[7] In 1992, Mr and Mrs Huang sent Chun-Ta and Chun-Chia to New Zealand to study and they purchased a house in Epsom for them to live in while in New Zealand.
[8] A few years later, Mr Huang began travelling between New Zealand and Taiwan, and in 1994 Mr and Mrs Huang purchased two further houses in Epsom. One was used as a family home and the other was left vacant. Mr Huang, Chun-Ta and Chun-Chia lived in the family home. Later that year, Sophie and Chun-Ta met and began a relationship and they lived in the Epsom home rent-free from around 1995 to 2003.
[9] The Trust was settled by Mr and Mrs Huang in 1996 and they were the appointed trustees. The final beneficiaries include their children and their grandchildren. The discretionary beneficiaries include the spouses of the final beneficiaries. It follows that Richard and Gini are beneficiaries of the Trust, and Sophie would have been a discretionary beneficiary had she remained married to Chun-Ta.
[10] Soon after the Trust was settled, the trustees purchased a rural property on the Coatesville-Riverhead Highway (the Coatesville farm). The Coatesville farm was initially leased to commercial kiwifruit growers, and the house on the farm was rented out.
[11] In 2000 the central and southern parts of the Coatesville farm were leased to the Li brothers, Cantonese market gardeners, who grew vegetables on the farm. From June 2015 to the present day the Coatesville farm has been leased to strawberry growing companies.
[12] In 2002, Mr Huang purchased another farm in Wellsford for $670,000 (Wellsford farm) and began living there on his own. Mrs Huang had remained in
Taiwan to take care of her mother, only travelling to New Zealand periodically. But in 2003, she moved permanently to New Zealand and joined her husband on the Wellsford farm.
[13] Chun-Ta and Sophie and their two children were still living at the Epsom property and were joined for a short period of time by Chun-Ching and his wife and children when they moved to New Zealand in 2002. Following the sale of the Epsom properties in 2003, Chun-Ta, Sophie and their two children moved to live on the Coatesville farm and lived there rent-free.
[14] In 2004, Chun-Ta suffered a stroke. Sophie says he recovered quickly and continued to work on the Coatesville farm. Chun-Ta denies this and says his health issues continue to the present day.
[15] Mr Huang’s health began to deteriorate in 2008 and in April of that year, Mr and Mrs Huang moved to the house at Coatesville to live with Chun-Ta, Sophie and the two children. A few months later, Sophie moved out of the house with Richard and Gini and began living in Albany. There is no dispute that she wanted to be closer to the children’s schools. However, there is a dispute about whether this marked the beginning of the separation between her and Chun-Ta.
[16] Mr Huang passed away on 24 August 2012. Under his Will dated 27 May 1997 (the Will), Mrs Huang was appointed executor and she was left his entire estate. Probate was granted on 19 November 2012. Farmland in Taiwan was transferred to Chun-Chieh as he was the only family member who remained living there. The Wellsford property was sold for $1.85m, and all other assets (including farm equipment and motor vehicles) were dealt with. By 31 October 2014, Mr Huang’s estate had been fully distributed.
[17] Chun-Ching was appointed a trustee of the Trust on 7 March 2013. He actively assisted his mother in managing the estate affairs and the business of the Trust. In 2016, the Trust resolved to sell the Coatesville farm and an agreement was struck for a sale price of $20 million. However, Sophie lodged a caveat on the Coatesville farm preventing the sale from going ahead. This proceeding was commenced soon after.
The pleadings and the application for leave
[18] At the conclusion of the trial, Ms Reed filed an application on behalf of the plaintiffs seeking leave to file:
(a)a further amended statement of claim; and
(b)an interlocutory application for orders removing Mrs Huang as the executrix or trustee of the estate of Mr Huang and to obtain discovery against the defendants.
[19] To address those applications, it is necessary to canvass some of the procedural history of the proceeding.
[20] The proceeding was commenced on 1 July 2016. Seven causes of action, including claims under the Law Reform (Testamentary Promises) Act 1949 (TPA), and Family Protection Act (FPA), were pleaded.
[21] By judgment dated 25 November 2016, Thomas J struck out the TPA and FPA causes of action.1 Her Honour found that Mr Huang’s estate was wholly distributed on or about 31 October 2014 and accordingly the FPA and TPA claims were time- barred. Thomas J also found that the Coatesville farm did not form part of the deceased’s estate as it was either owned by the Trust or by Mr and Mrs Huang as joint tenants, therefore passing to Mrs Huang by survivorship.2
[22] Those determinations were upheld on appeal.3 The Court of Appeal found that the plaintiffs’ arguments that the estate was not fully distributed by 31 October 2014 were “entirely contrary to indisputable facts”.4 As to the Coatesville farm, the Court of Appeal said that the suggestion that it was an asset of the estate was simply wrong as it was an asset of the Trust.5 The plaintiffs’ other arguments regarding the
1 Lai v Huang [2016] NZHC 2828 at [74]–[76].
2 At [72]–[74].
3 Lai v Huang [2017] NZCA 499.
4 At [36].
5 At [37].
distribution of the proceeds of sale of the Wellsford farm, farm machinery, motor vehicles, one of the Epsom properties and Taiwanese assets were also dismissed.
[23] The plaintiffs filed an amended statement of claim on 26 January 2018, and a second amended statement of claim on 7 December 2018. The latter is the claim that went to trial. Six causes of action are pleaded: proprietary estoppel, constructive trust, breach of fiduciary duties (against Mrs Huang, and against Chun-Ching), breach of the Trustee Act 1956, and a claim under the Property (Relationships) Act 1976 against Chun-Ta.
Should leave be granted?
[24] The plaintiffs’ proposed amendments to the second amended statement of claim would re-introduce the FPA and TPA causes of action. The essence of the proposed causes would be the same as those struck out by the High Court and Court of Appeal, although the proposed amendments are pleaded differently to the original causes so as to reflect what Ms Reed characterises as additional facts disclosed during the course of the trial.
[25] Ms Reed submits that leave is justified because it only became apparent during the trial that there was not a final distribution of the estate, and that Mrs Huang had not carried out her basic duties as executrix of the estate. Ms Reed submits that there would be no prejudice to the defendants by allowing the amendments to be made because they had an opportunity to answer the allegations when giving evidence.
[26] I consider the proposed amendments to the statement of claim represent a collateral challenge to the decisions of the High Court and the Court of Appeal. Those Courts determined that the estate was finally distributed, and both the TPA and FPA causes of action were found to be out of time. Both Courts determined that the claims insofar as the Coatesville farm was concerned were misconceived because the Coatesville farm did not form part of the estate.
[27] The plaintiffs seek to resurrect these claims again through their proposed amendments. The attempt to do so is patently designed to circumvent the clear,
binding and final decisions of this Court and the Court of Appeal. That is an abuse of process.
[28] The application for leave to bring an application to remove Mrs Huang as trustee and for further discovery is also misconceived. I do not accept that the plaintiffs did not have sufficient information prior to trial to make the claim they now seek to make. The core information regarding the administration of the estate was discovered and before the Court. The purpose of a statement of claim is to clearly articulate the allegations made against a defendant so that they may have a fair opportunity to answer and defend them. A trial is not an opportunity to explore every potential avenue of discontent with a view to constructing new claims against a defendant at its conclusion.
[29] Accordingly, I decline to grant leave to amend the statement of claim and decline to grant leave to bring an application to remove Mrs Huang as an executor and to obtain discovery.
Evidential rulings
[30] The scope of the pleadings is also relevant to evidential rulings that I made during the trial.
[31] Questioning of witnesses must be confined to matters that are relevant. Relevance is to be determined by the issues arising out of pleadings. Questions which concern claims that have been struck out or are otherwise un-pleaded are generally irrelevant to the proceeding and are disallowed accordingly.
[32] This was the basis upon which I disallowed a line of questioning of Mrs Huang. I gave an oral ruling at the time disallowing the questions under ss 7 and 8 of the Evidence Act 2006. As that decision followed argument by both parties, I have set out detailed reasons for it in a written ruling which is delivered separately with this judgment.
Did Mr Huang give assurances that the Coatesville farm would belong to the plaintiffs and Chun-Ta?
[33] The first cause of action seeks relief in relation to the Coatesville farm on the basis of proprietary estoppel.
Relevant legal principles
[34] Proprietary estoppel is a species of equitable estoppel. Although historically it was treated as a separate and distinct cause of action, the current position in New Zealand is to treat the law of equitable estoppel as unified and governed by a common set of rules based on the concept of unconscionability.6
[35]The elements of an equitable estoppel were set out by the Court of Appeal in
Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd as follows:7
(a)A belief or expectation by the claimant created or encouraged by words or conduct of the respondent;
(b)To the extent an express representation is relied upon, it is clearly and unequivocally expressed;
(c)The claimant reasonably relied to its detriment on the representation; and
(d)It would be unconscionable for the respondent to depart from the belief or expectation.
[36] The plaintiffs relied on the House of Lords decision in Thorner v Major.8 In that case, Lord Hoffman said that whether there was an actual intention for the property to pass to the plaintiffs was irrelevant. The question was whether the words
6 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407; Marcus Roberts “Equitable Estoppel in New Zealand; Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd” (2016) 27 (2) KLJ 145; Kinara Trustees v Infinity Enterprises NZ Ltd [2019] NZHC 1526 at [178].
7 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407 at [44].
8 Thorner v Major [2009] UKHL 18, [2009] 1 WLR 779.
and actions would have reasonably conveyed an assurance that it would.9 In the same case, Lord Walker of Gestingthorpe said that the representation does not need to be precise, but it had to be “clear enough” in context.10
[37] In that case, the plaintiff had worked without pay for many years on a farm owned by his first cousin once removed. There was no evidence of a direct or express representation that the plaintiff would inherit the farm, nevertheless there was sufficient evidence from which such an assurance could be inferred. Proprietary estoppel was made out.
[38] The principles arising out of Thorner v Major were applied recently in Carroll v Bates.11 Dunningham J found that there were clear representations made about the property, including those made to family members. There was also reliance on those representations by the plaintiff in investing time and money into the property in the expectation that she would receive the property. This was sufficient to establish a claim based on proprietary estoppel.
Application to this case
[39] Applying those principles to this case, I am not persuaded that there is sufficient evidence from which an assurance that the Coatesville farm would belong to Chun-Ta and the plaintiffs may be inferred.
[40] Such an assurance is at odds with the purchase of the property by the Trust in 1996. Mrs Huang explained that the property had been purchased as a long-term investment and it was always intended to be shared between all their children to benefit them in the future. The fact that the property is held in Trust, separate from the other property forming part of Mr Huang’s estate, corroborates that account.
[41] The evidence of Chun-Ching, Chun-Ta and Chiung-Ying provides further support for that position. Each of them said that their parents would discuss significant financial matters with their children. For example, Chiung-Ying confirmed that when
9 At [3].
10 At [56].
11 Carroll v Bates [2018] NZHC 2463.
the Trust was set up in 1996, her father told her that the Trust was set up to benefit the whole family and the land was an investment for the whole family’s financial future. I found her evidence, and the evidence of Chun-Ching and Chun-Ta to the same effect, both persuasive and credible. Further, Chun-Ching described the purchase of the Coatesville farm as a “land-banking” strategy. The lease of the farm to commercial growers for very low rents supports that characterisation.
[42] That evidence also responds to Sophie’s claim that Chun-Ching and Chun- Chieh have received property from their parents, and so it was reasonable for them to assume that Chun-Ta’s family would receive the Coatesville farm. I am not persuaded that the evidence shows that Chun-Ching has received significant financial benefits over and above those of his siblings. It is, however, correct that Chun-Chieh received the farm in Taiwan following the death of his father. But the evidence of Mrs Huang and her children confirmed that this was agreed to by all family members because Chun-Chieh was the only family member remaining in Taiwan. And, as Chiung-Ying explained, they were all happy to agree to this because they recognised that the significant family asset was the Coatesville farm from which they would all ultimately benefit.
[43] The fact that the farm was held in Trust also counters any inferences to be drawn from the source of the funds used to purchase it. Chun-Ta accepted in cross- examination that he was aware that the sale proceeds from one of the Epsom properties, registered in his name, were used to purchase the Coatesville farm. There is some doubt about whether that was in fact the case, but ultimately it makes no difference. There is no dispute that Chun-Ta did not purchase the Epsom property, nor did he contribute any funds to it. He was a student at the time and did not have any means of doing so. In any respect, the Trust purchase and ownership of the farm means that any inference to be drawn from the Epsom property being in Chun-Ta’s name cannot be sustained. Whatever the position with the Epsom properties, the purchase of the farm was to benefit all Huang family members, and that was the purpose of holding it in Trust.
[44] An asset from which all family members would benefit also places any remarks made by Mr Huang to Sophie and Richard that the farm would belong to their family in context. Sophie’s evidence on this point was as follows:
42.Over the 15 years which I have worked and lived at the Coatesville farm with Mr Huang, he talked often about how wonderful farming was and that we needed to continue with the farm. He said he would never sell the Coatesville farm because it had a rich water source – we had an underground well behind the house.
43.In the early years he told us to keep working hard and that the farm would be the family’s legacy. Later, he told us that the farm belonged to our family and are to take good care of it. We were to never sell the farm and that all of our family’s generation were to be carried on the farm.
[45] Richard Huang also gave very similar evidence. He says he could remember his grandfather telling him that:
… we are very lucky to have the farm and that we should work hard on it. He told me never to sell the farm. He told me this several times, but I remember clearly the time he told me this in 2008, around the time my mother was arranging for us to be closer to better schools. We were picking grass around the plants. After my grandfather said sternly that we are never to sell the farm, he explained that the farm is very valuable and that it has a good water supply from the well and that, if a war happened we would have clean water and nice crops.
[46] I consider it plausible that Mr Huang would have made statements such as this. His wealth had been accumulated from hard work on farms over a number of years. It is conceivable that he would seek to instil these same values in his family members.
[47] But I do not consider it reasonable to interpret his remarks as promises to leave the Coatesville farm to Chun-Ta’s family exclusively. Rather, they are consistent with an intention to leave the farm to all members of Mr Huang’s family. At the time that he allegedly made the remarks Sophie was still married to Chun-Ta, and as such, was a discretionary beneficiary of the Trust. Richard and Gini were, and still are, discretionary and final beneficiaries of the Trust. They all stood to benefit from the farm in that respect. To the extent that Mr Huang made remarks such as those relied on by Sophie and Richard then he was simply reflecting the legal position in the Trust deed.
[48] In addition, and as explained further on in this judgment, I do not consider Sophie and Chun-Ta were encouraged to work on the farm in the expectation that they would inherit it exclusively. Rather, they were supported by being allowed to live on the farm rent-free and use the land to grow vegetables for themselves and for sale. None of their contributions added significant value to the land, and they were matched by the benefits they received from living there rent-free.
[49] Counsel for the plaintiffs, Ms Reed, points to Chun-Ta’s previous employment as a farmer, the fact that he was described as such in the Will, and his lack of any employment history in New Zealand, as supporting the plaintiffs’ claim. In relation to the latter point, she relies on the fact that Mr and Mrs Huang never asked Chun-Ta about his employment plans or requested him to move out of the house at the farm. This, Ms Reed submits, is probably because they always expected him to remain and work on the farm.
[50] Those inferences are strained in my view. Previous work experience as a farmer, and the mere description of Chun-Ta as such in the Will is not a sufficient basis from which to draw an inference of the necessary assurances to support a proprietary estoppel claim to the Coatesville farm.
[51] The reliance on Chun-Ta’s unemployment history also faces a significant hurdle, namely, that Chun-Ta does not claim that he worked on the property in the expectation that he would inherit it exclusively. To the contrary, he says that he always understood that the farm was held in Trust and was for the benefit of the entire family. He says that his parents supported him by allowing him to live in the Epsom property, and then the Coatesville property, rent-free. That support became even more important after he had his stroke in 2004. Far from working on the farm in the expectation that it would eventually belong to him, Chun-Ta says that living and working on the farm was a means of support.
[52] In summary, there is no evidence of assurances that the Coatesville farm would be left to the plaintiffs and Chun-Ta exclusively and an essential element of the proprietary estoppel claim cannot be made out. This cause of action is dismissed.
What were Chun-Ta and Sophie’s contributions to the Coatesville farm?
[53] The plaintiffs’ alternative claim to the Coatesville farm is based on a constructive trust. The plaintiffs say that they made significant contributions towards the Coatesville farm in the reasonable expectation that they would obtain an interest in it. This claim also underpins the plaintiffs’ sixth cause of action in which Sophie claims that Chun-Ta’s contributions to the farm gives rise to property interests under the Property (Relationship) Act 1976.
[54] As a preliminary point, I note that this cause of action is pleaded against Mrs Huang in her capacity as executrix of the estate, and Chun-Ching personally. As the farm does not form part of the estate, but is held in Trust, I have treated it as if it were a claim against the fourth defendants, that is, Mrs Huang and Chun-Ching as trustees of the Trust.
Legal principles
[55] The principles relevant to a constructive trust are well settled. The plaintiffs must show:12
(a)Contributions, direct or indirect to the property in question;
(b)The expectation of an interest in the property;
(c)That the expectation is a reasonable one; and
(d)That the defendant should reasonably expect to yield the plaintiff an interest.
[56] In Vervoort v Forrest, the Court of Appeal expanded on the first of those requirements, the contributions, as follows:13
[47] It is clear the contributions need not be money and can be other services, and that there has to be a causal relationship between the contributions and the acquisition, preservation or enhancement of the owner
12 Lankow v Rose [1995] 1 NZLR 277 (CA) at 294.
13 Vervoort v Forrest [2016] NZCA 375.
partner’s assets. A claim to a constructive trust is a proprietary claim and the contributions have to be made to assets, but not necessarily particular assets. The contribution can be entirely indirect, for instance, a contribution to groceries by one partner while the other partner pays the mortgage.
(footnotes omitted)
[57] Whatever the nature of the contributions, it is clear that they must have added significant value to the property.14 They must have also have “manifestly exceeded”15 any benefits received so that there is “a situation of sufficient disproportion to merit Equity’s intervention”.16
[58] The fact that the Coatesville farm is owned by the Trust does not prevent the plaintiffs from claiming an interest in it pursuant to a constructive trust. In Vervoort v Forrest, the Court of Appeal confirmed that a constructive trust may be imposed on property owned by an express trust.17
What contributions were made?
[59] Sophie says that in the early days she only worked part-time on the farm because her son Richard was still very young. Nevertheless, she says that she cared for livestock, harvested kiwifruit, did the housework, and cooked for Chun-Ta and Mr Huang. From 2003, Sophie says she began working on the farm full-time. She says she planted bamboo for the purposes of sale and assisted in maintaining it through the year. This included hand-cutting the grass about the bamboo trees, cutting old branches, trimming and watering the bamboo shoots.
[60] In addition, Sophie says she continued to maintain the kiwifruit trees, trimming and tying the vines, and harvesting the kiwifruit. She says that other vegetables (in particular, burdock), and calla lilies were grown for commercial sale. Sophie says she and Chun-Ta did all the work in planting, maintaining, harvesting, and delivering this produce to the market. Sophie also claims she looked after chickens and undertook other general farm work around this time.
14 At [75].
15 Lankow v Rose [1995] 1 NZLR 277 (CA) at 282.
16 Blumenthal v Stewart [2017] NZCA 181 at [53].
17 Vervoort v Forrest [2016] NZCA 375 at [51].
[61]Based on the minimum wage, Sophie estimates that she would have earned
$34,000 per year for her part-time work on the farm in the periods between 1996– 2002, and 2008–2015, and full-time work between 2002–2008. She makes similar calculations for Chun-Ta based on full time work between 1996 and 2016. Based on these calculations, Sophie says:
36. Between me and Chun-Ta, we would have been paid, at minimum, approximately $960,000 over the 20 years that we worked at the farm. Even with expenses at 30% of our income, Chun-Ta and I would have saved over $500,000. On top of the 30% expenses, I have also averaged the income tax deduction that may have been applied over the years of 15%. We would have still been left with over $500,000 of savings.
[62] In addition, Sophie says she did not pursue other employment opportunities so that she could continue working on the farm. For example, she says she declined an opportunity to work in a beauty salon as it was inconsistent with her commitment to the farm. She says that when they were living in Albany, she returned every weekend to work on the farm. Richard also claims that he worked hard on the farm, encouraged by his grandfather’s promise that it would belong to them one day.
[63] There is no dispute that vegetables, fruit, flowers and bamboo were grown on the farm. Similarly, some of this produce was sold, through honesty boxes left on the side of the road, and on Trade Me. Chun-Ta also accepts that for a period of time, he and his father tried to look after the farm themselves, and he acknowledges that Sophie assisted in pulling out old kiwifruit plants, bagging and selling some of the fruit.
[64] The main difference between Sophie and Chun-Ta’s evidence concerns the nature and extent of this work. Chun-Ta denies that this was full time work which added value to the farm in the expectation that it would one day belong to them. Rather, Chun-Ta says this work was a means of supporting him and his family financially or was a hobby.
[65] I prefer Chun-Ta’s evidence to that given by Sophie. Chun-Ta was measured and candid in his account. There were no signs of family pressure (as Sophie seemed to imply in her evidence). Financially, it would have been better for Chun-Ta to side with the plaintiffs and the fact that his evidence was against his best financial interests
reinforces its credibility. Significantly, other evidence called at trial either undermined the position taken by Sophie, or corroborated Chun-Ta’s account, as explained further below.
[66] First, Sophie’s claims that she worked exclusively on the farm, and sold the produce commercially, are contradicted by the documentary evidence:
(a)Her disclosed IRD statements from the year beginning 1 April 2001 show that she was working as a real estate agent between 1997 and 2003. Bank statements also show wages received from a homecare company, and health and beauty shop and from other employers between 2009 and 2017.
(b)Sophie’s bank statements for the period between 1 July 2006 to 23 December 2016 showed that she received $201,145 from Work and Income New Zealand in employment benefits during this period. She also received working for family tax credits and child support payments during this period.
[67] In addition, Sophie’s claims that she worked every weekend at the farm from 2008 to 2016 are contradicted by evidence from her flatmate (Mr Bi) that in fact she worked in a sushi shop, as a waitress, and as a beauty salon employee on the weekends during this period.
[68] Second, Sophie’s evidence as to the extent of the work that she and Chun-Ta did on the farm is at odds with the leasing of that land to commercial growers. Mr Li and his brother leased the farm from 2000 onwards and they operated a market garden from the property. Mr Li produced an aerial photograph of the farm and gave evidence about the various uses of the farm, including large tracts that were not arable land. In short, there was insufficient area on the farm for Chun-Ta and Sophie to work commercially as Sophie alleges. That evidence corroborates Chun-Ta’s characterisation of the work they did for their personal use only and in an area close to the house.
[69] Third, although there were many witnesses called on behalf of the plaintiffs who said they saw Sophie and Chun-Ta working on the farm, or purchased produce from them, this evidence does not establish the type of contributions required to establish a constructive trust. Mr Li said that in all the time he had been on the farm he did not see Mr Huang, or any members of his family, carry out work consistent with commercial growing. Mr Li was an independent witness with no interest in the proceeding. On the basis of his evidence, Sophie’s description of the contributions made to the farm was grossly exaggerated.
[70] Fourth, to the extent that it is suggested that Richard and Gini were also made to work on the farm in the expectation that their family would inherit it exclusively, then I reject that suggestion as implausible. Richard and Gini were very young when they first moved to the farm. They were much too young to be making any significant contribution to the farm at this stage. I accept that as they got older they probably did both work on the farm on occasion, but this was in the nature of chores and not substantial work contributing to the value of the farm.
[71] Fifth, Chun-Ta had a stroke in 2004 and was physically unable to undertake the type of work on the farm that Sophie says he did. Sophie’s attempt to circumvent this problem by claiming that Chun-Ta recovered very quickly and was back to work promptly was disingenuous. I prefer Chun-Ta’s evidence that it was a slow recovery, he was unable to work, and he is still suffering from ill-health to this day.
[72] Sixth, the Trust accounts do not show any income from commercial work performed by either Chun-Ta or Sophie during the time they lived there. To the extent that produce was sold by Chun-Ta, Sophie or the children, it appears that they kept the proceeds for themselves and did not account to the Trust for those profits. That supports Chun-Ta’s characterisation of the work done on the farm as being for their personal benefit and as a means of support.
[73] The contributions made by Chun-Ta and Sophie may be compared to those considered in Blumenthal v Stewart.18 In that case, the appellant claimed that he had, during a nine-year period made various contributions to a rural property (held by his
18 Blumenthal v Stewart [2017] NZCA 181.
mother’s de facto partner’s trust), including spraying weeds, heavy lifting, helping with firewood, maintaining the water-pump, maintaining and checking electric fences, keeping the property pest free, tidying up grounds around the tenanted property, and looking after the property while one of the trustees was away. The Court of Appeal (affirming the decision of Justice Ellis at first instance) held that these were well short of contributions meriting recognition or amounting to services above what normally occur in a family unit.19 The evidence of contributions in this case similarly fall short of what is required to establish a constructive trust claim.
[74] In sum, any work done on the farm was for Chun-Ta and Sophie’s benefit only, and it did not add significant value to the property. Nor could it be said that the contributions have well exceeded the benefits received. There was no expectation of any interest to be received from the farm over and above the interest that Chun-Ta, Richard, and Gini would receive as beneficiaries of the Trust. Rather than living and working on the farm in the reasonable expectation that it would belong to them, the Trust was allowing them to live there and to grow produce there as a way of supporting and assisting them.
[75] The constructive trust claim is accordingly dismissed. That finding also determines the sixth cause of action which is also dismissed.
Did Mrs Huang or Chun-Ching owe fiduciary duties to Sophie, Richard and Gini?
[76]The third and fourth causes of action are for breach of fiduciary duties.
[77] The third cause of action is against Mrs Huang alone. It is pleaded that a familial relationship between the plaintiffs and Mrs Huang gave rise to a fiduciary relationship because:
a.The plaintiffs were reliant on the first defendant to make provision for their proper maintenance and support from the Estate of the Deceased in recognition of their familial relationship, their substantial unpaid help at the Coatesville Farm, and the fact that they had been financially dependent on the Deceased and first defendant;
19 Blumenthal v Stewart [2017] NZCA 181 at [40].
b.The first defendant was in the position of power and had full control of the Estate in becoming the executrix and inheritee of the Estate.
c.The plaintiffs were potential claimants of the estate of which the first defendant was or should have been aware.
[78] That relationship is said to give rise to various fiduciary obligations in relation to the estate, and in relation to claims under the Family Protection Act 1955. The pleaded breaches are as follows:
59.In breach of the above duties, the first defendant:
a.Failed to recognise the plaintiffs’ interest in the Coatesville Farm;
b.Transferred the Coatesville Farm to herself and the second defendant without providing due share of the farm to any of the plaintiffs;
c.Failed to notify the plaintiffs of the grant of probate;
d.Failed to take any advice about the plaintiffs’ potential claim;
e.Failed to take make an application on behalf of the second plaintiff and the third plaintiff under the Family Protection Act 1955.
[79] The fourth cause of action is against Chun-Ching alone. It is alleged that Mrs Huang delegated her duties and powers to Chun-Ching to administer the estate and sell the Coatesville Farm. The plaintiffs plead that the familial relationship, and Chun-Ching’s alleged control of the family finances, created a fiduciary relationship between Chun-Ching and the plaintiffs. They say he breached these duties by failing to provide information relating to the estate, failing to protect the plaintiffs’ interests in the estate, and by taking steps to sell the Coatesville farm which forced the plaintiffs to investigate its ownership. The plaintiffs say that as a result of Chun-Ching’s breach, the plaintiffs are out of time to make FPA and TPA causes of action.
[80] Insofar as both causes of action relate to the Coatesville Farm then it faces the same, insurmountable, hurdles as the FPA and TPA causes of action struck out by Thomas J and affirmed on appeal. Any fiduciary duties owed to beneficiaries could not be in relation to the Coatesville farm, which did not form part of the estate.
[81] The remaining pleaded claims amount to allegations that both Mrs Huang and Chun-Ching owed duties to the plaintiffs in their capacities as executors and trustees under the Will. As I apprehend the claims, the plaintiffs seek to lay the blame for their failure to make TPA and FPA claims within the stated time period at the feet of Mrs Huang and Chun-Ching.
[82] In Sadler v Public Trust, the Court of Appeal considered the circumstances in which an executor and trustee under a will might owe duties to possible claimants under the FPA and summarised the law as follows:20
(a)A duty of even-handedness extends to potential claimants against an estate where an executor is aware that they wish to make a claim.
(b)This duty extends to ensuring that an executor does not actively and dishonestly conceal relevant material about the estate from potential claimants who seek information about the estate.
(c)We leave open the question of whether the duty of even-handedness may extend to those of whose claim the executor ought to be aware. We also leave open whether any duty of even-handedness to such potential claimants would extend to a duty to inform those potential claimants of the fact of death.
(d)There is no general duty on an executor to advertise the fact of death or to inform all potential claimants of the fact of death. This applies even where there may be a suspicion (but not sufficient to bring the potential claimant within category [41](c) above) that a particular potential claimant may wish to make a claim. This means that the question left open by this Court in Price v Smith …has now been answered in the negative.
(footnotes omitted)
[83] That case concerned a claim by the daughter of the deceased who was unaware of her father’s death and had been left nothing in a will. The father and daughter had been estranged for some time and the deceased had left explicit instructions that his daughters were not to be informed of his death. The Court of Appeal upheld the High Court’s conclusion that, at its highest, there were only grounds of suspicion that the daughter might make a claim and that was not enough to bring her within the grounds set out in (a) or (c) above. There was also no concealment in terms of (b). Accordingly, the duty of even-handedness did not arise.
20 Sadler v Public Trust [2009] NZCA 364 at [41].
[84] Whether Chun-Ching was in fact acting as a de facto executor of the estate is debatable. However, I need not determine that point conclusively. That is because, as explained further below, whether Chun-Ching was acting as a de facto executor, I am not persuaded that the duty of even-handedness and a duty to advise or take action on a potential claim arises in this case.
[85] This is not a case where the plaintiffs were unaware of the death of the deceased. There is no evidence that they were kept in the dark about it or the death was deliberately concealed from them. In addition, the failure to make a claim under the FPA and TPA in time appears to be due to a misunderstanding regarding the ownership of the Coatesville farm. The Coatesville farm does not form part of the estate; it is held in Trust. There is no basis to suggest that Mrs Huang and Chun-Ching should have been aware of this confusion or that they are somehow responsible for it. The plaintiffs cannot blame their own misapprehensions about the ownership of that asset on either Mrs Huang or Chun-Ching.
[86] Furthermore, there is nothing in this case to suggest that either Mrs Huang or Chun-Ching should have realised that Richard and Gini might want to make a claim on the estate. Their interests were, and still are, to be accommodated by virtue of their status as final and discretionary beneficiaries under the Trust. These circumstances do not give rise to even a suspicion of a claim. They fall well short of those in Sadler v Public Trust which were not enough to trigger a duty of even-handedness.
[87] Nor is there any evidence of concealment. Ms Reed submits that Mrs Huang has failed to provide discovery regarding the administration of the estate. I am not persuaded that is so. In any respect, a failure to disclose all documents relating to the administration of the estate is not evidence of concealment. The adequacy of the administration of the estate was not pleaded. It is no wonder that Mrs Huang was unable to answer detailed questions regarding the particulars of the administration of the estate which took place more than five years ago when there was no notice that this would be an issue. Her inability to remember those details is not evidence of concealment, nor incompetence as was belatedly alleged.
[88] Finally, and for the same reasons, I am not persuaded that this is a clear case where either Mrs Huang and/or Chun-Ching should have made a claim on behalf of either Richard or Gini.
[89]The third and fourth causes of action are accordingly dismissed.
Have Mrs Huang and Chun-Ching breached their duties as Trustees?
[90] The fifth cause of action is against Mrs Huang and Chun-Ching for breach of their duties as trustees of the Trust. The plaintiffs claim that after they moved out, the trustees neglected the farm and allowed it to be used in a manner that decreases its fertility and value. An order appointing replacement trustees to the Trust is sought.
[91] The key factual claim under this cause of action is that the trustees allowed contaminated construction waste to be stored on the land free of charge, and that this has decreased the value of the farm.
[92] It is correct that soil and rocks are stored on a vacant part of the Coatesville farm free of charge. But the allegation that this is contaminated construction waste is unsubstantiated by the evidence. Richard Huang commissioned a report into that issue in 2018. Soil samples were taken and analysed by an environmental scientist. The report, dated 7 March 2018, concluded that there was no visual or olfactory evidence of contamination. Similarly, although the soil was not considered suitable for classification as clean-fill materials, it was nevertheless considered suitable for retention onsite.
[93] Furthermore, any allegation that the Trustees allowed Chun-Ta to use the farm to give favours to his friends misconstrues the nature of the agreement struck between the owner of the earthworks company and the trustees. It is true that the owner of the earthworks company is Chun-Ta’s friend, but this was not a one-sided deal. The trustees agreed to allow the soil and rock to be stored on the Coatesville farm as consideration for the construction of a vehicle crossing on the farm and the laying of gravel for the main driveway to the house. Those are works that, at least on their face, are beneficial to the land, and the Trust, and the trustees cannot be criticised for entering into such an arrangement.
[94] Allegations that the storage of the soil has caused the land to flood are also unsubstantiated. It appears that there have always been some flooding issues on the property as the Land Information Memorandum for the property confirms. Similarly, there is no evidence that there has been any decreased fertility resulting from the soil and earthworks being stored on the land. The strawberry-growing tenant has not complained about this and gave evidence that he takes potential contamination of soil very seriously given its significance for his crops.
[95] Richard Huang also made general claims about the state of disrepair of the house on the farm. I consider these claims to be exaggerated. The Trustees acknowledge that the house does leak on occasion during a storm, but this has been an issue ever since the house was purchased in 1996. Chun-Ching gave evidence that the Trust does not currently have sufficient funds to repair this leak or renovate the house. In any respect, I accept his evidence that the value of the Coatesville farm is in the land, not the house, and the Trustees have attempted to realise that value by selling the farm – an objective thwarted by the caveat lodged by Sophie.
[96] Finally, general allegations around the competence of Mrs Huang to act as trustee must also be rejected. Those allegations were not pleaded, and any evidence elicited on that topic was irrelevant. More importantly, I am not satisfied that there was any evidence that she had improperly delegated her duties or failed in her duties as a trustee.
[97] The claim against the fourth defendants for breach of Trustee duties is dismissed.
Result
[98]The plaintiffs’ claims are dismissed.
[99] The defendants are entitled to costs. Given the family context of the dispute, I strongly urge the parties to confer with a view to agreeing costs. Failing agreement, the defendants shall file a memorandum as to costs (no longer than five pages in length) within 10 working days of receipt of this judgment. The plaintiffs shall file a
reply (no longer than five pages in length) five working days thereafter. Costs shall be determined on the papers.
Edwards J
Counsel: J R Robertson, Auckland
Solicitors: Prestige Lawyers Ltd, Auckland Glaister Ennor, AucklandP
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