Lock v Weatherston

[2020] NZHC 2246

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-1186

[2020] NZHC 2246

BETWEEN

CHRISTOPHER JAMES LOCK and JENNIFER ANNE COOKE
Plaintiffs

AND

MURRAY DAVID WEATHERSTON

Defendant

Hearing:	31 August 2020
Appearances:	James R Pullar and Miles Davis for the Plaintiffs Defendant is self-represented
Judgment:	31 August 2020

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:

Taylor Shaw, Christchurch, for the Plaintiffs

Copy for:

Murray David Weatherston

LOCK v WEATHERSTON [2020] NZHC 2246 [31 August 2020]

[1]    This case concerns the estate of the late Michael John Lock, who died on      4 April 2016, and a trust he established on 10 March 1993. Mr Lock was a master mariner and accordingly I will call him Captain Lock. The plaintiffs are his only children. Mr Weatherston, a financial advisor, is the executor of Captain Lock’s estate and he is the sole trustee of the trust. The trust is a discretionary trust. The children are the final beneficiaries and they are included amongst the discretionary beneficiaries. The children are not, however, beneficiaries under their father’s will. Captain Lock left the residue of his estate to the trustees of his family trust. There was a bequest of his personal property to his wife, the plaintiffs’ mother, but she died before Captain Lock.

[2]    The children say that Mr Weatherston has been slow in administering the estate and the trust, and he has failed to keep them fully informed. Their evidence shows that he has not always responded promptly to their requests for information and they say that the information provided was not as full as it should have been. In this proceeding, they seek orders for him to provide them with information about the trust and about the estate, and orders removing him as an executor and as a trustee. They propose that they be substituted as executors and trustees. They have applied for summary judgment.

[3]    The principles on which summary judgment applications are decided are well- established. The Court of Appeal re-stated them in Krukziener v Hanover Finance Ltd:1

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example, where the evidence is inconsistent with undisputed

1      Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].

contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at

341. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

[4]    This means that to give a plaintiff summary judgment the court must be satisfied that judgment can be entered now, without the need for further interlocutory steps such as discovery and interrogatories, or for a full hearing with witnesses giving evidence in person and being cross-examined. In a typical summary judgment application founded on the common law, the court applies rules of law and considers whether a defendant has an arguable defence on the facts when those rules are applied.

[5]    Things are different, however, when a court is asked on a summary judgment application to exercise a discretionary power. In those cases, the court needs to consider a range of matters, and there may be a range of potential outcomes. When there is a range of potential outcomes, the court has to be satisfied on the information provided in the summary judgment application that there can be only one possible outcome. If other outcomes remain reasonably arguable, the court cannot give summary judgment. That means that in these cases the plaintiff must negate all outcomes except that sought in the statement of claim.

Facts

[6]    In  his  will  of  10  March  1993,  Captain  Lock  appointed  his  wife  and  Mr Weatherston as executors and trustees of his will. As I have mentioned, Captain Lock’s wife died before him and accordingly Mr Weatherston is the sole executor and trustee. Under his will Captain Lock left his personal property to his wife and forgave all debts owed to him by the trustees of the MJ and AE Lock Family Trust, which is identified as having been established under a deed of settlement dated 10 March 1993. He left the residue of his estate to his wife and, if she did not survive him, then to the trustees of the family trust. The will provides a charging clause in favour of any solicitor, accountant or professional person who acts as trustee.

[7]    A copy of the trust deed is in evidence. The deed is described as have been made in the early 1990s but I infer from the will that it was made on the same day as

Captain Lock made his will. Page 1 is missing from the copy of the trust deed put in evidence in court, but that does not seem to have created any difficulties for this case.

[8]    The trust is called the “M J and A E Lock Family Trust”. Captain Lock is the settlor. Captain Lock, his wife, and Mr Weatherston are the trustees. The vesting date is the maximum period under the Perpetuities Act 1964. The children are the final beneficiaries of the trust. The discretionary beneficiaries are defined to include the children, any issue of the children, Captain Lock and his wife, and any charity. There should be no less than two, and no more than seven, trustees. The trust deed provides that there should be no less than two and no more than seven trustees and that discretionary beneficiaries are eligible for appointment as trustees. There is a charging clause in favour of any professional trustee. The trust deed provides power to make distributions of income and capital to discretionary beneficiaries.

[9]    While Captain Lock died on 4 April 2016, probate of the will was not granted until 10 August 2017. On Captain Lock’s death, Mr Weatherston was the sole trustee of the family trust. He is also executor under the will. As to the administration of the estate, the normal expectation is that an estate will be wound up within a year of the grant of probate. That is the “executor’s year”. That has not happened in this case.

[10]   Christopher Lock, the first plaintiff, deposes as to the difficulties in obtaining information from Mr Weatherston. According to Mr Lock, Mr Weatherston gave assurances as to when the estate would be wound up but there were delays for which Mr Lock considers there was not a satisfactory explanation. The plaintiffs engaged their present lawyers in June 2018. The evidence shows correspondence and emails between the lawyers on the one hand and Mr Weatherston on the other, with the lawyers seeking information. While Mr Weatherston did provide some information, in the eyes of the plaintiffs it has not been as full as it ought to have been. The delays eventually led to the plaintiffs beginning this proceeding in June 2019.

[11]   Mr Weatherston has claimed fees for the administration of the trust and the administration of the estate. He says those fees are $9,000 including GST. He says that when the proceeding was started, final distributions had already been made. The distributions worked this way: the assets of the estate were realised and as they were

realised the proceeds were paid to the trust. As trustee, Mr Weatherston has also resolved to make distributions to the children in equal shares. He has made those payments to them as discretionary beneficiaries, distributions of capital. He has not brought forward the vesting date even though the trust deed allows that. He says that by the end of 2018, 95.6 per cent of the assets had been fully distributed. At the hearing today he said that the estate has been fully wound up, all the assets of the estate have been paid to the trust and the trust has, in turn, distributed all available funds to the children after paying all costs and expenses.

[12]   While the plaintiffs began this proceeding in 2019, they did not apply for summary judgment until February 2020. Gault J gave leave for the summary judgment application under r 12.4(2) of the High Court Rules 2016 in June this year.

[13]   The plaintiffs’ statement of claim has three causes of action. In the first, the children seek orders for Mr Weatherston to provide them with information relating to both the trust and the estate:

(a)statement of accounts;

(b)copies of all minutes and resolutions;

(c)any document pertaining to any distributions;

(d)any document pertaining to any gifting of debt incurred; and

(e)bank statements of all bank accounts.

In the second cause of action, the children seek Mr Weatherston’s removal as executor of the estate. In the third cause of action, they want him removed as trustee.

[14]   There is, to a large extent, an overlap of the claims for the estate and for the trust. But for this decision it is more convenient to deal with the estate claims first, and the trust claims second.

Claims against Mr Weatherston as executor

Standing

[15]   There is a standing issue for the children’s claims against Mr Weatherston as executor.  That  is  because  they  are  not  beneficiaries  of  the  estate.   In  suing  Mr Weatherston as executor they are relying on the rights of a beneficiary of the estate. The beneficiary of the estate is the trustee of the Lock Family Trust. Unsurprisingly, Mr Weatherston as trustee would not sue himself as executor. That does not mean that the children, as beneficiaries of the trust, should be denied the right to see that       Mr Weatherston as executor has administered the estate correctly.

[16]   This is one of those cases where the law recognises that there are special circumstances which would allow the beneficiary of a trust to bring a claim to enforce the rights of the trustee. Authorities that recognise a right to sue derivatively in these circumstances are Hayim v Citibank NA2 and Roberts v Gill & Co.3 Because of the identity of the executor and the trustee of the estate there are “special circumstances” in that line of authorities which allow the children to sue derivatively to enforce the rights of the trustee. Normally, the special circumstances must be pleaded and proved. Leave to bring derivative proceedings is not required. While the children have not pleaded the “special circumstances”, that aspect can be cured by an amended statement of claim. I will continue with this decision on the basis that the children have standing to bring a proceeding derivatively against Mr Weatherston as executor of Captain Lock’s estate.

The application to remove Mr Weatherston as executor of the estate

[17]The application is made under s 21 of the Administration Act 1969:

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,

2      Hayim v Citibank NA [1987] 1 AC 730 (PC) at 748.

3      Roberts v Gill & Co [2010] UKSC 22, [2011] 1 AC 248 at [46].

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.

[18]   On an application to remove an executor, the court applies principles similar to those applied in applications to remove trustees. There is a useful line of authorities beginning with Associate Judge Osborne’s decision in Crick v McIlwraith4 followed by Farquhar v Nunns5, Tod v Tod6 , BUPA Care Services v Gillibrand 7and Frickleton v Frickleton.8 Essentially, the principles are these:

(a)The starting point is the Court’s duty to see estates properly managed and trusts properly executed.

(b)The jurisdiction involves a large discretion which is heavily fact- dependent.

(c)The wishes of the testator/settlor (evidenced by the appointment of a particular executor/trustee) are to be given consideration, but ultimately the question is as to what is expedient in the interests of beneficiaries.

(d)Expedience is a lower threshold than necessity, and imports considerations of suitability, practicality and efficiency. Misconduct, breach of trust, dishonesty or unfitness need not be established.

(e)Hostility as between administrators/trustees and beneficiaries is not of itself a reason for removal, but hostility will assume relevance if and when it risks prejudice in the interests of the beneficiaries.

[19]   In support of their application for removal, the children refer to the long time taken to wind-up the estate  and  the  poor  quality  of  the  information  given  by  Mr Weatherston as to the administration of the estate. I accept that on the face of it there are grounds for dissatisfaction about the way that Mr Weatherston has wound up

4      Crick v McIlwraith [2012] NZHC 1290 at [16].

5      Farquhar v Nunns [2013] NZHC 1670 at [13].

6      Tod v Tod [2015] NZCA 501.

7      Bupa Care Services v Gillibrand [2013] NZHC 2086, [2013] 3 NZLR 701 at [19].

8      Frickleton v Frickleton [2016] NZCA 408, [2017] 2 NZLR 154.

the estate – particularly in the time taken to obtain a grant of probate and the time taken to realise assets and distribute them. He has not been as forthcoming as he should have been in keeping the children informed.

[20]   Mr Weatherston has however raised a defence. He says that the estate has now been fully wound up; all the assets of the estate have been distributed to the trust and, further, there have been distributions to the children as beneficiaries of the trust. There is nothing left to administer in the estate, and, because there is nothing left to administer, no useful purpose would be served by appointing the children as executors. Mr Weatherston acknowledged that whether or not he was removed as executor, and whether or not the children became executors, he would remain accountable for the way he carried out his duties as executor. In support of his defence, Mr Weatherson has included a bank statement showing transactions on the estate with a nil balance following payment of all expenses and all distributions to the trust.

[21]   The onus remains on the plaintiffs to show that such a defence is not arguable. Further steps are required before the court can be properly satisfied with the defence, but it is a defence that should be heard on its merits. Ultimately, before the court makes any decision whether new executors ought to be appointed, the court will need to be satisfied that there will be some useful purpose in appointing new executors. On this summary judgment application, I cannot dismiss that defence as unarguable. As it is arguable for Mr Weatherston that no useful purpose will be served by removing him as executor, summary judgment cannot be granted on that part of the children’s claim.

Request for information from the executor

[22]   The next aspect of the executorship is the children’s request for information from Mr Weatherston as executor. As already mentioned, Mr Weatherston has provided a bank statement for the estate from the date of grant of probate and some of the documents to show other steps taken during the executorship.

[23]   It is helpful to assess the plaintiffs’ request against the obligations which an executor assumes when applying for a grant of probate. Mr Weatherston’s affidavit in

support of the application for the grant of probate is not in evidence, but he must have given an affidavit along the lines of the affidavit in Form PR1 of the First Schedule of the High Court Rules 2016. That form provides in paragraph 11:

11 I/We will faithfully execute the will (including any document/codicil changing the will) of which probate is granted in accordance with the law. If the court requires me/us to, I/we will file in the court and verify by affidavit—

(a)an accurate inventory of the deceased’s estate; and

(b)an account of the deceased’s estate that—

(i)is accurate; and

(ii)states the dates and details of all receipts and disbursements; and

(iii)states which of the receipts and disbursements were on capital account and which were on revenue account.

That is an invariable obligation which an executor assumes in applying for probate.

[24]   Mr Weatherston, who had the form shown to him, accepts that he ought to give an accounting in terms of that obligation. While he has provided some accounting materials, he has not provided a full inventory of Captain Lock’s estate. He has not shown whether there were any liabilities at the date of death. While he has provided bank statements running from the date of the grant of probate, there needs to be some accounting for assets and liabilities between the date of death and the grant of probate. What is required is a statement of assets and liabilities of the estate as at the date of death and an accounting for what has become of them since then, including payment of any costs in the administration, payment of any taxes, payment of any fees and showing how the funds had been distributed. Mr Weatherston indicated that he would be able to provide such an affidavit within two weeks. It is reasonable that he should be able to provide it by the end of September 2020.

[25]   To summarise Mr Weatherston is to file an affidavit by 30 September 2020 in which he is to give:

(a)a complete and accurate inventory of Captain Lock’s estate, including all assets of the estate at the date of death and any which have accrued to the estate since then;

(b)a statement of all liabilities of Captain Lock at the date of death;

(c)a record of all expenses incurred in the administration of the estate;

(d)a record of all receipts in the administration of the estate and showing all distributions; and

(e)attach documents that evidence receipts and costs incurred.

It is not necessary for him to state whether receipts and disbursements were on capital account or revenue account because it is common ground in this case that everything was on capital account. There are no life estates in this case.

The trust

[26]   So far as the trust is concerned, there is no standing issue. The children are discretionary beneficiaries and final beneficiaries and, as such, have standing to hold Mr Weatherston accountable for his trusteeship.

Removal as trustee

[27]   The  issues  here  are  similar  to   those   on   the   application   to  remove Mr Weatherston as executor of Captain Lock’s estate. The jurisdiction to remove is under s 51 of the Trustee Act 1956, and the court’s inherent jurisdiction. The children relied on the principles stated in Green v Green.9 That sets out the principles that have been repeated and applied in a number of cases:

[600]  In any case, the Court also has an inherent jurisdiction to remove trustees as part of its general jurisdiction to supervise the administration of trusts.

9      Green v Green [2015] NZHC 1218 at [598]-[606], cited in Jensen v Jensen [2019] NZHC 329 at [18].

[601]   When exercising its jurisdiction to remove trustees the Court is guided by the welfare of the beneficiaries.

…

[602]  As well as the welfare of the beneficiaries, the security of trust property and the satisfactory execution of the trusts are recognised as guiding principles in the exercise of the Court’s jurisdiction.

…

[603]    As the Court of Appeal recognised in Mendelssohn & Schmid v Centrepoint Community Growth Trust the settlor’s intentions, neutrality between beneficiaries and promotion of the purposes of the trust are also relevant circumstances.

[604]   In considering whether a trustee should be removed it is not necessary to establish that there has been a breach of trust, but equally establishing a breach of trust will not necessarily be sufficient to justify the removal of a trustee. Inconsequential mistakes should not be allowed undermine a settlor’s intention. Nor will a trustee be removed simply because of a position of conflict between duty and interest. Whether or not a position of conflict will justify removal depends on the nature of the conflict and the other circumstances of the case.

[605]   As to incompatibility between trustees and beneficiaries the Court of Appeal in Kain v Hutton said:¹⁰

…mere incompatibility between trustees and beneficiaries is not enough … Any incompatibility must be at such a level that the proper administration of the trust is seriously adversely affected and it has become difficult for a trustee to act in the interests of the beneficiary…

[606]    What is apparent therefore, is that each or any of the existence of conflicts of interest, misconduct on the part of the trustee, incompatibility or hostility between trustees and beneficiaries can be reasons for removing a trustee, but whether removal is appropriate in a particular case will depend on whether any of those factors are present to a sufficient extent to undermine the satisfactory execution of the trust for the welfare of the beneficiaries.

[28]   In support of Mr Weatherston’s removal as trustee, the children referred to the Court of Appeal’s decision in Addleman v Lambie Trustee Ltd,11 to note that one of a trustee’s fundamental duties is to maintain proper accounts for the administration of the trust property and have these available for inspection by the beneficiaries. This is a necessary incident of a trustee’s fiduciary duty to account to the beneficiaries. Failure to keep such accounts is a breach of trust. The children also relied on the

10     Kain v Hutton [2007] NZCA 199.

11     Addleman v Lambie Trustee Ltd [2019] NZCA 480, (2019) 5 NZTR 29-016.

principles laid down by the Supreme Court in Erceg v Erceg12 as to the provision of information.

[29]   Again Mr Weatherston, in opposition, raised the point that the trust has now been fully distributed. I accept that he has raised an arguable defence on that point. He has put in evidence a bank statement for the trust which now shows a nil balance. There are no funds left to administer. He has given evidence that all the distributions from the estate to the trust in turn have been divided equally between the children and that all payments have been made after all expenses have first been met. In the absence of any property owned by the trust, he says that there would be no point in removing him as trustee and appointing new trustees because there are no assets which are to be held on trust. A trusteeship cannot exist in a vacuum or when there are no assets held on trust. As with the executorship, that is an arguable defence which prevents me giving summary judgment against him today.

[30]   It remains to be seen whether there are further assets to be administered under the trust, but that is not something I can decide today. It is enough to record that Mr Weatherston has raised an arguable defence which prevents me making an order removing him as a trustee. Again, I record that Mr Weatherston acknowledges that whether he was removed as a trustee or not, he is accountable to the children for what he has done as trustee. The dismissal of the summary judgment application does not affect his accountability.

The request for information from Mr Weatherston as trustee

[31]   In Erceg the Supreme Court laid down general principles to be considered on a beneficiary’s request for information from the trustees.13 It listed these factors for consideration:

(a)The documents that are sought;

12     Erceg v Erceg [2017] NZSC 28, [2017] 1 NZLR 320.

13     Erceg v Erceg [2017] NZSC 28, [2017] 1 NZLR 320 at [56].

(b)The context for the request and the objective of the beneficiary in making the request;

(c)the nature of the interests held by the beneficiary seeking access;

(d)whether there are issues of personal or commercial confidentiality;

(e)whether there is any practical difficulty in providing the information;

(f)whether the documents sought disclose the trustees’ reasons for the decisions made by the trustees;

(g)the likely impact on the trust and other beneficiaries if disclosure is made;

(h)The likely impact on the settlor or third parties if disclosure is made;

(i)whether disclosure can be made whilst protecting confidentiality; and

(j)whether safeguards can be placed on the use of trust documentation.

[32]   In this case the matter is relatively straightforward. The only beneficiaries whose interests need to be considered are the plaintiffs. There is no need to scrutinise Mr Weatherston’s reasons for deciding to make distributions to the children. That is uncontroversial. That aspect of his decisions is unremarkable. The purpose of the children in seeking disclosure is to ensure that the trust has been properly managed.

[33]   In short, just as Mr Weatherston is to make disclosure as executor of the estate, he should make a similar affidavit as to his conduct of the trusteeship. That will serve the purpose of the children. Moreover, if I were to require more extensive disclosure I would be verging into territory where there could be arguable objections and summary judgment could not be granted. Accordingly I require Mr Weatherston to file and serve an affidavit in respect of his trusteeship along the same lines as I have directed for his executorship by 30 September 2020.

Conclusion

[34]In summary:

(a)I dismiss the summary judgment applications for Mr Weatherston to be removed as executor and as trustee;

(b)I order Mr Weatherston to file and serve affidavits as to the conduct of his executorship and his trusteeship by 30 September 2020. He is to give the information directed at [24] above for the executorship and corresponding information for the trusteeship;

(c)I direct the Registrar to allocate a first case management conference no earlier than 30 September 2020. The purpose of that conference will be to review the affidavits filed by Mr Weatherston and see whether any further directions are required. At that conference the children may indicate whether they are satisfied with the disclosure made, and whether they wish to push  on  with  their  applications  to  remove  Mr Weatherston as executor and trustee.

…………………………………

Associate Judge R M Bell