Mackintosh v Thomas
[2018] NZHC 1372
•11 June 2018
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2016-409-000171
[2018] NZHC 1372
IN THE MATTER OF THE ESTATE OF NORMAN DEAN THOMAS AND IN THE MATTER
OF AN APPLICATION FOR DIRECTIONS UNDER SS 64 AND 66 OF THE TRUSTEE ACT 1956
BETWEEN
JOHN BOWDEN MACKINTOSH AND MATTHEW CHADLOW HALL
Applicants
AND
PHILIP DEAN THOMAS, ALISON MARGARET SYME, MARK WREFORD REED, SIMON THOMAS REED AND
ELEANOR MARY MARR
Respondents
Hearing: 6 June 2018 Appearances:
C A McVeigh QC for Applicant trustees
H A Evans and C H Liu for Philip Thomas
RJB Fowler QC and S Valdez for Alison Syme JWA Johnson for Mark Reed and Simon Reed K W Clay for Eleanor Marr
Judgment:
11 June 2018
JUDGMENT OF GENDALL J
MACKINTOSH v THOMAS [2018] NZHC 1372 [11 June 2018]
Contents
Introduction and background................................................................................ [1]
The first Court of Appeal judgment (the CA Judgment No. 1)............................ [10]
The second Court of Appeal judgment (the CA Judgment No. 2)....................... [14]
The Mediation Heads of Agreement (HOA)....................................................... [16]
A.Application by Philip................................................................................ [27]
B.Application by Alison............................................................................... [41]
C.Application by Eleanor............................................................................. [53]
Result................................................................................................................... [61]
Alternative directions.......................................................................................... [63]
Costs.................................................................................................................... [64]
Introduction and background
[1]Norman Dean Thomas (the Deceased) died in 2012.
[2] The Deceased’s estate is a substantial one. It comprises interests in 11 Canterbury farm properties and involves other farm and general assets. As I understand it, the estate has a value of about $22 million.
[3] Under his Will the Deceased left all his estate, including the interests he had in the farm properties, to his daughters, the second-named respondent, Alison Syme (Alison) and the fifth-named respondent, Eleanor Marr (Eleanor). Eleanor, Alison and one of Alison’s sons, the fourth-named respondent, Simon Reed (Simon) were appointed executors and trustees under the Will.
[4] Eleanor, Alison and Simon were removed as executors and trustees by a consent order and replaced by professional trustees, the applicants John Bowden Mackintosh (Mr Mackintosh) and Matthew Chadlow Hall (Mr Hall) (together the trustees).
[5] The Deceased’s son, the first-named respondent, Philip Thomas (Philip) was not a beneficiary in his father’s will. Philip, however, had farmed several of the farm properties for many years in partnership with his father. Unfortunately, this partnership arrangement suffered a breakdown and, following this, Philip lodged caveats over his father’s one half share of the partnership farms. The other one half share is owned by Philip. Philip claimed an entitlement to his father’s share in those farms, either by virtue of the partnership agreement or by way of a constructive trust.
[6] When the Deceased died in 2012, Philip’s claims remained unresolved. Following the Deceased’s death, two of his grandchildren, Simon and his brother Mark Reed (Mark) and other relations of the deceased, brought statutory claims against the estate. Those claims, together with an earlier unresolved claim brought by the Deceased during his lifetime for division of the Partnership property with Philip, were then amalgamated with Philip’s claims into a single proceeding against and involving the estate.
[7] In order to resolve the various claims a successful four day mediation was held before Mr R Fisher QC. As a product of this mediation, on 20 September 2015 a “Mediation Heads of Agreement” (the HOA) was negotiated between the parties. This allocated the estate’s interests in the various farm properties and other assets between first, Philip, secondly, Eleanor, and thirdly, Alison, Mark and Simon together. The HOA also provided for payment of tax, it included an agreement to abandon any claims against the estate, and it provided a formula for payment of any shortfall that arose in the estate. The HOA contemplated the execution of a comprehensive agreement to deal with implementation and subsidiary matters, and anticipated a Court consent order being obtained, but these never eventuated.
[8] The trustees did not participate in the mediation and were not parties to the HOA, but they have proceeded since that time, generally, on the basis that the HOA distributions and terms will be ultimately implemented.
[9] Coming forward to around March 2016, the point had been reached in the administration of the estate where the trustees required urgent access to significant cash resources to fund that administration. Accordingly, litigation was brought whereby the trustees sought directions from this Court for the sale of property of the estate as a means of providing funding. As a result, Heath J in this Court made an order under s 339 of the Property Law Act 2007 directing that Philip purchase the estate’s one half share in one of the farm properties known as the Mays block. Philip or his interests owned the other one half share.
The first Court of Appeal judgment (the CA Judgment No. 1)
[10] Philip appealed that order. He did so primarily on the ground that Heath J did not have the power to make an order under s 339 without first resolving a constructive trust claim Philip had to the estate’s one half share in the property and removing the caveat he had lodged to protect this interest. His appeal was supported by Eleanor, Mark and Simon, who all shared his view that it had not been demonstrated that the sale of any farm property was required and that a sale would undermine the HOA.
[11] In a judgment issued by the Court of Appeal on 28 November 2017 (the CA Judgment No. 1) Heath J’s order made under s 339 of the Property Law Act was set
aside. The Court of Appeal found that in the circumstances where the HOA, accepted by all parties to it to be binding, provided a mechanism for the funding of the estate, the appropriate form of order to achieve the purpose of satisfying the trustees’ funding requirements was a direction that payments were to be made in accordance with a shortfall provision which was included as cl 37 of the HOA.
[12]Clause 37 of the HOA had provided:
If there is a shortfall in the estate, it will be met as to:
a.$0 to $400,000 shortfall by Eleanor Marr 50% and Philip Thomas 50%.
b.Shortfall in excess of $400,000 by Eleanor Marr, Alison Syme and Philip Thomas in equal one third shares.
[13]That decision of the Court of Appeal went on to provide:
…
[54]…We consider it appropriate that counsel for the first respondents, Philip, Eleanor and Alison, should confer on the precise terms of an order which reflects the proposal in Philip’s memorandum of 13 November 2017.
[55]We request that those parties file a memorandum by 12 December 2017 detailing the terms of an order which provides for payment forthwith of the amount of the estate’s liabilities as at 1 November 2017 and a procedure for ongoing quarterly payments pending further order of the Court. If the parties are unable to agree upon the terms of an order within that period the Court will settle the terms of the order itself.
…
The second Court of Appeal judgment (the CA Judgment No. 2)
[14] The parties were unable to agree on the terms of an order and in a second judgment issued by the Court of Appeal on 19 December 2017 (the CA Judgment No. 2) that Court made orders. All parties, including the trustees, seem to accept that this Court of Appeal decision and the orders made have primacy here. Those orders took the following form:
Orders
[16]We direct that within 15 working days:
(a)Philip is to pay $98,000 into the trustees’ bank account;
(b)Alison is to pay $173,000 into the trustees’ bank account; and
(c)Eleanor is to pay $293,000 into the trustees’ bank account.
[17] In addition, pending any further order of the High Court, Philip, Alison and Eleanor are to make a quarterly payment to the trustees’ account of $52,000 ($156,000 in total) commencing on 1 March 2018.1
[15] Interestingly, the orders made by the Court of Appeal in the CA Judgment No. 2 went on to provide the following:
[18] As noted above, (at [9]), Alison has indicated that to meet her funding obligations she will need to be able to utilise the titles of certain properties in order to provide security for the funding she would need. We anticipate that Eleanor and Philip may have a similar need.
[19] Consequently, we direct that the trustees are to enable Alison, Philip and Eleanor to utilise the titles of the properties as allocated to each of the them in cl 1, 2 and 4 respectively of the Mediation Heads of Agreement for the purpose of providing security to obtain the funding that each must provide to the trustees pursuant to this judgment. If, despite the terms of cl 32 and 33 of the Mediation Heads of Agreement, caveats remain on the titles, application should be made to be High Court for removal for this purpose. Alison, Philip and Eleanor will each be personally and solely responsible for the costs of using the titles of the respective properties as security to obtain funds.
[20] The directions which we have made are solely by reference to the obligation assumed by Philip, Alison and Eleanor under cl 37 of the Mediation Heads of Agreement. For that reason, we decline to make directions as proposed by Eleanor to provide for a reduction to reflect rental payments or by way of categorisation or explanation of the status of any payment as a loan.
[21] We consider it is appropriate for the matter to be remitted back to the High Court to deal with any further issues or applications that arise out of these orders. Specifically leave is reserved:
(a)for the trustees to apply to the High Court for orders for further funding provision to be made in the event that presently contingent liabilities become payable; and
1 Some small adjustment in these final figures, by agreement has been settled between Philip, Eleanor and Alison. As at 31 January 2018 the figures are now:
Philip - $81,333, Eleanor - $275,333 and Alison - $206,333.
Eleanor has fully paid her $275,333 plus $104,000 being the quarterly payments due 1 March 2018 and 1 June 2018. Philip has paid nothing and including the two quarterly payments due 1 March and 1 June 2018 owes $185,333. Alison has also paid nothing and including the two quarterly payments due 1 March and 1 June 2018 owes $310,333. But for present purposes, these matters make little difference to the real issues before me.
(b)for all parties to apply to the High Court for further directions either as to the implementation of the orders made in this judgment or for the variation of the orders in the event that changed circumstances or unexpected developments make this necessary.
The Mediation Heads of Agreement (HOA)
[16] It is useful at this point to set out certain other provisions of the HOA which are generally relevant to matters now before the Court. The HOA did include additional provisions setting out some matters of detail which are not directly relevant here.
[17]The relevant provisions of the HOA, however, are:
MEDIATION HEADS OF AGREEMENT AGREEMENT DATED 20 SEPTEMBER 2015
The parties agree on the following:
Transfer of Land
1.That the estate and Philip Thomas’ interests in the land listed in Table 1 will be vested in Alison Syme, Mark Reed and Simon Reed on the following conditions:
a.Where the parties do not have occupation of that land they will receive occupation of the land on 31 March 2016.
b.Unencumbered legal title of the land will be provided on a date to be agreed with the trustees.
c.Alison Syme, Mark Reed and Simon Reed will determine who receives legal title of the land provided that any transferee will be GST registered at the time of transfer.
Table 1 Halkett Cridges Chesmars Portion of McCauslands land known as Pitts Road
2.That the estate’s interests in the land listed in Table 2 will be vested in Philip Thomas on the following conditions:
a.It is acknowledged that Philip Thomas has occupation of the land.
b.Legal title of the land will be provided on a date to be agreed with the trustees.
Table 2 Cranmore Steeles Wilsons Bedfords/Mays Middlewoods McCauslands, less that portion of McCauslands known
as Pitts Road
3.That Alison Syme’s interest in Nordean, whether in her own right or as a current beneficiary under the Will and including any current account, will be vested in Philip Thomas on the following conditions:
a.Philip Thomas receives the Nordean land on 31 March 2016.
b.Legal title of the land will be provided on a date to be agreed with the trustees.
Transfer of Other Assets
4.That the estate will sell its interests in Yaldhurst for the benefit of Eleanor Marr on the following conditions:
a.Mark Reed will provide vacant possession of the land on 31 March 2016, unless agreed otherwise with the trustees (but with Mark having the right to harvest crops after 31 March 2016 if required).
b.Eleanor Marr pays for the cost of sale of the property.
…
6.That any other beneficial interest the estate has in the N D and P D Thomas Partnership will vest in Philip Thomas.
…
8.Eleanor Marr retains her 5/12th share in Nordean which is represented by her interest in the Thomas Family Trust and the Nordean Farm Limited, which interest Philip Thomas will purchase by 31 March 2016 or as otherwise agreed.
…
Transfer of Liabilities
14. That the N D and P D Thomas Partnership’s mortgage liability to Westpac will be refinanced by Philip Thomas so that when Pitts Road is transferred it will be free of the mortgage.
…
Other Matters
…
32.Mark Reed, Simon Reed and Alison Syme will forthwith remove caveats lodged against any of the properties the subject of this Agreement.
33.Philip Thomas will remove caveats lodged against any of the properties the subject of this Agreement in order to allow the transfer of legal title in accordance with this Agreement.
34.All parties will abandon any claims which they have made against the trustees of the estate and will not bring any future claims against the trustees of the estate.
35.All proceedings will be discontinued with no issues as to costs.
36.That Eleanor Marr and Philip Thomas will have an equal one half share in any residue of the estate.
37.If there is a shortfall in the estate, it will be met as to:
a.$0 to $400,000 shortfall by Eleanor Marr 50% and Philip Thomas 50%.
b.shortfall in excess of $400,000 by Eleanor Marr, Alison Syme and Philip Thomas in equal one third shares.
38.While the provisions of this Agreement reflect the substantive binding intentions of the parties, the precise mechanisms in terms of how the transactions will be effected are yet to be determined.
39.The precise mechanisms, to give effect to the intentions of the Agreement, are to be subsequently agreed and recorded in a comprehensive Agreement which will:
a.seek Court orders by consent; and
b.give effect to the most tax effective means by which the substantive agreements can be effected.
[18] Returning to the Court of Appeal orders made in the CA Judgment No. 2 outlined at paras [14] and [15] above, since that time certain of the stipulated payments have not been made. Eleanor has made all the payments required from her in terms of the Court of Appeal orders, including the quarterly payments due on 1 March 2018
and 1 June 2018. Neither Philip nor Alison, however, have themselves made any of the payments required in the Court of Appeal orders.
[19] Instead, applications have been filed in this Court by both Philip and Alison seeking what are effectively orders for implementation or variation of the payment terms. In this they rely on para [21](b) of the CA Judgment No. 2 outlined at para [15] above reserving leave to apply to this Court for this purpose.
[20] These applications by Philip and Alison are opposed by other parties, including the trustees.
[21] In addition, Eleanor has herself filed what is described by her counsel, Mr Clay, as a “holding application” seeking variation by way of cancellation of future quarterly payments due from her commencing 1 September 2018. This application is advanced on the basis that, if Philip or Alison were to be successful in having their payment terms varied, consideration must be given to Eleanor’s position who, unlike her brother and sister, has promptly made every payment to date from her to the trustees.
[22]Again, this application by Eleanor has also some opposition.
[23] I leave the position of Simon and Mark on the ongoing issues between the other parties here on one side. I accept, as their counsel Mr Johnson acknowledged, that they have a very limited role relating to the issues before me.
[24] At the hearing before me of each of these applications, substantial material and submissions were provided by all parties. I have carefully read and considered all of these.
[25] I conclude, however, that the matters before me are essentially relatively simple ones, bearing in mind the provisions of the CA Judgment No. 2 and its orders, which appeared to uphold the primacy of the HOA. The Court of Appeal orders at issue here are fundamentally premised on enforcement of cl 37 of the HOA.
[26] With all this in mind, I now turn to consider each of the specific applications before the Court.
A. Application by Philip
[27] In his application filed 16 March 2018 Philip seeks orders from this Court providing further directions as to the implementation of the CA Judgment No. 2 specifically:
(a)Directing the trustees to transfer one or more of the properties known as Cranmore, Steeles, Wilsons, Bedfords/Mays, Middlewoods and McCauslands to Philip for the purposes of enabling him to fund his contribution to the estate;
(b)Directing the removal of caveats on those properties; and
(c)Making such other orders as to the transfer of properties as the Court thinks fit.
[28] Philip’s application in outlining the grounds for the order sought at para [2](b) states that he is unable to meet his obligations under the Court of Appeal judgment “unless a property is made available to him”.
[29] In submissions advanced by Mr Evans, he acknowledged that Philip accepts that he must fund the trustees of the estate and, although Mr Evans says he has done this consistently over many years, Philip is now in a position where he is not able to do so without having recourse to land assets. Accordingly, he requires the trustees to make property available to him, he says, for financing purposes.
[30] Mr Evans went on to contend that, in short, Philip requires at least the property known as Steeles to be transferred to him and also, ideally, Cranmore as well if he is to meet his obligations under the Court of Appeal judgment. Mr Evans went on to say that this would also enable Philip to proceed with arrangements related to Central Plains Water (CPW) in which he is engaged, particularly relating to the purchase of Stage 2 shares in the CPW scheme. On this last point, however, Philip’s 16 March 2018 application to this Court makes no mention of this CPW issue. Nor, in my view, from the material which is currently before the Court, can I see that it has direct relevance to the current application. It is true, as I understand it, that some discussions
have taken place between Philip and the trustees concerning the possibility of raising certain funds to meet a CPW liability but, at this point, this must remain a matter simply for discussion between those parties. It has no direct relevance to matters I am now required to decide.
[31] In his application, Philip notes that it is made in reliance upon s 67 of the Trustee Act 1956 and Order D(ii) of the CA Judgment No. 2. On that aspect, I am of the view that it is not necessary here to consider whether the application should proceed on the basis of s 67 of the Trustee Act 1956. The terms of Order D(ii) of the CA Judgment No. 2 (which largely follow the leave reservation outlined in para [21] of that judgment outlined above at para [15]) are sufficient for present purposes. I treat Philip’s application as one pursuant to the leave reservation seeking further directions “either as to the implementation of the orders made in [the Court of Appeal] judgment or for the variation of the orders in the event that changed circumstances or unexpected developments make this necessary.”
[32] In his application, however, Philip states that he seeks further directions as to the implementation of the Court of Appeal judgment. It does not seem that he is seeking a variation of those orders.
[33] Returning to the actual orders made in the CA Judgment No. 2, it is significant to note the fact here that the Court of Appeal at para [18] anticipated that any or all of Alison, Philip and Eleanor might have a need “to be able to utilise the titles of certain properties in order to provide security for the funding [they] would need”. Consequently, it is convenient to repeat the relevant part of para [19] of the judgment which specifically directed that:
The trustees are to enable Alison, Philip and Eleanor to utilise the titles of the properties as allocated to each of them in cl 1, 2 and 4 respectively of the Mediation Heads of Agreement for the purpose of providing security to obtain the funding that each must provide to the trustees pursuant to this judgment…
[34] This direction is clear. It was given to meet precisely the situation which has arisen where Alison and Philip have a genuine inability to meet their funding obligations to the estate. It is a direction to the trustees to utilise the titles of properties
which have been allocated to the individual beneficiary for the purpose of providing
security to fund their contribution to the estate.
[35] By way of example and linked to this direction it is useful at this point to consider a letter which is before the Court dated 4 April 2018 from the trustees’ solicitors to Philip’s solicitors which relevantly stated:
Thomas Estate – Your client’s application for directions
…As you will see, this email contains advice from the bank (Westpac) concerning the terms on which they would be prepared to lend money to your client using the security of a title to partnership property.
This Westpac correspondence followed discussions the trustees had with Westpac exploring what the bank would require as security for a loan to Philip Thomas. The bank will require a guarantee from the trustees in favour of Philip. The guarantee will need to be secured by a first mortgage over land owned by the partnership. The bank is willing to limit the trustees’ liability to the secured assets of the partnership. With that limitation and the bank undertaking not to recover the debt from the trustees personally without first exercising their security or recovering the debt from Philip, the terms are acceptable to the trustees.
The trustees are therefore prepared to enable Philip to utilise the title to the Mays block for the purpose of providing security for him to obtain the funding that he requires to comply with the Court of Appeal’s judgment of 19 December 2017.
Can you please advise us no later than 5 p.m. on Monday next, 9 April, whether your client is prepared to utilise this title in the way in which it is being offered.
We suggest that this is an eminently satisfactory solution to the application which your client has made, and in the expectation that Philip is prepared to act on the proposal being put forward, are you also able to confirm that he will discontinue his application presently before the Court and thus avoid an unnecessary hearing and the saving of considerable cost to the estate.
[36] As I understand the position from Mr McVeigh QC, counsel for the trustees, no substantive reply has been received to this letter. Mr Evans for Philip, however, disputes this to some extent. Nevertheless, before me Mr McVeigh went further and indicated that the offer contained in this letter was still alive and, in addition, the trustees would be prepared to substitute the Steeles property for the Mays block if, for good reason, Philip was unable to raise the necessary funds utilising the Mays block as security.
[37] Turning back to the specific terms of the para [19] direction in the CA Judgment No. 2 (noted at para [15] above), it is entirely clear to me that what is proposed by the trustees in the 4 April 2018 letter from their lawyers, noted at para
[35] above, is generally in line with what the Court of Appeal had in mind. Specifically, I repeat that in its judgment the Court of Appeal directed that the titles to properties allocated to Philip could be made available to him for the purpose of
providing security. This was simply to allow cashflow funding to be obtained for the trustees’ ongoing administration of the estate, until final distribution, (a date that arguably has been delayed here by continuing disputes and “machinations” between the parties). And, as I understand it, these orders made by the Court of Appeal were, in fact, along lines proposed by Philip himself.
[38] The direction sought in Philip’s present application that properties be transferred outright to him to enable him to fund his contribution to the estate is an entirely different proposition. Clearly the trustees have shown, as the letter outlined at para [35] above illustrates, that bank funding is available to Philip. This is on the basis that he is to be the borrower with a limited guarantee from the trustees and security provided by the trustees over estate property for which in the meantime they retain title.
[39] In my view, this properly deals with the application before me from Philip which must be dismissed. The order he seeks at this point for the outright transfer to him of estate properties is refused. His agreed funding of the trustees, it seems without question, is available from a bank loan that can be made to Philip. The related direction he requests for removal of caveats is also, therefore, unnecessary.
[40] As a possible alternative, however, and for the avoidance of doubt, further directions will follow at the conclusion of this judgment which it is hoped will assist not only Philip but all parties here.
B. Application by Alison
[41] In her application filed 31 January 2018 Alison seeks specific orders from this Court:
41.1Varying the Orders of the Court of Appeal dated 19 December 2017, or providing further directions as to their implementation, by either revoking or suspending the direction that the second-named respondent [Alison] make the payments set out in those Orders, and in lieu either directing that a property be sold to provide the funding sought by the applicants, or that property of sufficient value and income generating capacity be transferred or made available to the second-named respondent for the purpose of meeting the funding requirements of the Court of Appeal orders.
[42]The application sets out the grounds on which each order is sought as follows:
42.1By Order D(ii) the Court of Appeal specifically reserved leave for all parties to apply to the High Court for further directions either as to the implementation of the Orders made by that Court or the variation of the Orders, in the event that changed circumstances or unexpected developments made this necessary.
42.2Since the making of the Orders the second-named respondent has been unable to obtain the lending necessary to comply with the Orders, and has ascertained that she is unlikely to be able to do so in the absence of a demonstrable ability to service the lending and to meet the ongoing obligations of the Orders.
[43] The application itself also indicates that it is made in reliance on s 67 of the Trustee Act 1956 and Order D(ii) of the Court of Appeal dated 19 December 2017. On this aspect (as I have noted at para [31] above relating to Philip’s application), it is not necessary here to rely upon s 67 of the Trustee Act 1956. This application, like Philip’s proceeds specifically under the grant of leave outlined at para [21] of the CA Judgment No. 2.
[44] In submissions advanced before me, Mr Fowler QC, counsel for Alison, acknowledged that what is sought by Alison in her application would entail a variation of the Court of Appeal Orders. He noted that this was provided for specifically in the leave reserved under Order D(ii) of the Court of Appeal’s judgment:
…for the variation of the orders in the event that changed circumstances or unexpected developments make this necessary.
[45] On this aspect, Mr Fowler said that Alison specifically sought orders from this Court either:
(a)Revoking or suspending the direction that she make the payments to the trustees set out in the Court of Appeal Orders; or
(b)To enable property of sufficient value and income generating capacity to be made available to Alison for the purpose of meeting the funding requirements of the Court of Appeal Orders. As to this, the following property transfers need to take place:
(i)The titles to the farm properties known as Halkett and Pitts Road be transferred to Alison outright.
(ii)A 5/8th share in the title to the farm property known as Cridges be transferred to Mark outright.
(iii)A 3/8th share in the title to the farm property known as Cridges be transferred to Alison outright.
(iv)The title to the farm property known as Chesmars be transferred to Simon outright.
[46] Alison maintains that she has made genuine and extensive efforts to explore options to allow her to raise the funding to comply with the Court of Appeal orders but these have been unsuccessful. She contends, therefore, that “changed circumstances” or “unexpected developments” have arisen which have created the need for her to bring this current application. Alison’s evidence is that when she enquired with her bank, the ANZ Bank, as to the availability of funding, the Bank said it considered her income to be insufficient and, therefore, it was not prepared to lend to her. From submissions advanced to me by Mr Fowler, however, it does seem that the ANZ has indicated to Alison that if she were to receive the farm properties known as Pitts Road and Halkett and actually obtained rental income from these properties in accordance with valuation evidence before the Court, ANZ may be prepared to consider a loan to her. This loan would be for approximately $414,000 to cover the first year’s worth of payments under the Court of Appeal orders.
[47] Although, strictly speaking, it is unnecessary for me to decide this issue, I express the view at this point that the argument for Alison, that “unexpected developments” or “changed circumstances” have arisen to make the present
application “necessary”, cannot succeed. The need for Alison in terms of cl 16 and 17 of the CA Judgment No. 2 to initially fund $173,000 (now agreed at $206,333) in January 2018 and then a further $52,000 on each of 1 March 2018 and 1 June 2018 has been apparent for some time. No evidence is before the Court of any significant change in her financial position over this period. Without further detailed evidence to illustrate these “changed circumstances” or “unexpected developments” it seems to me that no variation of the Court of Appeal Orders, being orders made after some significant discussion with all parties, would be justified here.
[48] But I need to say that, in any event, like the situation I describe relating to Philip’s present application, noted at para [33] and [34] above, the position concerning Alison is precisely one for which the direction of the Court of Appeal in paras [18] and [19] of its judgment was made.
[49] And, as I see it, there can be no doubt that rental income from the farm properties allocated to Alison should be generated to provide her with an income to service any debt raised to cover her funding requirements. Like the situation envisaged for Philip, I see no reason why a similar arrangement to Philip’s might not be reached between the trustees, Alison and her bank. And, as an aside, I note that, whilst it is true that cl 15 of the HOA said:
15. Except as otherwise provided for in clauses 16 – 29 no other rents or outgoings are payable by any of the parties for any property occupied including for occupation of any properties from 1 October 2015 to 31 March 2016.
it seems the HOA envisaged that distribution of the estate and the properties would be likely to occur soon after 31 March 2016. This, of course, has not happened. I see no reason therefore why rental on the various estate properties occupied by family members should not be paid now.
[50] For similar reasons to those outlined at paras [33] - [39] above relating to Philip’s application, therefore, the request from Alison that the estate’s interest in the titles to certain farm properties be transferred outright at this point to her, Mark and Simon is rejected. Whilst I do note that Alison was named as a beneficiary in the Deceased’s will and, along with her sons, is entitled to receive property under the
HOA, she and her siblings agreed to the HOA arrangements to fund cashflow for the estate administration and, if difficulties arose, for estate titles to be made available to her but only for security purposes at most.
[51] To that extent, Alison’s application to this Court, both to vary the terms of the Court of Appeal Orders insofar as they relate to her, and to require outright transfers of estate properties to her and her sons, fails and is dismissed.
[52] Nevertheless, for the reasons I outline at para [40] above, further directions concerning the raising of this necessary funding required by the trustees (which hopefully might assist) are to follow.
C. Application by Eleanor
[53] In her application filed 2 May 2018, Eleanor seeks a specific order from this Court:
1.1 That her liability…to make any further payment under the Court of Appeal judgment dated 19 December 2017 be suspended from 6 June 2018 or such other date as the Court deems appropriate, until further order of this Court.
[54] Essentially, the relevant order that Eleanor’s application relates to is the one set out at para [17] of the second CA Judgment No. 2 which requires quarterly payments to be made by Eleanor (together with Philip and Alison) of $52,000 each commencing from 1 September 2018.
[55] As I have already noted, Eleanor has already made two quarterly payments, each of $52,000, due from her on 1 March 2018 and 1 June 2018, along with the lump sum payment required from her of about $293,000. These were specified in para [16] of the CA Judgment No. 2 (also outlined at [14] above).
[56] Eleanor now seeks an order that her liability to make any further quarterly payments be suspended now until further order of this Court. This is on the basis that if this Court is to grant the applications by either Philip or Alison and, for example, to vary the requirements for them to make payments to the trustees then consideration is appropriately given to the position of Eleanor who is indeed up to date in all her
required payments. As to this aspect, Mr Clay, for Eleanor, submits that there has been either a “change in the circumstances” here or “unexpected developments” in that neither Philip nor Alison have made their payments as ordered by the Court of Appeal. This has meant that Eleanor’s present application has proved to be necessary to ensure equal contributions going forward and overall justice in this matter.
[57] It is true that recently it seems that Eleanor has actually carried the major liability for the cashflow of the estate recently, given that she has promptly made her required payments. But, given my decisions above on the applications before the Court from both Philip and Alison, there is no need for any further consideration of Eleanor’s application. This is because both Philip and Alison are required to bring their contribution payments up to date by this judgment. Thus all parties will again be on an even footing relative to the Court of Appeal’s Orders.
[58] Notwithstanding this, I do express a tentative view at this point that Eleanor’s suggestion that there has been a “change in circumstances” or “unexpected developments” such that her position has been necessarily affected have not been established in the sense required by the CA Judgment No. 2 to warrant a variation in those orders.
[59] It must follow, therefore, that from a technical point of view at least, Eleanor’s application fails and it is dismissed.
[60] Nevertheless, as I have also noted in the applications of Philip and Alison, amended directions to assist the parties here are to follow.
Result
[61] For the reasons outlined above, the present applications by Philip, Alison and Eleanor fail and are dismissed.
[62] All parties here acknowledge however the need for substantial cashflow payments to be made to the trustees as a matter of some urgency to allow administration of the estate to continue. That was the position before the Court of Appeal when its first and second judgments were issued and it directed the alternative
solution to address the fact that the estate was in immediate need of funds. This alternative solution was provided in place of Heath J’s earlier order for a sale of the estate’s interest in one farming property to occur.
Alternative directions
[63] Mr McVeigh for the trustees complained that this was the sixth time the trustees had come before a court seeking funds for administration of this estate. He said the trustees had no wish to do this but had no alternative and their wish remains simply to complete administration of the estate with finality in the most cost effective and equitable manner. Those comments are noted with some concern. That said, and with a view to providing what it is hoped will be of some assistance for the parties in their immediate issue of raising funds for the estate administration,2 I now set out the following directions:
(a)Within 20 working days of today the trustees are to liaise with Philip on the one hand, and with Alison on the other hand, with a view to reaching agreement to enable Philip and Alison respectively in an even- handed way to utilise a title or titles of the estate properties allocated to each of them in cl 1 and 2 of the HOA strictly for the purpose of providing security (with registered proprietorship of the property in question remaining with the Trustees at this point) to obtain the funding that Philip and Alison must provide to the trustees pursuant to the CA Judgment No. 2.
(b)With this in mind, the form of proposal outlined in the letter from counsel for the trustees specified at para [35] above, may well provide a useful template or example of how such security might be put in place to satisfy bank funding requirements.
(c)As an alternative to matters outlined at para [63](a) above, Mr McVeigh for the trustees before me proposed a possible alternative arrangement
2 This will not determine overall liability issues. When the estate is finally distributed, questions of the shortfall and entitlement to the residue can be addressed as set out at paras [36] and [37] respectively of the HOA.
involving a “transaction basis” for the provision of security for this funding. In the absence of a proposal along the lines outlined in para [63](a) above being achievable, then the parties are directed to give consideration to this “transaction basis” form of providing the necessary security here.
(d)Timing is critical here, given the need for the Trustees to have further substantial cashflow funds for estate administration matters. Given this, it is envisaged that the necessary preliminary work will be completed so that Philip and Alison will be in a position to meet their funding requirements under the Orders outlined in the CA Judgment No. 2 within no more than 30 working days from the date of this judgment.
(e)Leave is reserved, however, for any party on two days’ notice to approach this Court for further directions which may be required to properly achieve the outcomes intended by this judgment.
Costs
[64] As to costs, they are reserved. In the absence of the parties being unable to agree between themselves on the issue of costs, then they may file memoranda (not to exceed 10 pages) sequentially which are to be referred to me and, in the absence of any party indicating they wish to be heard on the question of costs, I will decide that issue based upon the memoranda filed and the material then before the Court.
...................................................
Gendall J
Solicitors:
Christopher McVeigh QC, Christchurch Young Hunter, Christchurch
RJB Fowler QC, Wellington Wynn Williams, Christchurch
0
0
0