Lapwood v Teirney

[2012] NZHC 1803

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-7643 [2012] NZHC 1803

IN THE MATTER OF     The Family Protection Act 1955

AND

IN THE MATTER OF     the Estate of IVY MARY LAPWOOD, late of Papakura, Retired, Deceased

BETWEEN  LESLIE REED LAPWOOD Plaintiff

ANDJOHN CHARLES MATTHEW TEIRNEY Defendant

Hearing:         23 July 2012

Counsel:         A Gilchrist for plaintiff

Judgment:      23 July 2012

(ORAL) JUDGMENT OF LANG J [on formal proof application]

LESLIE REED LAPWOOD V JOHN CHARLES MATTHEW TEIRNEY HC AK CIV-2011-404-7643 [23 July

2012]

[1]      Mr and Mrs Lapwood were married on 22 September 1958.  At that time Mr Lapwood already had two sons, John and Eric, from a previous marriage.  During the course of their marriage Mr and Mrs Lapwood had two further sons, Lance and Wayne.

[2]      Mrs Lapwood died on 13 December 2006 at the age of 84 years.  By her last will dated 25 February 2004, she appointed her son John as executor of her estate. She bequeathed all of her property to her four sons in equal shares.

[3]      The only substantial item of property Mrs Lapwood owned at the date of her death was a one-half share as a tenant in common in a rural property situated at 402

Papakura–Clevedon Road (“the property”).  Mr Lapwood owns the other half share of the property, and has remained living there since the death of his wife.  The only other items Mrs Lapwood owned were household items and shares that she owned jointly with Mr Lapwood. These have passed to Mr Lapwood by survivorship.

[4]      Difficulties  have  now  arisen,  because  three  of  the  four  children  have indicated that they wish Mr Lapwood to leave the property.  They have also filed a proceeding  in  this  Court  seeking  orders  for  the  sale  of  the  property  under  the Property Law Act 2007.1   That proceeding has been stayed pending determination of the present proceeding, but if Mr Lapwood is not successful in his present claim it will be heard in November 2012.   Not surprisingly, Mr Lapwood has resisted the childrens’ application.  He wishes to remain living at the property.  It has been his home since 2004.

[5]      In this proceeding, Mr Lapwood seeks leave to apply out of time for further provision from his wife’s estate under the provisions of the Family Protection Act

1955 (“the Act”).  He contends his wife failed to make proper provision for him in

her will.   He asks the Court to grant him relief, and to allow him to have a life interest in the property.  He accepts, however, that once he is unable to use the home

1 Teirney v Lapwood HC Auckland CRI-2011-404-0056090.

as a permanent residence it should be sold, and the proceeds of sale divided in accordance with the current ownership.

[6]      The  proceeding  has  been  served  on  all  of  the  persons  affected  by  Mr Lapwood’s  claim.    None  have  chosen  to  defend  it.    The  claim  has  therefore proceeded by way of an application for judgment by formal proof.

A jurisdictional problem

[7]      The Act requires any claim to be filed within twelve months from the date of the grant of administration.2   Mrs Lapwood’s son John obtained a grant of probate on

8 January 2007.  Mr Lapwood was therefore required to file any claim under the Act no later than 8 January 2008.

[8]      Mr Lapwood did not, however, file the present proceeding until 25 November

2011.  He therefore filed it more than three years after John obtained the grant of probate.  That would not normally be an insurmountable problem, because the Court has the power to grant leave to bring a claim under the Act out of time.3

[9]      A further difficulty arises, however, because in his capacity as executor John transferred Mrs Lapwood’s one-half share in the property to her four children in accordance  with  the  provisions  of  her  will  on  19  September  2007.     As  a consequence, it no longer forms part of Mrs Lapwood’s estate.  More importantly, the proviso to s 9(1) of the Act prohibits the Court from granting an application for extension of time within which to apply where an estate has been finally distributed.

[10]     The only way in which Mr Lapwood could now obtain orders in respect of the property is by asking the Court to exercise its powers under s 49(3) of the Administration Act 1969.  This provides the Court with the power to make orders (commonly called “tracing orders”) in respect of property that has been distributed to a third party by an administrator or trustee. Any application under s 49(3) must also, however, be filed within 12 months of the date of the grant of administration.  The

Court has no power under the Administration Act 1969 to grant an extension of time

2 Family Protection Act 1955, s 9(2)(b).

3 Ibid, s 9(1).

for the making an order under s 49(3).  For that reason Mr Lapwood no longer has the ability to ask the Court to exercise its powers under s 49(3).

[11]     Counsel for Mr Lapwood sought to retrieve the situation by referring me to two authorities, Re Wise (deceased)4 and Burt v Skelley.5

[12]     In Re Wise (deceased), two brothers were the executors and trustees of their late father’s estate.   One of the principal assets of the estate was a farm property. The brothers purported to transfer the farm to themselves in accordance with the provisions of a deed of family arrangement they entered into with their mother.

[13]     Under the terms of the will, the trustees were required to pay the widow of the deceased, their mother, an annuity from the income produced by the farm for the balance of her life.  The two brothers were entitled to share equally in the balance of that  income.    The  will  also  provided  that,  if  either  brother  was  to  die  leaving children, those children were to share equally in the income from the farm that their father would otherwise have received.

[14]     Two of the daughters of the deceased, who had not entered into the deed, then filed  proceedings  under  the Act  seeking  leave  to  apply out  of  time  for  further provision from their father’s estate.  They also sought a tracing order under s 49(1) of the Administration Act 1969 in relation to the property that their brothers had transferred to themselves under the deed of family arrangement.

[15]     In the High Court, Doogue J struck out the daughters’ applications on the basis  that  the  transfer  of  the  farm  property  pursuant  to  the  deed  of  family arrangement  constituted  a  final  distribution  of  the  assets  of  the  estate  for  the purposes of both s 9(1) of the Act and s 49(3) of the Administration Act 1969.  In doing so, he proceeded on the basis that the brothers and their mother were the only beneficiaries of the father’s estate.

[16]     The Court of Appeal reinstated the daughters’ applications.  It held that the

brothers  had  departed  from  the  scheme  of  the  will  by transferring  the  farm  to

4 Re Wise (deceased) (1992) 9 FRNZ 225.

5 Burt v Skelley (1998) 17 FRNZ 152.

themselves. At the time of the transfer their children held a contingent interest in the future  income  of  the  estate  until  the  death  of  their  grandmother.    The  transfer defeated that contingent interest. The Court said:6

The term “distribution” is not defined in the Family Protection Act. Whether a  distribution  has  occurred  may  be  essentially  a  question  of  fact  (Re Anderson [1957] NZLR 401, 402) but in the context of s 9 it is necessarily directed to transfers to beneficiaries which are made in terms of the will or under other lawful authority. Trustees may depart from their duty to adhere to the terms of a trust instrument only where the variation is sanctioned by the Court under its inherent jurisdiction or under special statutory power eg s

64 and s 64A Trustee Act 1956, or where all the beneficiaries, including contingent beneficiaries are sui juris and consent (Saunders v Vautier (1841)

4 Beav 114; Re Lushington [1964] NZLR 161; 48 Halsbury para 637).  It is

in that sense that distribution is used in s 9.  It follows that an application of assets of the estate by trustees in favour of a beneficiary constitutes a distribution of the estate for the purposes of s 9 only if it is validly made. …

[17]     It followed that the transfer of the farm did not fall within the definition of a final distribution for the purposes of s 9 of the Act.

[18]     The facts in Re Wise are clearly distinguishable from those in the present case.  Here, the transfer of Mrs Lapwood’s interest in the property was made strictly in accordance with the terms of her will.  Re Wise  is therefore of no assistance to Mr Lapwood.

[19]     In Burt v Skelley, a Full Court of this Court held that the time limits imposed by s 49(3) do not apply to a claim seeking the equitable (rather than statutory) remedy of tracing.  The Court considered that s 49(2) of the Administration Act 1969 expressly preserves the ability of a party to seek this remedy.  It provides as follows:

49      Following of assets, etc

…

(2)     The remedies given to any person by subsection  (1) of this section are in addition to all other rights and remedies (if any) available to that person, and nothing in that subsection shall restrict any such other rights and remedies.

...

[20]     The Court also held7  that the remedy of tracing is an ancillary remedy that permits a court to give effect to its orders.  It does not amount to a cause of action in its own right.

[21]     Counsel for Mr Lapwood submits that the effect of  Burt v Skelley is  to expand the time within which an applicant seeking orders under s 49(1) of the Administration Act must apply for a tracing order.   I disagree.   The effect of the decision is that a claimant in equity is not prevented from seeking to trace through to assets by the time limit imposed by s 49(3).  Where, however, the tracing order is sought within the context of proceedings under the Act, the time limit under s 49(3) must be observed.

[22]     Mr Lapwood seeks substantive relief solely under the Act.   He does not advance any claim based in equity.  This means that he can only obtain a statutory tracing order under s 49(1) of the Administration Act 1969 and not an equitable remedy.  As a consequence, his failure to observe the time limit imposed by s 49(3) is fatal to his claim.

Would the claim have succeeded but for the jurisdictional problem?

[23]     I record, however, that  had  I the power to do  so,  I would have had  no hesitation in finding a breach of moral duty proved in the present case.  Mr and Mrs Lapwood were married for 48 years.  Mr Lapwood’s affidavit makes it clear that he and his wife both worked hard throughout their marriage to provide a secure home environment for themselves and their children.

[24]     I am also satisfied that both Mr and Mrs Lapwood intended that the survivor of them should be permitted to live in the family home for the duration of his or her lifetime.  I have the benefit of a letter dated 24 January 2007 written by the solicitors who acted for Mr and Mrs Lapwood between  1960 and 2004.   He  records the circumstances in which the property came to be purchased in November 2003.

[25]     He says that Mr and Mrs Lapwood elected to purchase the property as tenants in common in equal shares because they both intended to transfer their respective interests in that property to mirror trusts.  Under the terms of those trusts, each was to have the right to occupy the property for his or her lifetime after the death of the other.  Thereafter, the property was to be sold and the proceeds divided between the children.  Mrs Lapwood intended the assets of her mirror trust to be distributed to her four sons, whilst the final beneficiaries of Mr Lapwood trusts were his two sons.

[26]     Unfortunately,  however,  it appears that matrimonial problems surfaced  at some stage after Mr and Mrs Lapwood completed the purchase of the property on 23

January 2004.  Thereafter, they did not take the necessary steps to set up the mirror trusts as was originally intended.  There is nothing to suggest, however, that either of them ever intended that one would be precluded from continuing to live on the property following the death of the other.

[27]     I consider that both Mr and Mrs Lapwood were under a clear obligation to make provision in their wills to ensure that the survivor was adequately provided for in terms of accommodation. At the very least, this meant providing the survivor with a life interest in the property.  The fact that Mrs Lapwood did not alter her will to provide that security means that, at 82 years of age, Mr Lapwood faces the very real prospect of being forced to leave the property and finding somewhere else to live on relatively limited means.

[28]     I would not have had any difficulty, either, in determining that leave should be granted to permit Mr Lapwood to apply out of time.  The evidence makes it clear that he and the children have been endeavouring to reach a negotiated solution for many years, but this has not been possible.  The present proceeding appears to have been precipitated by the proceeding the children issued in this Court seeking an order that the property be sold.

Result

[29]     For the reasons I have already given, the claim as presently framed cannot succeed and is dismissed.

Costs

[30]     I make no order as to costs.

Lang J

Solicitors:

Robert John Burton, Papakura

McKenzie Alvin, Tauranga

Counsel:
A Gilchrist, Auckland