McGregor v McGregor
[2016] NZHC 3142
•19 December 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-2134 [2016] NZHC 3142
UNDER the Property Law Act 2007 BETWEEN
JUDITH ANN MCGREGOR Plaintiff
AND
MARK ANDREW MCGREGOR, NATASHA MARIE STOKES AND JUDITH ANN MCGREGOR AS EXECUTORS OF THE ESTATE OF JOHN DUNCAN MCGREGOR Defendants
Hearing: 15 December 2016 Counsel:
PM Molloy for plaintiff
PJ Stevenson for defendantsJudgment:
19 December 2016
JUDGMENT OF FITZGERALD J
Solicitors: PM Molloy, Auckland
Douglas Burgess Law, Auckland
McGregor v McGregor, Stokes and McGregor as executors of the Estate of JD McGregor [2016] NZHC 3142 [19 December 2016]
Contents
Introduction ............................................................................................................[1] Factual background ................................................................................................[7] Legal principles ....................................................................................................[16] The parties’ submissions ............................................................................................
Applicants’ submissions [27]
Plaintiff ’s submissions [29]
Analysis ......................................................................................................................
Jurisdiction to order joinder [31]
Discretion to exercise jurisdiction [49] Costs .....................................................................................................................[52] Conclusion............................................................................................................[53] Result....................................................................................................................[54]
Introduction
[1] Mark Andrew McGregor, John Brendan McGregor and Erin Margaret Pusich are siblings. They are the children of the late John Duncan McGregor. For convenience, I will refer to the applicants as Mark, John and Erin. I will refer to their father as “the Deceased”. Mark, John and Erin apply to be joined as further defendants to this proceeding.
[2] The plaintiff to this proceeding is Judith Anne McGregor (“Mrs McGregor”), the Deceased’s second wife. The existing defendants to the proceeding are the three executors/trustees of the Deceased’s estate, namely Mark, Mrs McGregor herself and Mrs McGregor’s daughter, Ms Natasha Stokes. Mrs McGregor seeks an order pursuant to s 339 of the Property Law Act 2007 (“Act”) for the sale of a residential property in Henderson (“Property”). Mrs McGregor co-owns the Property with the
executors/trustees of the Deceased’s estate (each owning a 4/9th and a 5/9th share in
the Property respectively). I will refer to the share of the Property that is now owned
by the executors/trustees as the “Deceased’s share in the Property”.
[3] By his will, the Deceased gave his share in the Property to the executors/trustees, on trust, to permit Mrs McGregor to use and occupy the Property for the remainder of her life. Pursuant to the will, during the term of her life interest, Mrs McGregor may request the executors/trustees to sell the Deceased’s share in the Property (which in all likelihood, would require a sale of the Property as a whole), and to employ the proceeds of sale in the purchase or erection of another property (to be held on the same trusts), or to invest the proceeds of sale with the net income to be paid to Mrs McGregor during her lifetime. Upon Mrs McGregor’s death, the Deceased’s share in the Property or the proceeds of sale is to form part of the Deceased’s residual estate. Mark, John and Erin are the final beneficiaries of the residual estate.
[4] Mrs McGregor has brought these proceedings as the executors/trustees are unable to agree on matters concerning the Property. Underlying the present application is what appears to be a rift between Mark, John and Erin on the one hand, and Mrs McGregor on the other.
[5] Given the executors’/trustees’ inability to agree, they have not taken independent legal advice (in their capacity as executors/trustees, either collectively or individually) and to date, have not taken any steps in the current proceeding. In that context, Mark, John and Erin, in their capacity as residuary beneficiaries, apply to be joined to the proceedings as further defendants. They consider that there are other options to be considered in respect of the future disposition of the Property and they wish to appear and be heard on those matters.
[6] At the hearing, I encouraged the executors/trustees to seek independent legal advice, either collectively or individually. I reiterate that encouragement. They each have duties and obligations as a result of their (important) roles as executors/trustees. After the present application and proceedings have been determined, the executors/trustees will inevitably be called on from time to time to make decisions in relation to, and to deal with, the estate and the trust property. It is important that they are able to function effectively in these roles.
Factual background
[7] The following background is taken from the factual matters pleaded in the statement of claim. There is currently no statement of defence. As such, the facts set out below are intended as a broad overview only. They are not to be taken as determinative or binding in the context of any further steps in this or any related proceeding.
[8] The Deceased and Mrs McGregor lived together from April 1997 in a de facto relationship and were married on 17 December 2001. Their marriage subsisted until the Deceased died on 8 December 2004. Probate of the Deceased’s will was granted to the executors out of this Court on 20 March 2005.
[9] The Property was Mrs McGregor’s and the Deceased’s family home. There is no dispute that Mrs McGregor and the executors/trustees co-own the property as tenants in common, in the shares referred to at [2] above.
[10] The Deceased’s will provides as follows:
4.(a) I GIVE to my Trustees my interest in the property at 9 San Lorenzo Rise, Palm Heights, Henderson (“the property”) UPON TRUST to permit my wife (“the Life Tenant”) to have the use occupation income and enjoyment of the property during the life of the Life Tenant on the terms and conditions contained in this clause;
(b) The Life Tenant shall pay all rates and taxes and other outgoings on the property, keep it in good and habitable state of repair (fair wear and tear and damage by fire flood, earthquake and other inevitable accident excepted) and keep it insured to the satisfaction of my Trustees under a comprehensive policy on replacement conditions;
(c) My Trustees may at the request of the Life Tenant sell the property and employ the proceeds of sale in the purchase or erection of another property to be held upon the same trusts (including this trust for sale and erection or repurchase) or, alternatively may invest the proceeds of sale and pay the net annual income arising therefore to the Life Tenant during the life of the Life Tenant; and
(d) I direct that on the death of the Life Tenant the property or the proceeds of sale shall fall into and form part of my residuary estate.
[11] As noted, pursuant to clause 4(c) of the will, Mrs McGregor has requested
that the executors/trustees sell the Deceased’s share in the Property. Pursuant to the
terms of the will, Mrs McGregor’s life interest would continue in any replacement property, or if the proceeds of sale are invested, she would receive the net investment income, with the capital amount to fall into the residue of the estate upon her death.
[12] It is also appropriate to refer to a Deed of Family Arrangement entered into between Mrs McGregor, Mark, John and Erin. The Deed itself is not in evidence on this application.1 However, it seems that the applicants had made loans to the Deceased. As part of a settlement of those arrangements, and pursuant to the Deed of Family Arrangement, Mrs McGregor advanced to or paid on behalf of the estate the sum of $154,500, $112,500 of which was paid to John (presumably in repayment
of a loan). It is not clear what the balance was used for or whether any other loans owed by the estate to Mark and Erin were also repaid. As security for Mrs McGregor’s advance to the estate, the estate mortgaged the Deceased’s share in the Property to Mrs McGregor. As at 21 August 2016, a total of $231,122.48 (principal and interest) was owed by the estate to Mrs McGregor and secured by the mortgage. That loan, together with interest on it, is payable from the residue of the estate upon the earlier event of sale of the Property or termination of Mrs McGregor’s life interest in it.
[13] It appears that, after entry into the Deed of Family Arrangement in 2007, there were no further interactions between John and Erin on the one hand, and Mrs McGregor on the other. John deposes that neither he nor Erin were in contact with Mark during this period either. However, it seems that John and Erin began communicating with Mark again in or around December 2015, subsequent to Mrs McGregor contacting Mark (in his role as executor) about selling the Property. John deposes as follows:
We began communicating [with Mark] again after Judith got in contact with him about selling the house during 2015, and he told us that he was concerned that she was putting pressure on him to agree to the sale behind our backs. We did not want Mark to meet with Judith and be bullied by her.
[14] I interpose at this point that any sale would not be “behind the [beneficiaries’]
backs”; rather, the will expressly envisages that Mrs McGregor may request the executors/trustees to sell the Deceased’s share in the Property. In addition, it would
1 As such, I am unable to confirm if there are any other parties to the Deed, or its precise terms.
be inappropriate for beneficiaries to seek to persuade Mark not to meet with Mrs McGregor (and presumably Ms Stokes also), to discuss these matters in their collective role as executors and trustees of the estate.
[15] As no steps have been taken in respect of a sale, Mrs McGregor has commenced this proceeding. As matters presently stand, it is possible that the executors/trustees will take no steps in the proceeding.
Legal principles
[16] The joinder application is brought pursuant to r 4.56 of the High Court Rules. Specifically, the applicants say that:
(a) They ought to have been joined to the proceeding (for the purposes of r 4.56(1)(b)(i)); and/or
(b)The applicants’ presence may be necessary to adjudicate on and settle all questions involved in the proceeding (for the purposes of r 4.56(1)(b)(ii)).
[17] At the hearing, Ms Stevenson, rightly in my view, did not press the first ground set out above. As the executors/trustees are already defendants to the proceedings, it is not the case that the applicants “ought” to have been joined from the outset. In fact, the opposite is more likely the case. Rule 4.23 specifically addresses proceedings against or by executors, trustees and administrators. Rule
4.23(2) provides that “[t]here is no need to join persons beneficially interested in a trust or an estate to a proceeding because the trustees, executors, and administrators represent those persons.” Accordingly, in the ordinary course, there is no need or requirement to join beneficiaries in addition to, or instead of, executors or trustees. I return to this rule, and its interaction with r 4.56, below.
[18] There is no dispute that, for the purposes r 4.56, there are two inquiries: (a) First, whether I have jurisdiction to order joinder; and
(b)Second, if I have jurisdiction, whether I should exercise my discretion in favour or against joinder.2
[19] The principles concerning joinder of an additional plaintiff or defendant were usefully summarised by Thomas J in Capital and Merchant Finance Ltd (in rec and in liq)) v Perpetual Trust Ltd.3 While that case concerned an application by a third party to be joined as an intervener, rather than as a party, Thomas J commenced her discussion of the relevant principles by examining the basis upon which additional plaintiffs or defendants may be joined.4 In short, the test is whether an applicant’s legal rights or liabilities in relation to the subject matter of the proceeding will be directly affected by the proceeding.5 I do not take the reference in the authorities to “legal” rights as limiting the type of rights that may be directly affected by the proceeding to legal, as opposed to equitable, rights. Rather, the context in which the phrase “legal rights” is used in the authorities is to distinguish “legal rights” from mere commercial, financial or reputational rights. The authorities also confirm that the existence of a cause of action between the plaintiff and a proposed further defendant is not a necessary prerequisite. Mr Molloy accepted this in his submissions.
[20] In Wilson v Attorney-General [Judicial Conduct] (No 2), a judicial review proceeding, the Full Court of the High Court adopted a slightly wider test for joinder, allowing joinder of an interested party where that party’s rights would be directly or indirectly affected by the proceedings.6 Given this matter does not concern judicial review, I adopt the narrower test set out above, namely whether it is arguable that the applicants’ legal rights (rather than simply their commercial, financial or reputational rights) may be directly affected by these proceedings.
[21] In the context of permitting a party to be joined as an intervener, i.e. rather than as a formal party, Thomas J in Capital and Merchant Finance Ltd (in rec and in
2 See generally the discussion in Andrew Beck and others McGechan on Procedure (looseleaf ed, Brookers) at [HR4.56.08] to [HR4.56.13].
3 Capital and Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd [2014] NZHC 3205, [2015] NZAR 228.
4 At [10] to [39].
5 At [40]; see also Diagnostic Medlab Ltd v Auckland District Health Board (HC Auckland CIV-
2006-404-4724, 18 October 2006 at [52].
6 Wilson v Attorney-General [Judicial Conduct] (No 2) [2010] NZAR 509 (HC), at [20].
liq) v Perpetual Trust Ltd distilled the relevant authorities into a number of key principles, namely:7
(a) An applicant must show that its legal rights against or liabilities in relation to the subject matter will be directly affected. Commercial, financial, or reputational interests in the outcome will only be sufficient in exceptional circumstances.
(b) If the intending intervener's presence before the Court will not improve the quality of information before the Court, that will count heavily against its addition to the proceedings.
(c) A relevant consideration is the extent to which the proposed intervener can rely on one of the parties to protect its rights and obligations.
(d) If either party would be prejudiced by the intervention, or if the intervention would create an impression of partiality, the application will not be granted.
(e) In cases where development of the law is likely, the application is more likely to be granted if the proposed intervener has special expertise to assist the Court on wider public policy issues.
(f) The underlying issue is whether it would be unjust to adjudicate on the matter in dispute without the intervener being heard. Several of the factors mentioned above tie into this issue.
(g) Where intervention is justified, the degree of participation granted to the intervener should be the minimum necessary to protect the intervener's interests.
[22] I have found reference to these principles helpful when considering the discretionary element of the joinder inquiry.
[23] It is also appropriate to refer to r 4.23, which provides as follows:
4.23 Trustees, executors, and administrators
(1) Trustees, executors, and administrators may sue and be sued on behalf of, or as representing, the property or estate of which they are trustees, executors, or administrators.
(2) There is no need to join persons beneficially interested in a trust or an estate to a proceeding because the trustees, executors, and administrators represent those persons.
7 At [41].
(3) However, the court may, at any stage, order that a beneficially interested person be made a party, either in addition to or instead of the trustees, executors, or administrators.
[24] As can be seen, the ordinary course is that there is no need to join beneficiaries to an action to which the executors, trustees or administrators are already party. The Court nevertheless retains discretion to order joinder. The interaction between the predecessors of rr 4.56 and 4.23 was considered by William
Young J in Ramage v Alpers.8 The facts in that case were somewhat similar to those
in the present case, in that residuary beneficiaries sought to be joined to proceedings commenced by the deceased’s second wife and widow, against the executor of the deceased’s estate. Young J held that where the proposed additional party has an interest in the subject matter of the dispute as a beneficiary in an estate, the executor of which is already a defendant to the proceeding, it seemed sensible to treat (the
predecessor of) r 4.23 “as occupying centre stage”. Young J stated:9
So, accepting that there is jurisdiction under [r 4.56] to join the residuary beneficiaries as defendants and permit them to defend the partnership claim, I think that whether or not I should do this is best treated as governed by the well developed principles that apply as between executors and beneficiaries.
[25] Young J considered the principles that had developed in respect of (the predecessor to) r 4.23, and summarised them as follows:10
It is the law that in certain circumstances a beneficiary in an estate may commence proceedings in his or her own name on behalf of the estate providing the executor is joined as a party. This may arise where the executor refuses to participate in the litigation and the situation is such that participation by the estate in the litigation is obviously appropriate. This may also extend to cases where the executor has a conflict of interest which makes it difficult or impossible for a particular claim to be advanced or defended. The authorities and principles as to this are reviewed in the judgment of Goff J in Field v Firmenich & Co [1971] 1 All ER 1104.
The rules as to when a residuary beneficiary may, without court order, sue or defend proceedings relating directly to the estate do not necessarily control the circumstances in which the Rule 77 discretion should be exercised. But the cases in which such orders have been made suggest that similar considerations are material. On the whole, the cases in which this issue has arisen have involved conflicts of interest between the executor and beneficiaries. Illustrative examples are McDonald v Simmonds (1994)
8 PRNZ 12 and Davies v Deputy Official Assignee (1904) 24 NZLR 161.
8 Ramage v Alpers HC Christchurch M467/97, 1 June 1999.
9 At 10.
10 At 7-8.
Clearly, Rule 77 must be taken as setting out the default position which applies in the absence of some good reason for joinder of the beneficiary.
[26] In Ramage v Alpers, Young J declined to order that the residuary beneficiaries be joined as defendants to the proceeding. This was primarily on the basis that the proceedings did not concern a dispute between the executor and the residuary beneficiaries, and that Young J was satisfied that the executor was prepared to defend the proceedings appropriately.11
The parties’ submissions
Applicants’ submissions
[27] Ms Stevenson for the applicants submits that, through the terms of the will, the applicants have a beneficial (equitable) interest in the Deceased’s share in the Property, and that interest may be directly affected by the outcome of this proceeding. On that basis, Ms Stevenson says that there is jurisdiction to make an order for joinder. She further submits that I ought to exercise that jurisdiction in favour of joinder, as otherwise there will be no alternative view before the Court on Mrs McGregor’s application. Ms Stevenson points to the options available to the Court on a s 339 application, and the matters that the Court must take into account when considering such an application (see ss 342 and 343 of the Act). The applicants wish to be heard on those matters given, as matters currently stand, the executors are unlikely to take any steps in the proceeding.
[28] Ms Stevenson also refers to s 341(2)(b) of the Act, which provides that any s 339 application must be served on “a person who has an estate or interest in the property that may be affected by the granting of the application”. She submits that the application ought to have been served on each of Mark, John and Erin, in their capacity as residuary beneficiaries, given their equitable interest in the Property. She also refers to s 341(2)(c) of the Act, which provides that a s 339 application must also be served on “a person claiming to be a party to, or entitled to a benefit under, an instrument relating to the property”. She submits that the will itself is an
“instrument” and thus Mark, John and Erin ought to have been served pursuant to
11 At 8.
this provision also. She accepts, however, that even if Mark, John and Erin ought to have been served, that does not necessarily mean they also ought to be joined as parties to the proceedings. I record at this point that I do not consider the service requirements of s 341(2) to be directly relevant to whether or not I have jurisdiction to order joinder. They may, however, be relevant to the exercise of my discretion, if jurisdiction exists.
Plaintiff ’s submissions
[29] Mr Molloy for Mrs McGregor says that the applicants have no current legal or beneficial interest in the Property, given their interest is only in the residue of the estate. Mr Molloy submits that, in light of the existence of Mrs McGregor’s life interest in the Deceased’s share of the Property; the possibility that the Property will be sold and converted into a different property; or sold and converted into funds which are then to be invested with the income to be paid to Mrs McGregor, the residue of the estate is yet to be ascertained. As it has not yet been ascertained, the applicants have no legal or beneficial interest in it. Mr Molloy further submits that, given the applicants have no present interest in the Property, it is self-evident that their legal rights cannot be directly affected by the proceedings.
[30] Mr Molloy says that even if I were satisfied that I have jurisdiction to join the applicants as parties to the proceeding, I ought to exercise my jurisdiction against joinder. This is because the executors/trustees are already defendants to the proceeding and it is the executors’ role to represent the interests of the beneficiaries. Mr Molloy submits that that the fact that Mark, as one of the executors, and is not currently participating in that role, should not be “rewarded” by permitting the applicants to be joined.
Analysis
Jurisdiction to order joinder
[31] I first consider whether the applicants have a present interest in the Deceased’s share in the Property. If they do, it is difficult to say that their interest will not be “directly affected” by the outcome of the litigation.
[32] The nature of a residuary beneficiary’s interest in a co-owner’s share of a property, which is also subject to a life interest to a third person, was recently considered by Woolford J in Rutherford v Rutherford.12 The facts in that case were similar to the present facts. In that case, Mr and Mrs Rutherford had purchased a property together in 2009. They each owned a half-share in the house. Mr Rutherford died in 2011. Under Mr Rutherford’s will, his share in the property was given to his executors and trustees on trust, to allow Mrs Rutherford to occupy, use or obtain income from it for the rest of her life. Mrs Rutherford was entitled to
request the executors/trustees to sell the property and repurchase a further property, or to invest the proceeds with all net income being paid to her. Upon Mrs Rutherford’s death or remarriage, Mr Rutherford’s share in the property fell into the residue of his estate, which was bequeathed to the children of Mr Rutherford’s first marriage as beneficiaries of his estate as a whole.
[33] In that case, Mrs Rutherford wished to sell the property and had requested the executors to do so. The applicants, being the residuary beneficiaries, lodged a caveat on the property to prevent the sale proceeding. The issue before the Court was whether the applicants, as residuary beneficiaries, had a sufficient interest in the property to support the caveat.
[34] Woolford J referred to the Court of Appeal’s decision in Guardian Trust and Executors Company of New Zealand Ltd v Hall, which held that the legatee of a share in the residue of an estate has no interest (legal or beneficial) in any of the testator’s property until the residue has been ascertained.13 This is because until that point, there are no “specific subjects identifiable as the trust fund”.14 Woolford J therefore considered whether, on the facts before him, the administration process was
complete, such that the residue was sufficiently “ascertained”.
[35] Woolford J referred to Re Eagle (dec’d), in which Cartwright J held that when the administration of the estate is complete, the executors then hold the assets
12 Rutherford v Rutherford [2015] NZHC 878, [2015] NZAR 1303.
13 Guardian Trust and Executors Company of New Zealand Ltd v Hall [1938] NZLR 1020 (SC) at
1026. This decision and principle was also relied on by Mr Molloy, for Mrs McGregor.
14 See for example, Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 (PC)
at 707 – 708.
of the estate as trustees.15 When the “transition” from executor to trustee occurs is a question of fact. However, Woolford J held that generally, once the executor’s normal duties (such as proving the will, burying the deceased, getting in the assets and paying the debts, funeral and testamentary expenses and death duties) are complete, the residue is transferred to the executor who assents to the property vesting in him or herself as trustee. Citing Cartwright J in Re Eagle (dec’d), Woolford J concluded that the period of administration ceases at the point when there is a transition to the office of trustee, even without a final distribution.
[36] There are limited facts before me on this application in respect of this issue. However, probate was granted on the Deceased’s will in early 2005, some 11 years ago. Mr Molloy submits that the residue has not yet been ascertained given Mrs McGregor’s continuing life interest; the possibility of sale of the Property and conversion into another property or investment of the sale proceeds; and that costs and expenses will necessarily be incurred by the estate in relation to these matters.
[37] In Rutherford v Rutherford, Woolford J found that the residue was sufficiently certain to be ascertained, despite the existence of a life interest, the prospect of the property being converted to another form and there being ongoing costs associated with those steps. This was because the subject of the trust in that case was not the specific property, but the ongoing interest in property.16 Woolford J
concluded that:17
This is sufficiently certain to found a trust, and correspondingly must be an ascertainable residue capable of being transferred from being held by the respondents as executors to being held by them as trustees.
[38] I agree with Woolford J’s analysis. The terms of the will in Rutherford v Rutherford and the present case are similar. It is not the Deceased’s share in the Property that is held on trust for the residuary beneficiaries, but that share in the Property, and any replacement property, and the capital from any proceeds of sale. Accordingly, and as Woolford J also observed, the fact that the specific object that
will ultimately come to the applicants, potentially in many years time, is not
15 Re Eagle (dec’d) HC Auckland M721/97, 21 November 1997.
16 At [30], citing Greg Kelly and Chris Kelly Law of Trusts and Truestees (7th ed, LexisNexis, Wellington, 2013) at 65.
17 At [30].
precisely determined at this point, does not mean the residue is not necessarily ascertained. I also observe that if Mr Molloy’s submission were correct, the point at which the role of executor transitions to trustee would entirely depend on the (quite random) point at which the life tenancy ceases, or when Mrs McGregor might happen to ask the executors/trustees to sell the Property.
[39] Accordingly, I find that the residue of the Deceased’s estate is sufficiently
certain to have been ascertained.
[40] Having found that the applicants are capable of having an interest in the residue, the next question is, do they have any interest, and if so, what is its nature?
[41] Mrs McGregor obviously has a life interest in the Deceased’s share in the Property. Her life interest, or estate, is the “particular estate”.18 As the authors of Principles of Real Property Law explain, when that particular estate comes to an end, the land “remains away” from the settlor and the estate which is given to the executors (to hold on trust for Mark, John and Erin) is called the “remainder”. The authors refer to the following definition of a “remainder”:19
The estate created when a grantor who, having granted away a particular estate, by the same instrument grants to another person an estate in the same land limited to commence after the particular estate.20
[42] Every remainder is either a vested or contingent interest. In order to be a vested interest, the terms of the instrument granting the interest must give its owner a present and unqualified right to the possession of the land as soon as the prior estate (in this case, Mrs McGregor’s life estate) comes to an end. In that way, the only “qualification” on the remainder estate is the termination of the prior life estate. If there are other conditions attaching to the remainder estate (for example, the remainder going to the eldest daughter of the life tenant living at the time of the life tenant’s death), the interest is contingent, given it is not known until the death of the
life tenant who the eldest daughter living at that time will be. A contingent
18 GW Hinde, DW McMorland and NR Campbell Principles of Real Property Law (2nd ed, LexisNexis, Wellington, 2014) at [5.008].
19 At [5.008].
20 Megarry and Wade The Law of Real Property (4th ed, Sweet and Maxwell, London, 1975) at
181-182 cf Megarry and Wade The Law of Real Property (8th ed, Sweet and Maxwell, London,
2012) at [9.008].
remainder therefore only vests once all “conditions” attaching to it have been
satisfied.21
[43] Finally, remainders may be legal or equitable. The authors of Principles of Real Property Law observe that today, most remainders are equitable, which have been created by vesting property in trustees upon appropriate trusts.22
[44] In Rutherford v Rutherford, Woolford J found that the residuary beneficiaries in that case had a vested residual interest in the value of the property concerned. This could be changed into either other property, or to a property and some investment value, which the residuary beneficiaries in that case were unconditionally entitled to at a fixed point (i.e. on death or remarriage of Mrs Rutherford), irrespective of the form and combination it appeared at that time.23
[45] I consider a similar analysis applies in this case. Mrs McGregor has a life interest or estate in the Deceased’s share in the Property. The “remainder”, once Mrs McGregor’s life estate is taken into account, is held by the executors/trustees on trust for the residuary beneficiaries. It is therefore an equitable remainder. It is true that the particular form or nature of what may ultimately pass to the residuary beneficiaries is not yet known. But, like in Rutherford v Rutherford, I am satisfied that the applicants have a present vested interest in the residue of the estate, which includes the remainder in the Deceased’s share in the Property and its proceeds. The interest is vested as there are no conditions that have to be fulfilled to entitle the residuary beneficiaries to take their respective shares of the residue, including the remainder, other than the termination of Mrs McGregor’s life interest.
[46] In Rutherford v Rutherford, Woolford J nevertheless went on to hold that, despite the residuary beneficiaries having the vested interest outlined above, it was not sufficient to support a caveat. This was because to support a caveat, there must
be an interest in the specific identifiable property which is the subject of the caveat.
21 Hinde, above n 18, at [5.009]. See also the discussion in Johns v Johns [2004] 3 NZLR 202 (CA) at [42]-[47], where the Court confirmed that whether or not a beneficiary’s right to share in the residue of an estate was vested or contingent, it was still an “interest” (being a future interest).
22 Hinde, above n 18, at [5.010].
23 At [39].
Woolford J found that, because the interest in that case was a “transferable interest” in something other than a fixed piece of land, it was not sufficiently specific to create a proprietory right capable of supporting a caveat.
[47] Different principles apply, however, in relation to joinder, which requires a direct interest in the subject matter of the litigation. I am satisfied that for jurisdictional purposes, the residuary beneficiaries in this case have a sufficient interest in the property which is the subject matter of the litigation. They have a presently vested interest in the equitable remainder (which forms part of the residue of the estate), which is held on trust for them by the executors/trustees. Although this is not fixed in the Property itself (given the Property may change form or be converted to an investment), it is nevertheless a present and vested interest. So, if the Property were sold and a replacement property purchased, under the terms of the will, Mrs McGregor’s life interest would “transfer” to or continue in that new property – as would the residuary beneficiaries’ interest in the equitable remainder of that life interest. Alternatively, if the Property is sold and the proceeds of sale invested, the capital investment forms part of the residue of the estate – the only pre- condition to it being distributed to the residuary beneficiaries being Mrs McGregor’s death. As such, there are specific subjects identifiable as the trust fund; being the Deceased’s share in the Property, and the proceeds arising from any dealings with it in accordance with the terms of the will.
[48] I am also satisfied that the residuary beneficiaries’ rights in respect of the subject matter of the proceedings may be “directly affected” by the outcome of the litigation. The applicants have a present vested interest in the Deceased’s share in the Property, which is the subject of the litigation. What occurs in relation to the Property as a whole (and thus the Deceased’s share in it) may well affect the applicants’ presently vested interest.
Discretion to exercise jurisdiction
[49] I therefore turn to whether I should order joinder in this case. I have come to the conclusion that I ought to exercise my discretion in favour of joinder.
[50] The primary reason for this is that in the present circumstances, it is quite possible that the executors will take no steps in this proceeding, with the result that the final beneficiaries’ interests will not be before the Court on the s 339 application. This is in contrast to the scenario before Young J in Ramage v Alpers, where it was clear that the executor intended to defend the proceedings appropriately, and indeed by advancing a case similar to that which the residuary beneficiaries had wished to advance. Further, in terms of points (b) and (c) of the principles set out by Thomas J in Capital and Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd, the quality of the information before the Court will be improved and, at least as matters currently stand, the applicants cannot rely on one of the existing parties to protect their rights and obligations. I am also conscious of the fact that the Court has a wide discretion on a s 339 application, and is not constrained by the relief sought by the
parties.24 The appropriate exercise by the Court of this broad discretion may be
assisted by material other than that advanced by Mrs McGregor.
[51] I do not consider that there will be prejudice, or at least any undue prejudice, to Mrs McGregor in permitting joinder. Had the executors taken proper steps in this proceeding, one would have expected there to be a statement of defence and some evidence and submissions on behalf of the estate. Permitting the applicants to take similar steps is not likely to materially alter the nature or course of the hearing.
Costs
[52] Neither party addressed me at the hearing on costs. While the joinder application has been successful, given the circumstances in which this proceeding has been commenced and the current application made, I consider it appropriate that the costs of the present application lie where they fall.
Conclusion
[53] I conclude by recording that I have reached the above decision on joinder with some reluctance. The current position is unsatisfactory and has only come about given the executors’/trustees’ current inability to agree and work together.
Again, I urge the executors/trustees to take independent legal advice, either
24 Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401 at [32].
collectively or individually, as to their duties and obligations. It may also be helpful for all parties concerned to meet to discuss and seek to resolve matters (with the assistance of a neutral third party, if required).
Result
[54] I make the following orders:
(a) The applicants are joined as further defendants to this proceeding.
(b)A case management conference is to be allocated on the first available date after 1 February 2017, for the purpose of allocating a hearing
date and timetabling steps in the lead up to the hearing.
Fitzgerald J
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