MacKinnon-Johnson v Clark
[2023] NZHC 3819
•20 December 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-002220
[2023] NZHC 3819
BETWEEN JOEL MACKINNON-JOHNSON, EMMA ELIZABETH MACKINNON, and KATIE JOY MACKINNON
Plaintiffs
AND
BELLA ROBERTA CLARK and ROBYN
ANN McCLEARY as administrators of the Estate of Rangiterewai Elizabeth McCleary First Defendants
BELLA ROBERTA CLARK and ROBYN ANN McCLEARY
Second Defendants
KIERAN NALLY
Third Defendant
Hearing: 7 September 2023 Appearances:
A E McDonald and S C S Rutledge for the Plaintiffs L A Foley for the First and Second Defendants
K Burkhart and A Wilson for the Third Defendant
Judgment:
20 December 2023
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 20 December 2023 at 4.00 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
MACKINNON-JOHNSON v CLARK [2023] NZHC 3819 [20 December 2023]
Introduction
[1] Rangiterewai McCleary (Rangi) had three daughters: Heather MacKinnon (Heather) and the second defendants Bella Clark (Bella) and Robyn McCleary (Robyn). In the late 1990s Rangi got into financial difficulties in a business venture. Heather purchased mortgages over Rangi’s home at 1A Bannerman Road, Western Springs, to prevent a mortgagee sale. In 2004, they agreed that Rangi would transfer 1A Bannerman Road, and two properties Rangi was about to purchase (1 Bannerman Road and 65 Fairview Road, Waiheke Island) to Heather. The arrangement, recorded in a formal deed, was that Heather was to hold 1 and 1A Bannerman Road on trust for Rangi as beneficiary. The deed recorded that Rangi transferred the Fairview Road property to Heather in full and final settlement and satisfaction of any entitlement Heather might have to Rangi’s estate upon her death.
[2] In a will executed in 2007, Rangi appointed Heather as executor and trustee and named Bella and Robyn as beneficiaries, recording that Heather had received her share of her estate during her lifetime. However, in a further will executed in 2010, Rangi appointed Heather as executor and trustee and provided that her estate should be divided equally between Heather, Bella, and Robyn, and if any daughter pre- deceased her, that their children would take their mother’s share.
[3] Heather died in 2013. In 2015, the executors and trustees of her estate, two of her three children – Joel MacKinnon-Johnson (Joel) and Emma MacKinnon (Emma)
– entered into a further deed with Rangi, through Mr Kieran Nally, her court-appointed property manager. This deed was said to settle all claims that Rangi may have against Heather’s estate, and all claims Heather’s estate may have against Rangi. The deed required Heather’s estate to pay Rangi a sum of money and to transfer the title of 1A Bannerman Road back to Rangi. The deed also acknowledged that in consideration for the transfer of Fairview Road to Heather in 2004, Heather had received her share and entitlement to Rangi’s estate during her lifetime and had no further claim on Rangi’s estate.
[4] Rangi died later in 2015. Bella and Robyn were appointed administrators of Rangi’s estate based on the 2010 will. Because of the 2004 and 2015 deeds, and based
on advice from Mr Nally, they transferred 1A Bannerman Road to themselves as beneficiaries, in equal shares.
[5] In this proceeding Heather’s children, Joel, Emma and Katie, claim it was improper of Bella and Robyn, assisted by Mr Nally, not to administer Rangi’s estate according to the 2010 will, which should have involved selling 1A Bannerman Road and distributing the net sale proceeds to the beneficiaries, including them (as they were entitled to share equally in the one-third share of the estate that Heather would have been entitled to had she lived). Specifically, the plaintiffs claim that Bella and Robyn breached their duties as administrators of Rangi’s estate, committed land transfer fraud, and should be removed as administrators and replaced. They claim that Mr Nally dishonestly assisted Bella and Robyn’s breach of trust, was negligent, and breached the Fair Trading Act 1986.
[6] In this application, Bella and Robyn, as administrators of Rangi’s estate, and in their personal capacity, apply for orders striking out the first, second, and sixth causes of action against them. Mr Nally applies for orders striking out the third, fourth and fifth causes of action against him. Their grounds according to their interlocutory applications are that the statement of claim does not disclose a reasonably arguable cause of action, is likely to cause prejudice or delay, or is otherwise an abuse of process of the Court.
[7] In their statements of defence, they plead that Heather settled any entitlement arising from any existing or future will made by Rangi under the 2004 and 2015 deeds. And that because of these deeds, Heather had no entitlement under Rangi’s 2010 will, the defendants had no obligation to notify the plaintiffs of the terms of the 2010 will after Rangi’s death, and they did administer Rangi’s estate in accordance with the terms of the 2010 will, subject to the 2004 and 2015 deeds.
[8]The issues to decide are:
(a)Is the plaintiffs’ claim that they are entitled to one-third of Rangi’s estate, because the 2004 and 2015 deeds are invalid and of no effect, reasonably arguable?
(b)Is the claim against Mr Nally not reasonably arguable for the other reasons given in his written submissions?
Legal principles
[9] The Court’s power to strike out a cause of action is provided by r 15.1(1) of the High Court Rules 2016. The Court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b)is likely to cause prejudice or delay; or
(c)is frivolous or vexatious; or
(d)is otherwise an abuse of the process of the court.
[10] There is no disagreement about the well-established principles applying to strike-out applications involving no reasonably arguable cause of action:1
(a)Pleaded facts are assumed to be true. This does not extend to pleaded allegations which are entirely speculative and without foundation.
(b)The cause of action or defence must be clearly untenable. The Court must be satisfied that it cannot succeed.
(c)The jurisdiction is to be exercised sparingly and only in clear cases.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law requiring extensive argument.
(e)The Court should be particularly slow to strike out a claim in any developing area of the law.
1 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33]; and Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.
[11] Pleadings likely to cause prejudice or delay are those that involve “an element of impropriety”. This includes pleadings that are unnecessarily lengthy, irrelevant, comprised of purely evidential matters, or unintelligible.2
[12] Pleadings may be struck out as otherwise an abuse of process when they are an “improper use of [the Court’s] machinery” and use of that process “for a purpose or in a way significantly different from its ordinary and proper use”.3 This includes a proceeding brought with an improper motive or to obtain a collateral advantage beyond that legitimately gained from a court proceeding, or an attempt to relitigate matters that have already been determined.4
Is the plaintiffs’ claim that they are entitled to one-third of Rangi’s estate, because the 2004 and 2015 deeds were of no effect, reasonably arguable?
[13] As explained earlier, the defendants claim that none of the causes of action in the plaintiffs’ statement of claim are reasonably arguable, because of the 2004 and 2015 deeds. They say that the share that Heather would have taken under the 2010 will was fully and finally settled in equity, statute, or otherwise by the 2004 and 2015 deeds. And that the 2004 and 2015 deeds meant that regardless of the 2010 will, Heather had no entitlement to Rangi’s estate. They say that because the plaintiffs’ entitlement under Rangi’s 2010 will is entirely derived from Heather’s entitlement, the plaintiffs had and have no entitlement under Rangi’s will. Therefore, the defendants had no obligations to inform the plaintiffs after Rangi’s death, nor take account of them in administering the estate. They say they correctly administered Rangi’s estate according to the 2010 will, subject to the 2004 and 2015 deeds.
[14] As the considerations relevant to the two deeds are slightly different, I turn first to the 2004 deed.
2 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [89].
3 At [87]; and Attorney-General v Barker [2000] 1 FLR 759 (QBD) at 764.
4 Commissioner of Inland Revenue v Chesterfields Preschools Ltd, above n 2, at [89], as cited recently in Green v Gillette [2022] NZCA 49 at [25]; and Collier v Butterworths of New Zealand Ltd (1997) 11 PRNZ 581 (HC) at 586.
The 2004 Deed
[15] The plaintiffs’ case is that whatever the parties’ intentions at the time, as a matter of law the 2004 deed did not disclaim, waive, or renounce Heather’s entitlements to receive under Rangi’s will. Nor did it prevent Rangi from making a new will that made provision for Heather; or disclaim, waive, or renounce any provision made for the plaintiffs under Rangi’s will.
[16] The plaintiffs rely on the principle that a will is ambulatory – it may be revoked or altered until the will-maker’s death, provided the will-maker retains testamentary capacity.5 Therefore, it is not until a will-maker dies that the beneficiaries obtain an interest in the bequeathed property.6
[17] The plaintiffs submit, based on a judgment of the High Court of England and Wales, Smith, that any disclaimer by a beneficiary while the will-maker is alive is invalid and ineffective because there is nothing for the beneficiary to disclaim.7 The plaintiffs also rely on a Canadian case to similar effect: Robinson v Morrell Estate.8
[18] Thus, the plaintiffs submit that when Rangi and Heather signed the 2004 deed, because Rangi was alive, Heather had no interest or entitlement in Rangi’s estate, and therefore no interest or entitlement which she could disclaim.
[19] The defendants seek to distinguish the cases relied on by the plaintiffs because, they say, they all involved the voluntary disclaimer of a benefit under a will or intestacy.9 They say that that is not the situation here, where there was valid consideration for Heather’s settlement of any claim against Rangi’s estate—legal title to Fairview Road. Thus, they characterise the 2004 deed as a contract, not a disclaimer, which the administrators of Rangi’s estate are entitled to enforce against Heather’s estate.
5 Lindsay Breach Neville’s Law of Trusts, Wills and Administration (14th ed, LexisNexis, Wellington, 2023) at 13.2.
6 Carrington v Carrington [2014] NZHC 869, [2014] NZFLR 571 at [85].
7 Smith v Smith [2001] 1 WLR 1937, [2001] 3 All ER 552 (Ch).
8 Robinson v Morrell Estate 2009 NSCA 597.
9 Emphasis added.
[20] I am not persuaded that the plaintiffs’ position on the 2004 deed is not reasonably arguable.
[21] In Smith, years before his mother died, a son signed a disclaimer of all benefits in his favour arising upon her death. In deciding whether a disclaimer of an interest under a will or intestacy in advance of the testator’s death is effective, the Deputy Judge of the High Court of England and Wales held:10
[7]There are a number of authorities which shed light on the operation of disclaimers, but none which cover the question which arises in this case, namely whether a voluntary disclaimer of interests in the estate of the deceased can be operative if executed before the death of the deceased.
[8]The authorities establish the following propositions:
(a)A disclaimer of an interest under a will, or indeed, of any other gift, is capable of operating so as to prevent the final vesting of the gift, since a man cannot be required to take a gift he does not wish to have:
“The law certainly is not so absurd as to force a man to take an estate against his will. Prima facie, every estate, whether given by will or otherwise, is supposed to be beneficial to the party to whom it is so given. Of that, however, he is the best judge, and if it turn[s] out that the party to whom the gift is made does not consider it beneficial, the law will certainly, by some mode or other, allow him to renounce or refuse the gift.”
(b)A disclaimer operates by way of avoidance, not disposition. In that case there was a firm disclaimer of an attempt to give shares, and a question arose as to the applicability of section 53(2) of the Law of Property Act 1925. This was dealt with shortly by Danckwerts LJ at p 1143: ‘We think that the short answer to this is that a disclaimer operates by way of avoidance, and not by way of disposition’
[9]The second of those principles provides some assistance in resolving the question that I am called on to decide. In the normal disclaimer case the disclaimer operates in relation to some actual transaction that has taken place or which a person has taken steps to try to bring about. In the context of wills, the will has been drawn, and the testator has died. In the context of an inter vivos gift, the donor has taken steps in order to divest himself of the property in favour of the donee. At that point there is a real interest which the donee can accept or disclaim, and on which an avoidance can operate.
[10]Now contrast a case such as the present. At the date of the disclaimer the intended donee has no interest whatsoever. He or she has a mere
10 Smith, above n 7 at [7]–[11].
expectancy. Any existing wills might or might not be revoked or varied; any existing intestacy might or might not persist until the death of the deceased. There are no proprietary rights, or other rights to control the destination of the estate in any way. What, then, is there to be disclaimed, or (as a matter of analysis) avoided? In my view the answer is nothing. A disclaimer bites on something that can be disclaimed; on a transaction which can in some way be said to be an attempt to make a gift. The testamentary intentions of a living person do not fall within that category. Until the death there is simply nothing that can be disclaimed, and any attempt to disclaim is invalid and ineffective.
[11]There is a principle in relation to disclaimers that they can only be effective if they are “made with knowledge of the interest … to be disclaimed, and with an intention to disclaim it’. While I do not rely on the first half of that statement as my principal reason for saying that disclaimers in advance of the death are not operative, it might be said to be a supporting factor. For firmer support I prefer the analogy of gifts and expectancies or future property. They are invalid in law, and can at most take effect as a contract to convey the property when it falls in, which equity will enforce if consideration is provided. While In re Paradise Motor Co tells us that a disclaimer does not work by means of a dispositive effect, nevertheless I consider that the absence of a subject matter, which presumably lies behind the invalidity of a gift of future property, prevents the avoidance which underlies a disclaimer as much as it underlies the absence of dispositive effect of an assignment of future property.
(citations omitted)
[22] The defendants are correct that Smith dealt with a voluntary disclaimer where no consideration was provided for the disclaimer. The High Court continued:11
Since no consideration was provided by Frank (or by anyone else), there is no question of his being able to treat the disclaimer as an agreement and enforce it accordingly. In any event, it is hard to treat it as an agreement when it is on its face a unilateral document without any inter partes or bilateral element.
[23] However, in the second case, Robinson v Morrell Estate, the Nova Scotia Court of Appeal considered the situation where there was consideration for the disclaimer.12 A couple signed a separation agreement which included a provision whereby they agreed to renounce and waive any claim in the estate of the other, and any right to share in the estate of the other. When he died, the former husband had not changed his will, which left the residues to his former wife. At first instance, the Chambers
11 At [11].
12 Robinson v Morrell Estate, above n 8.
Judge held that the separation agreement did not revoke the will, and accordingly, the former wife was entitled to the testamentary gift.
[24] On appeal the appellant, acknowledging that voluntary disclaimers in advance of death are void and of no effect, argued that the clause in the separation agreement by which the husband and wife renounced and waived any claim in the estate of the other was a contract supported by consideration. The appellant argued that the former wife was contractually bound to renounce her interest in her former husband’s will after his death.
[25] The Court said that Smith and the other cases relied on by the appellant stand for the principle that a voluntary disclaimer for a future interest has no legal effect.13 The Court said that since the disclaimer in Smith was voluntary, the Deputy Judge did not need to decide whether one given for consideration had any binding effect and did not do so.14 As to the Deputy Judge’s comments about a pre-death contract to disclaim, the Court said:15
[35] Since the disclaimer in Re Smith, supra was voluntary, the judge did not need to decide whether one given for consideration had any binding effect and did not do so. In any event, the wording he used is hardly definitive, but rather was limited or confined by the qualifier “can at most take effect”. The passage amounts only to an indication that, in deciding a different fact situation, the judge mused about the possibility of a pre-death contractual obligation to disclaim a gift under a will. Re Smith, supra cannot be relied upon as establishing that principle.
[26] The Court rejected the appellant’s argument, stating that the appellant had failed to produce any Canadian or English legal authority that a renunciation or disclaimer executed before the death of the testator, whether without consideration or for consideration, has been found to be legally effective.16
[27] In this application to strike-out, the onus is on the defendants as applicants to establish that the plaintiffs’ claim is untenable. Smith is clear authority that the voluntary disclaimer of any entitlement in an estate before the testator dies is
13 At [35] and [37].
14 At [35].
15 At [35].
16 At [37]. See also [43].
ineffective. I have not been referred to any authority to the effect that the position is different where the disclaimer is given for consideration. From the cases to which I have been referred, discussed above, the legal effect of a pre-death contract to renounce is unclear.
[28] I note that the learned authors of Williams on Wills state that a putative beneficiary under the will or intestacy of a living person has no interest in the deceased’s estate, which can be the subject of a disclaimer and so a purported inter vivos disclaimer by such a beneficiary has not effect, citing Smith and Robinson v Morrell Estate.17 Nevill’s Law of Trusts, Wills and Administration refers only to Smith for the same point.18
[29] On that basis, I am not persuaded that the plaintiffs’ claim, to the extent that it is based on the 2004 deed being invalid and ineffective, is not reasonably arguable.
[30]I turn now to the 2015 deed.
The 2015 Deed
[31] Rangi’s 2010 will provided that the residue of her estate was to be divided equally between Bella, Robyn, and Heather, and that if any of them died before her, leaving a child or children living at Rangi’s death, then that child, when they reach the age of 20, should take (or take equally amongst themselves) the share which their mother would otherwise have taken under the 2010 will had she been living at the time of Rangi’s death.
[32] When Rangi died on 9 May 2015, she was predeceased by Heather, who had died on 21 August 2013. Therefore, according to the terms of her will, one third of the residue of her estate should have been distributed to Heather’s children.
[33] In their written and oral submissions, the defendants submitted that there is compelling evidence to suggest that Rangi did not have testamentary capacity when she made the 2010 will. As I said during the hearing, submissions about Rangi’s
17 Francis Barlow Williams on Wills (10th ed, LexisNexis, Croydon, 2021) at [7.22] and [46.1].
18 Neville’s Law of Trusts, Wills and Administration, above n 5 at [13.2].
testamentary capacity have no place in this strike-out hearing. The defendants have not pleaded in their statements of defence that Rangi did not have testamentary capacity or identified it as an issue in their interlocutory applications to strike-out. In any event, a strike-out application proceeds based on undisputed facts. I am unable to make any finding on the testamentary capacity of Rangi, and I put these submissions to one side.
[34] The plaintiffs submit that the same principles discussed in relation to the 2004 deed apply to the 2015 deed. That is, because Rangi was alive when the deed was signed, no prospective beneficiary could disclaim, waive, or renounce any benefit to her estate, as they had no benefit to disclaim, waive or renounce.
[35] Furthermore, Joel and Emma signed the 2015 deed in their capacities as executors of Heather’s estate, with the estate’s solicitor Peter McCutcheon. The plaintiffs submit that in 2015 Heather had already died, and any gift to her from Rangi lapsed. Therefore, even if it were legally possible for Joel and Emma, as executors of Heather’s estate, to disclaim a future gift in Rangi’s estate, there was no gift to be disclaimed.
[36] The defendants make the same submissions in relation to the 2015 deed as the 2004 deed. They say that the authorities the plaintiffs rely on are distinguishable, as they concern voluntary disclaimer, and that the 2015 deed was a full and final settlement of any entitlement Heather’s estate had to Rangi’s estate.
[37] I consider that the plaintiffs’ position on the 2015 deed is reasonably arguable. First, it is reasonably arguable that when Heather died in 2013 any gift to her from Rangi’s estate would lapse. Therefore, there could not ever be any gift for her estate to disclaim in 2015 when the deed was signed.
[38] Second, when the 2015 deed was signed, Rangi was alive. There is legal authority that if the 2015 deed constituted a voluntary disclaimer by Heather’s estate of any future entitlement to Rangi’s estate, it is invalid and ineffective. To the extent that the agreement involved consideration, the defendants have not provided any legal authority for the proposition that a pre-death disclaimer involving consideration is an
enforceable contract. In the absence of authority on the point, the plaintiffs’ position is arguable.
[39] If the plaintiffs are correct, when the 2015 deed was signed it was the plaintiffs who were prospective beneficiaries under the 2010 will, not Heather’s estate. It is not alleged that the plaintiffs disclaimed their personal benefits to Rangi’s estate through this deed. Even if they had, for the reasons given it is arguable that any such disclaimer, even for consideration, is invalid and ineffective.
[40] For these reasons, I am not persuaded that the plaintiffs’ claim that it was improper of the defendants not to administer Rangi’s estate according to the 2010 will is untenable.
[41] As that was the basis for Robyn and Bella’s application to strike-out, this conclusion disposes of their application.
[42] I now turn to the further arguments made by Mr Nally in relation to the causes of action specific to him.
Is the claim against Mr Nally not reasonably arguable for other reasons?
Third cause of action – dishonest assistance
[43] In addition to the arguments based on the 2004 and 2015 deeds, Mr Nally appears to claim that the third cause of action is untenable because there is no proper foundation laid for a pleaded allegation of dishonesty on Mr Nally’s part.
[44] Ms Burkhart for Mr Nally relies on Sandman v McKay in which the Supreme Court confirmed that the test for dishonesty is an objective one, judged against the background of what the defendant subjectively knew:19
[78] A defendant is dishonest if he or she has actual knowledge that the transaction is one in which the defendant cannot honestly participate. Wilful blindness, which equates in equity with actual knowledge, also suffices. This arises where a defendant strongly suspects a breach of trust but makes a deliberate decision not to inquire in case the inquiry results in actual
19 Sandman v McKay [2019] NZSC 41, [2019] 1 NZLR 519 at [77] and [78].
knowledge. It is “necessary that the strength of the suspicion … makes it dishonest to decide not to make enquiry”.
(citations omitted)
[45]Similarly, the Court of Appeal observed in McKay v Sandman:20
The question is specific to the circumstances. As Lord Nicholls stated in Royal Brunei Airlines Sdn Bhd v Tan:
[W]hen called upon to decide whether a person was acting honestly, the Court will look at all the circumstances known to the third party at the time. The Court will also have regard to personal attributes of the third party, such as his experience and intelligence, and the reason why he acted as he did.
[46] Ms Burkhart submits that context is important when considering whether Mr Nally acted as an honest person in the circumstances. Mr Nally’s evidence is that he only became aware of the existence of the 2010 will in late September 2015, after the 2015 deed was entered into. Furthermore, that in administering the estate, Mr Nally relied on the terms of the 2004 and 2015 deeds, which he believed to be a comprehensive resolution of all claims between Rangi’s estate and Heather’s estate. His evidence is that when he became aware of the 2010 will, he filed a memorandum with the Court setting out the 2015 deed and how its provisions affected probate. Ms Burkhart submits that given Mr Nally’s knowledge at the time the 2016 transfer was affected, he acted as an honest person would do in those circumstances.
[47] In deciding whether Mr Nally acted dishonestly, the Court will assess his evidence of what he knew, why he acted as he did, and all the circumstances known to him at the time. This is not an assessment that the Court can make in a strike-out application. It would be premature to strike-out this cause of action as being inarguable at this stage.
Fourth cause of action—negligence
[48] Mr Nally claims that the fourth cause of action does not disclose a reasonably arguable cause of action because he did not owe the plaintiffs, as possible beneficiaries of Rangi’s estate, a duty to take reasonable care in the administration of the estate.
20 McKay v Sandman [2008] NZCA 103, [2018] NZAR 707 at [67], citing Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 (PC) at 391.
Secondly, if there was a duty of care, the plaintiffs cannot show that they relied on Mr Nally’s absence of advice (regarding their potential entitlement under the 2010 will).
[49] Ms Burkhart submits that because Mr Nally was not involved in preparing Rangi’s 2010 will, only being appointed in 2013 as her property manager, he did not assume any responsibility towards the plaintiffs as possible beneficiaries of that will. Therefore, there is not sufficient proximity between him and the plaintiffs to raise a duty of care. Furthermore, even if there was sufficient proximity to give rise to a duty of care, the plaintiffs need to show that they relied on Mr Nally’s absence of advice regarding their potential entitlement under the 2010 will and that this led them to believe that they did not need to take any further action in concerning Rangi’s estate. Ms Burkhart submits that the plaintiffs’ claim must fail because they had their own lawyer, Mr McCutcheon, and he was aware in late 2014 that Rangi may have made a further will after the 2007 will.
[50] I am not persuaded that the plaintiffs’ negligence cause of action is untenable for the reasons given by Mr Nally. First, the submissions seem to misunderstand the plaintiffs’ claim, which is:21
18.At all material times Mr Nally was retained by Bella and Robyn to administer the Estate and to advise them on matters to do with the Estate’s administration.
19.At all material times Mr Nally owed a duty of care to the plaintiffs as beneficiaries of the Estate to take reasonable care in the administration of the Estate.
20.In effecting the 2016 Transfer Mr Nally breached the duty of care that he owed to the plaintiffs.
[51] From this, I understand the plaintiffs’ claim to be that Mr Nally owed the plaintiffs, as beneficiaries, a duty of care to administer the estate after Rangi’s death according to the 2010 will, and that by advising Robyn and Bella to transfer 1A Bannerman Road to themselves to the exclusion of the plaintiffs, contrary to the 2010 will, he breached that duty of care. Thus, the claim against Mr Nally in negligence concerns his role in administration of the estate after Rangi’s death, when
21 Statement of Claim dated 8 November 2021.
the plaintiffs were actual beneficiaries (if the 2004 and 2015 deeds were ineffective), not a role in preparing the 2010 will.
[52] Second, the courts have recognised that a solicitor who has accepted instructions to prepare a will for a client owes a duty of reasonable care to the intended beneficiaries under the will.22 The rationale is that in practice, the public relies on solicitors to prepare effective wills.23 The plaintiffs’ claim proposes an extension to this recognised duty of care, to solicitors advising executors or administrators on the administration and distribution of an estate and the intended beneficiaries of the estate. In my view, there are analogies between the two situations, and it is not untenable that the Court may expand the tort to recognise a duty of care in these circumstances. It is reasonably arguable that loss to the plaintiffs as named beneficiaries under the 2010 will was foreseeable if the estate was not administered and distributed properly; and that the plaintiffs relied on Mr Nally as a professional to take reasonable care when advising on the administration and distribution of Rangi’s estate.
[53] It is relevant that the Supreme Court has cautioned against striking out claims based on a novel duty of care. In relation to strike-out applications based on proposed new duties of care, the Supreme Court in Couch v Attorney-General said:24
Whether the circumstances relied on by the plaintiff are capable of giving rise to a duty of care is the question for the Court. If a duty of care cannot confidently be excluded, the claim must be allowed to proceed. It is only if it is clear that the claim cannot succeed as a matter of law that it can be struck out.
[54] I note also that in Davis v Mancer,25 this Court declined an application to strike-out a claim that a solicitor acting for an estate owed a duty of care to the estate’s beneficiaries. The plaintiffs had successfully claimed under the Family Protection Act against the estate. The solicitor failed to properly advise the executor of his duties to, amongst other things, collect in the assets of the estate and act in the interests of the beneficiaries of the estate. Woolford J held that in these circumstances it was not
22 Gartside v Sheffield Young & Ellis [1983] NZLR 37 (CA) at 50; and White v Jones [1995] 2 AC 207 (HL) at .
23 Gartside v Sheffield Young & Ellis, above n 23 at 43.
24 Couch v Attorney-General, above n 1 at [2].
25 Davis v Mancer [2015] NZHC 3005.
entirely untenable that the tort might be expanded to protect the rights of beneficiaries in this situation.
[55] For these reasons, I cannot be sure at this stage that there is no tenable claim that Mr Nally, knowing the terms of the 2010 will and that the plaintiffs were beneficiaries under that will, owed them a duty to take reasonable care when advising on the administration and distribution of Rangi’s estate.
[56] Accordingly, I am not persuaded that the fourth cause of action for solicitors’ negligence does not disclose a reasonably arguable cause of action.
Fifth cause of action—breach of the Fair Trading Act 1986
[57] The plaintiffs claim that in failing to administer the estate in accordance with the terms of the 2010 will, and in failing to notify the plaintiffs that they were beneficiaries under the will, Mr Nally engaged in misleading and deceptive conduct in breach of the Fair Trading Act 1986.
[58] Mr Nally says that this cause of action should be struck out because he was under no obligation to disclose to the plaintiffs that they were beneficiaries under the 2010 will, because by virtue of the 2004 and 2015 deeds they were not beneficiaries. Therefore, Mr Nally’s actions did not involve misleading and deceptive conduct.
[59] As discussed, the plaintiffs say that proposition is wrong as a matter of law. I have found the plaintiffs’ position to be reasonably arguable. To the extent that Mr Nally’s application to strike-out this cause of action relies on the 2004 and 2015 deeds being invalid, it must fail.
[60] Ms Burkhart also makes submissions about whether Mr Nally’s conduct meets the test for misleading and deceptive conduct in s 9 of the Fair Trading Act 1986. She identifies that the Supreme Court has said that whether there is misleading and deceptive conduct should be assessed by asking the following question:26
26 Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at 503.
… whether a reasonable person in the claimant’s situation – that is, with the characteristics known to the defendant or of which the defendant ought to have been aware – would likely have been misled or deceived. If so, a breach of s 9 has been established.
[61] Furthermore, whether an omission to disclose information crosses the boundary into misleading and deceptive conduct depends on the circumstances of each situation.27
[62] Ms Burkhart submits that a reasonable person, with the characteristics known to Mr Nally (including that the plaintiffs were legally represented by Mr McCutcheon) or of which Mr Nally ought to have been aware, would not likely have been misled or deceived by Mr Nally’s conduct. And that Mr Nally did not deliberately make the plaintiffs think they were not beneficiaries of Rangi’s estate or give them a mistaken idea about what they were entitled to.
[63] These arguments rely on Mr Nally’s evidence as to his knowledge and understanding at the time. The evidence of the plaintiffs may also be relevant. As Ms Burkhart acknowledges, an assessment of whether Mr Nally’s conduct amounted to misleading and deceptive conduct will involve considering all the surrounding circumstances. This is not an assessment that can be undertaken in a strike-out application, which proceeds on the assumption that the plaintiffs’ pleaded facts are true. It would be premature to strike-out this cause of action as being inarguable at this stage.
Result
[64] The first and second defendants’ interlocutory application for orders striking out the first, second and sixth causes of action in the plaintiffs’ statement of claim is dismissed.
[65] The third defendant’s interlocutory application for orders striking out the third, fourth and fifth causes of action against the third defendant is dismissed.
27 Guthrie v Taylor Parris Group Cossey Ltd (2002) 10 TCLR 367 (HC) at [32].
[66] As to costs, I am of the preliminary view that, having succeeded, the plaintiffs are entitled to costs from the defendants on a 2B basis plus reasonable disbursements. I encourage the parties to agree costs, but if the parties cannot agree, memoranda (no more than three pages) are to be filed by 9 February 2024.
Associate Judge Gardiner
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