Milne v Sutherland
[2025] NZHC 1279
•22 May 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-000876
[2025] NZHC 1279
UNDER Section 21 of the Administration Act 1969 and section 112 of the Trusts Act 2019 IN THE MATTER
of the estate of Laurie Owen Evans and the estate of Doreen Rose Evans
BETWEEN
DAVID OWEN MILNE, LISA EMMA MILNE, CRAIG OWEN MILNE and STACEY ROSE MILNE
Plaintiffs
AND
SUSAN JOY SUTHERLAND and OWEN PAUL EVANS
Defendants
Hearing: 18 March 2025 Appearances:
M J Matthew for Plaintiffs
N W Taefi KC and A West for Defendants
Judgment:
22 May 2025
JUDGMENT OF GARDINER J
This judgment was delivered by me on 22 May 2025 at 3.00 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Rennie Cox (Auckland) for Plaintiffs Glaister Keegan (Auckland) for Defendants
MILNE v SUTHERLAND [2025] NZHC 1279 [22 May 2025]
Introduction
[1] This application for summary judgment concerns a dispute between the executors of the estate of Laurie Owen Evans (Laurie), and certain beneficiaries of Laurie’s estate. Laurie died in 1999, but the bequests at issue in this proceeding did not fall due for distribution until after the death of his wife, Doreen Rose Evans (Doreen) in 2022.
[2] The defendants, Susan Joy Sutherland (Sue) and Owen Paul Evans (Owen), are the surviving children of Laurie and Doreen. They are the executors and trustees of both their parents’ estates. They are also the principal beneficiaries of both estates.
[3]The plaintiffs are minor beneficiaries of Laurie’s estate. They are:
(a)David Milne (David) who is the son-in-law of Laurie and Doreen. David is entitled to 2/13th of the residue of Laurie’s estate.
(b)Lisa Milne (Lisa), Craig Milne (Craig) and Stacey Milne (Stacey) are David’s children and grandchildren of Laurie and Doreen. They are collectively entitled to 1/13th of the residue of Laurie’s estate, or 1/39th each.
[4] At the core of the disagreement between the parties is the interpretation of Laurie’s will, and the scope of the life interest he granted Doreen. The defendants say the life interest is an unfettered life interest. They say that the correct interpretation of Laurie’s will is that both the capital and income of Laurie’s estate was held on trust for Doreen’s “free use” during her lifetime. To this end, the trustees were beholden to enable Doreen to enjoy the full benefit of this bequest.
[5] The plaintiffs say that the life interest Laurie granted Doreen entitled her to “free use’ of his money while she was alive, but that any property she bought using that money remained beneficially owned by Laurie’s estate and reverted to his estate on her death.
[6] The plaintiffs apply for orders removing the defendants as executors and trustees of Laurie and Doreen’s estates and replacing them with independent administrators and trustees. The plaintiffs say that the defendants have breached their duties as trustees by wrongly treating the 3 Success Court, Omaha property (Omaha Property), which Doreen purchased using funds from Laurie’s estate, as part of her estate; and transferring the property to themselves as beneficiaries of Doreen’s estate. The plaintiffs say that the defendants have an obvious conflict of interest and have also failed to respond to enquiries and provide information in a timely manner.
[7] The plaintiffs also seek an order transferring the Omaha Property to the independent administrators of Laurie’s estate appointed by the Court.
[8] The defendants says that the issue of interpretation of the life interest provision in Laurie’s will is not appropriate for summary judgment. It requires the Court to hear evidence about the intention of the testator (including the evidence of the solicitor who prepared Laurie’s will) and to construe any ambiguity to give effect to the testator’s intentions.
[9] Likewise, the defendants say that their removal as trustees and executors is premature. The defendants say that they have acted in accordance with advice and their understanding of Laurie’s will. Further, removing them at this stage will only serve to create unnecessary costs and diminish the assets of the estate.
[10]The key issues for determination are:
(a)Do the defendants have a reasonably arguable defence to the plaintiffs’ claim that the Omaha Property does not form part of Doreen’s estate, but rather is held by the defendants on trust for the benefit of the beneficiaries of Laurie’s estate?
(b)Do the defendants have a reasonably arguable defence to the plaintiffs’ application to remove them as executors and trustees of the estates of Laurie and Doreen?
Background
[11] Laurie and Doreen were married and raised three children: Maureen, Sue, and Owen.
[12] Maureen died in early 1998, leaving behind her husband (David) and their three children (Lisa, Craig and Stacey).
[13] In December 1998, Laurie was diagnosed with cancer. On 17 December 1998, Laurie and Doreen signed their last wills, which were drafted by their solicitor, Clive Jackson.
[14]Laurie died on 14 January 1999.
The wills
[15] As noted, Laurie and Doreen’s wills were made at the same time. Sue and Owen were appointed executors and trustees of both estates.
[16] Doreen left everything to Laurie (bar particular gifts), or to Sue and Owen in equal shares if Laurie died first.
[17] Laurie left everything (bar particular gifts) on trust for the benefit of Doreen, as follows:
I GIVE the whole of my estate to my Trustees UPON TRUST: …
To hold the balance of my estate … UPON TRUST to permit my wife DOREEN ROSE EVANS to have the free use, income and occupation and enjoyment of the same during her lifetime …
[18] After Doreen’s death, the trustees were directed to distribute the “then balance” as follows:
(a)2/13th to David;
(b)1/13th to Lisa, Craig and Stacey in equal shares (being 1/39th each);
(c)10/13ths to Sue and Owen in equal shares as tenants in common.
[19] Laurie’s will also directed that all parts of his estate were to be converted into money as soon as possible after his death.
[20]Probate of Laurie’s will was granted on 24 February 1999.
Laurie’s estate
[21]It is agreed that at the date of his death, Laurie owned:
(a)an interest in the family home at Windermere Crescent, Blockhouse Bay, Auckland (the Family Home), as tenants in common with Doreen;
(b)cash held in bank accounts and term deposits;
(c)a yacht, marina and mooring; and
(d)99% of the shares in Laurie Evans Holdings Ltd (the Company), which in turn owned:
(i)a residential property (used as the family bach) in Russell (the Russell Property); and
(ii)a commercial property at Mountjoy Place, Onehunga, Auckland (the Onehunga Property).
[22] There is a factual dispute about the bank accounts. The defendants say that in January 1999, before going into hospital for treatment, Laurie instructed his bank manager to change his personal bank accounts to joint accounts with Doreen. He also made Doreen a signatory on his company accounts. The plaintiffs say the funds alleged to have been in a joint account were still in Laurie’s sole name after his death. The plaintiffs point to a bank document dated June 1999 which shows all accounts in Laurie’s name — they say that the handwritten note by Sue which attributes certain accounts to “Mum” is not compelling. Accordingly, deposits of
$201,000 and $181,000 respectively from Laurie’s name into Doreen’s name recorded
in Sue’s handwritten note — in the belief this was “mum’s money anyway” — were improperly made.
Dealings with Laurie’s estate
[23] On 26 April 2000, Doreen sold the Family Home for $315,000 and used the sale proceeds to purchase a unit in Knightsbridge rest home for $299,858.
[24]On 23 August 2000, Sue and Owen as trustees sold the Russell Property for
$290,000, thereby converting it into money in accordance with Laurie’s will. The funds were transferred to an account in Doreen’s name.
[25] On 28 August 2000, Doreen purchased the Omaha Property (for use as a family bach) for $400,000, using the funds from the sale of the Russell Property and a small amount of cash from one of the disputed bank accounts.
[26] In 2001, Sue and Owen as trustees sold the yacht, marina, and mooring, again converting the property into money in accordance with Laurie’s will. Sue and Owen did the same for the Onehunga Property held by the Company on 8 October 2013.
[27] Laurie made specific bequests that each grandchild receive $20,000 on their 21st birthdays. The trustees put this money in a separate account. This money has been paid to each of the eight grandchildren, including Lisa, Craig, and Stacey. This represents a deduction of $160,000 from Laurie’s estate.
[28] Between 1999 and her death in 2022, Doreen used the income and liquidated assets of Laurie’s estate for her regular living expenses, including retirement village costs, health insurance and medical costs. She had no other source of income.
[29] Throughout, Sue and Owen have maintained accounts for the Company and for Laurie’s estate. The accounts were prepared by an accountant. Owen and Sue say that they have provided all available copies of these accounts, together with any ledgers and handwritten notes, to the plaintiffs. These documents are attached to the affidavits filed in support of the notice of opposition.
Doreen’s estate
[30] On 25 January 2022, Doreen died. The balance of Laurie’s estate on this date was $243,786.71. This was made up of a term deposit of $52,169.83 in the name of the Company and money in a business transaction account.
[31]Probate was granted on 10 July 2022.
[32] Between September 2022 and September 2023, the parties communicated in anticipation of the distribution of the balance of Laurie’s estate.
[33] On 4 September 2023, Sue and Owen transferred the title of the Omaha Property to themselves as tenants in common in equal shares, as beneficiaries of Doreen’s estate.
[34] On 11 September 2023, Owen advised the plaintiffs that Laurie’s estate was available for distribution.
[35]The plaintiffs filed these proceedings on 9 April 2024.
Application for summary judgment
[36]Rule 12.2(1) of the High Court Rules 2016 provides:
The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[37] The relevant principles governing a summary judgment application are well established:1
(a)The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried. The Court must be left without any real doubt or uncertainty.
1 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
(b)The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated.
(c)The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent or is inherently improbable. In the end, the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.
[38] The defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the notice of opposition.2
The Omaha Property
The issue
[39] The first issue is whether the defendants have a reasonably arguable defence to the plaintiffs’ claim that the Omaha Property does not form part of Doreen’s estate, but rather is held by Sue and Owen on trust for the beneficiaries of Laurie’s estate.
[40] It is logical to address this issue first because the application for removal of the defendants as executors and trustees depends in large part on the claim that they have breached their duties by wrongly treating the Omaha Property as part of Doreen’s estate.
[41] The defendants’ position is that the life interest provision, properly construed, is sufficiently broad to permit the sale of the Russell Property (which was owned by the Company), the transfer of the proceeds to Doreen, and the subsequent purchase of the Omaha Property by Doreen.
2 Middleditch v New Zealand Hotel Investments Ltd (1992) 5 PRNZ 392 (CA) at 394.
[42] The plaintiffs say there is no arguable defence to the claim that the Omaha Property is held by the defendants on trust for the benefit of the beneficiaries of Laurie’s estate. This issue turns largely on the interpretation of the life interest provision of Laurie’s will.
[43] If the plaintiffs’ interpretation is correct, there remains a dispute of fact over whether the purchase price for the Omaha Property was derived entirely from Laurie’s estate.
The approach to interpreting wills
[44]The legal principles of interpretation were summarised in Re Jensen:3
(a)The overriding objective is to give effect to the intentions of the testator. All canons of construction must be subservient to that end. The testator's intentions are to be gleaned from an objective appraisal of the testamentary documents viewed as a whole but in cases of doubt the wording is to be interpreted in the context of those facts which must have been in the contemplation of the testator.
(b)If the testamentary language is unambiguous and discloses no obvious error, the Court must give effect to it as it stands. The Court must guard itself against conjecture as to the testator's possible true intentions notwithstanding the actual testamentary provisions or as to what he might have intended had he been better advised …
(c)Where a literal reading of the testamentary provisions shows clearly that an error has been made and the true intention can be deduced from the testamentary documents not by conjecture but with reasonable certainty, the Court will give effect to the true intention …
(d)To that end the Court can in appropriate cases supply omitted words
… and/or modify the words which have in fact been used … so long as this stems from a proper construction of the testamentary documents as a whole.
[45] The United Kingdom Supreme Court recently considered the issue in Marley v Rawlings and affirmed an approach that is analogous to the interpretation of contracts:4
[19] When interpreting a contract, the court is concerned to find the intention of the party or parties, and it does this by identifying the meaning of
3 Re Jensen [1992] 2 NZLR 506 (HC) at 510.
4 Marley v Rawlings [2014] UKSC 2, [2015] AC 129. Marley v Rawlings has been cited with approval in New Zealand: Bethell v Bethell [2014] NZCA 442, [2015] NZAR 1620 at [38].
the relevant words, (a) in the light of (i) the natural and ordinary meaning of those words, (ii) the overall purpose of the document, (iii) any other provisions of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) common sense, but (b) ignoring subjective evidence of any party's intentions. In this connection …
[2] When it comes to interpreting wills, it seems to me that the approach should be the same. Whether the document in question is a commercial contract or a will, the aim is to identify the intention of theparty or parties to the document by interpreting the words used in their documentary, factual and commercial context. As Lord Hoffmann said in Kirin-Amgen Inc v Hoechst Marion Roussel Ltd, Hoechst Marion Roussel Ltd v Kirin-Amgen [2004] UKHL 46 at [64], [2005] 1 All ER 667 at [64]: ‘No one has ever made an acontextual statement. There is always some context to any utterance, however meagre.’ To the same effect, Sir Thomas Bingham MR said in Arbuthnott v Fagan, Deeny v Gooda Walker Ltd (in liq) [1995] CLC 1396 at 1400, that ‘[c]ourts will never construe words in a vacuum’.
[46] The Court also has power to rectify a will based on errors through its equitable jurisdiction.5
The parties’ respective arguments
[47] The plaintiffs say that while Doreen’s life interest in Laurie’s assets gave her “free use” of Laurie’s money while she was alive, she was not able to convert this life interest into full beneficial ownership. They say that her ownership was always subject to the terms of Laurie’s will, so any property Doreen acquired with funds derived from Laurie’s estate “remained” beneficially owned by his estate and on her death “reverted” to it. Therefore, the defendants have no beneficial entitlement to any such property as beneficiaries under Doreen’s will. Rather, they hold the property on trust for the beneficiaries of Laurie’s estate.
[48] The plaintiffs say that the defendants have no defence to the claim that the Omaha Property is entirely traceable to Laurie’s estate. They say that the purchase price came from the sale proceeds from the Company’s Russell property and cash out from Laurie’s bank accounts — there being no “joint account” as alleged by the defendants. As any property acquired by Doreen derived from Laurie’s estate reverts
5 Re Jensen, above n 3, at [39]–[41]. See Re Walker (dec’d) HC Whanganui M37/99, 21 July 2000 where the Court corrected an error made by the solicitor omitting dispositions to one child of the testator. Extrinsic evidence was provided, including written instructions to the solicitor and a draft version of the will which suggested the child was intended to be included. See also Coleman v Chalklen [2016] NZHC 3178, where the High Court made a rectification order changing the residuary beneficiaries under the will to reflect the testator’s intentions.
to his estate on her death, the Court should order that the Omaha Property is transferred from the defendants to independent administrators appointed by the Court.
[49] The defendants say there is nothing in Laurie’s will to support the assertion that the trustees were not permitted to sell the Russell Property and transfer the proceeds to Doreen, for her to purchase the Omaha Property in her own name. The words of the will provide for all assets to be converted to cash, and for the funds to be held on trust for Doreen to give her the “free use, income, and occupation and enjoyment of” the assets during her lifetime. The only way to have the “free use and enjoyment” of cash is to spend it. Accordingly, the Court cannot imply a term to the effect that the clearly unfettered life interest was subject to a requirement on the trustees to preserve the estate for the benefit of the residuary beneficiaries.
[50] The defendants say that, to the extent that the words of Laurie’s will are ambiguous, the Court will be assisted by evidence from Clive Jackson, who is the lawyer that prepared Laurie’s will. Mr Jackson has sworn an affidavit in which he explains that Laurie’s intention was to provide Doreen with the unrestricted use of his estate but with the protection of a trust structure to assist her in managing the funds. He explains that he dispensed with the usual terms preventing the life interest holder from depleting the capital or using it inappropriately because the intention was that Doreen would be free to use the funds without restriction.
[51] I find that the defendants have an (at least) arguable defence to the plaintiffs’ claim concerning the Omaha Property. The cumulative effect of the requirement that all assets were to be converted into cash, and the provision that Doreen was to have the “free use, income, and occupation and enjoyment of” the assets (meaning cash) during her lifetime, supports their interpretation that there was no duty on the trustees to preserve the capital during Doreen’s lifetime. Doreen was free to use the cash as she wished, including to buy real property.
[52] The plaintiffs appear to accept that Doreen was free to spend the cash as she wished but say that any property she acquired using the cash remained beneficially owned by Laurie’s estate and “reverted” to his estate on her death. I understand why
they say this. Laurie gave Doreen a life interest in the assets of his estate, he did not bequeath the assets to her absolutely. The usual meaning of a life interest is that the recipient can enjoy the benefit of the assets(s) but the asset remains owned by the estate and the life interest owner’s interest ends on their death.6 The complicating fact in this case is Laurie’s instruction that all his assets were to be converted to cash and that Doreen was to have the free use and enjoyment of that cash. As the defendants submit, the only way to use and enjoy cash is to spend it.
[53] I do not understand there to be any dispute about the unspent cash in Laurie’s estate (a term deposit in the name of the Company and money in a business transaction account). This cash is held by the defendants on trust for the beneficiaries of Laurie’s estate and on Doreen’s death is to be distributed to those beneficiaries. The issue concerns property that Doreen acquired using cash from Laurie’s estate.
[54] While I understand why the plaintiffs might say that Doreen’s “life interest” means that any property she bought using the cash reverts to Laurie’s estate on her death, this construction has conceptual difficulties. For one, where is the line drawn? It cannot be that any property Doreen bought using cash derived from Laurie’s estate remained beneficially owned by the estate and reverted to it on Doreen’s death. The plaintiffs’ interpretation draws a distinction between types of property which is not drawn in the will or supported by any contextual evidence. Ms Taefi rightfully observed that an amendment to the language of the will would be required to clarify what property should revert back to Laurie’s estate. Furthermore, if the plaintiffs’ interpretation is correct, the Omaha Property should have been held by the defendants as trustees and not Doreen personally.
[55] It is not necessary for me to reach a definitive answer on the correct meaning of the life interest provision. The plaintiffs have applied for summary judgment which requires them to demonstrate that the defendants have no defence to the cause of action. I find by a considerable margin that they have not met this threshold.
[56] Additionally, it is settled that where material facts remain in dispute between the parties, and cannot be concluded confidently from the affidavits, the summary
6 Thompson v Thompson [2000] NZFLR 161 (HC) at [26].
judgment procedure is inappropriate.7 Evidently, it is material to ascertain whether Laurie did join his accounts with Doreen. This goes to the question of whether the purchase price for the Omaha Property was entirely derived from Laurie’s estate. That cannot be done on the material before me. This is another reason to decline the plaintiffs’ application for summary judgment.
Removal of the defendants as executors and trustees
[57] The second issue is whether the defendants have a reasonably arguable defence to the plaintiffs’ application to remove them as executors and trustees of the estates of Laurie and Doreen.
[58] The roles of trustee and executor are distinct, and removal is governed by separate legislation. Nevertheless, the roles of trustee and executor are similar, and the relevant legislation is described as complementary.8
Legal principles: removal of trustees
[59]Section 112 of the Trusts Act 2019 provides for the removal of a trustee:
(1) Whenever it is necessary or desirable to remove a trustee and it is difficult or impracticable to do so without the assistance of the court, the court may make an order removing a trustee.
(emphasis added)
[60]The same test applies for the appointment of a new trustee under s 114(1).
[61] The removal and replacement of trustees under the Trusts Act is carefully controlled. Only a person empowered under the terms of the trust to remove or appoint trustees may act. If no such person is so authorised, a narrow range of other interested persons may act, depending on the circumstances.9
7 Westpac Banking Corp v MM Kembla New Zealand Ltd [2001] 2 NZLR 298 at [62].
8 Lindsay Breach Nevill’s Law of Trusts, Wills and Administration (14th ed, LexisNexis, Wellington, 2023) at [20.1].
9 Trusts Act 2019, s 92.
[62] When exercising its jurisdiction to remove trustees, the Court is guided by the welfare of the beneficiaries, and, to a lesser extent, the security of trust property and the satisfactory execution of the trusts.
[63] Conflicts of interest, misconduct on the part of the trustee, incompatibility or hostility between trustees and beneficiaries can be reasons for removing a trustee. However, whether removal is appropriate in a particular case will depend on whether any of those factors are present to a sufficient extent to undermine the satisfactory execution of the trust for the welfare of the beneficiaries.
[64] The Court will not make an order to remove a trustee lightly. In Miller v Cameron, the High Court of Australia observed:10
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised.
[65] The principal reason for the court intervening to remove a trustee is to protect trust property or the interests of the beneficiaries. In the leading case, Letterstedt v Broers, the Privy Council observed:11
In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyond the very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries. Probably it is not possible to lay down any more definite rule in a matter so essentially dependent on details often of great nicety. But they proceed to look carefully into the circumstances of the case.
[66] Mere evidence of friction or even a degree of hostility between trustees and beneficiaries is not, in itself, a reason for the removal of the trustees.
10 Miller v Cameron (1936) 54 CLR 572 at 581, approved in Kain v Hutton [2007] NZCA 199, [2007] 3 NZLR 349 at [266].
11 Letterstedt v Broers (1884) 9 App Cas 371 (PC) at 387.
[67] It has been said that the court will not leap into action for every slight breach of a trustee’s strict duty if their general behaviour is reasonable. In Kain v Hutton, the Court of Appeal stated:12
To allow trustees to be removed for relatively inconsequential mistakes would be to usurp the settlor’s wishes in entrusting the assets to the trustees. In the same way, mere incompatibility between trustees and beneficiaries is not enough … Any incompatibility must be at such a level that the proper administration of the trust is seriously adversely affected and it has become difficult for a trustee to act in the interests of the beneficiary …
[68] Under s 116 of the Trusts Act, a court order removing and appointing new trustees also has the effect of divesting and vesting trust property in the new trustee. It also has the effect of transferring legal ownership of any interest in land which is trust property, under s 89 of the Land Transfer Act 2017.
Legal principles: removal of executors
[69] Section 21 of the Administration Act 1969 provides for the removal of an executor:
(1) Where an administrator is absent from New Zealand for 12 months without leaving a lawful attorney, or desires to be discharged from the office of administrator, or becomes incapable of acting as administrator or unfit to so act, or where it becomes expedient to discharge or remove an administrator, the court may discharge or remove that administrator, and may if it thinks fit appoint any person to be administrator in his or her place, on such terms and conditions in all respects as the court thinks fit.
(emphasis added)
[70] The law on removal of executors is governed by well-settled principles, as set out in Farquhar v Nunns:13
(a)The starting point is the Court’s duty to see estates properly administered and trusts properly executed.
(b)This jurisdiction involves a large discretion which is heavily fact dependent.
12 Kain v Hutton, above n 10, at [266]–[267].
13 Farquhar v Nunns [2013] NZHC 1670.
(c)The wishes of the testator/settlor (evidenced by the appointment of a particular executor or trustee) are to be given consideration, but
ultimately the question is as to what is expedient in the interests of the beneficiaries.
(d)Expedience is a lower threshold than necessity, and imports considerations of suitability, practicality, and efficiency. Misconduct, breach of trust, dishonesty, or unfitness need not be established.
(e)Hostility as between administrators/trustees and beneficiaries is not of itself a reason for removal, but hostility will assume relevance when it risks prejudicing the interests of the beneficiaries.
[71] If there is a demonstrable conflict of interest between executors and beneficiaries, removal is likely to be appropriate.14 However, where the trustees can be shown to be acting reasonably and there is no realistic suggestion of misconduct, they may not be removed.
The parties’ respective cases
[72] The plaintiffs say that the defendants have breached numerous duties as executors and trustees and have a significant and irreconcilable conflict of interest. They say that, by refusing to return the Omaha Property to Laurie’s estate consistent with his will and instead transferring it to themselves, they have breached their duties as executors and trustees of Laurie’s estate. They have also failed to recover a debt owed by Doreen’s estate to the Company. They have neglected to provide the plaintiffs with disclosure of information about the estate and to distribute the assets of Laurie’s estate within a reasonable time.
[73] Additionally, the plaintiffs says that the defendants have breached their duties as executors and trustees of Doreen’s estate by failing to keep proper accounts and to provide the plaintiffs with bank statements and accounts when requested and failing to pay the debt to Laurie’s estate.
14 See, for instance, Farnsworth v Farnsworth HC Auckland M1767/97, 12 January 1999; or
Bolton v Bolton [2021] NZHC 2692.
[74] The plaintiffs also say that the defendants have a conflict of interest, as beneficiaries of the two estates, as executors and trustees, with duties to Laurie’s estate, and the creditors of Doreen’s estate, and to the defendants as beneficiaries of Laurie’s estate. They are also conflicted, as potential defendants to an action by Laurie’s estate to recover property they have transferred to themselves in breach of trust.
[75] The defendants say that the plaintiffs are not beneficiaries of Doreen’s estate and have no basis to bring an application in relation to it.
[76] As to Laurie’s estate, the defendants say that their removal is unnecessary. They have fulfilled their duties conscientiously and in accordance with the terms of Laurie’s will as they have understood it. They say that even if they have misunderstood the terms of Laurie’s will — which is denied — it will not serve the interests of the beneficiaries to remove them. Appointing an independent trustee and executor will cause delay and expense.
Doreen’s estate
[77] The plaintiffs are not beneficiaries under Doreen’s will, other than in respect of specific jewellery bequests to Lisa and Stacey. The defendants are correct therefore that they do not owe the plaintiffs any reporting or other obligations in their capacity as trustees and executors of Doreen’s estate.
[78] There is no conflict of interest between the defendants’ roles as trustees/executors of Doreen’s estate and joint equal beneficiaries. Aside from specific sentimental bequests (including the bequests of jewellery to Stacey and Lisa), there are no other beneficiaries to Doreen’s estate. There is no dispute about the meaning of Doreen’s will.
[79] The plaintiffs’ concern is with their entitlement to receive a particular bequest under Laurie’s will. In making such a distribution, the defendants would be acting in their capacity as trustees and executors of Laurie’s estate, not Doreen’s.
[80] In these circumstances, there is no proper basis for an order of the Court to remove the defendants as executors and trustees of Doreen’s estate. Furthermore, no practical purpose can be served by removing the defendants from their roles and replacing them with other persons after most of the estate has been distributed.
Laurie’s estate
[81] The main basis for the plaintiffs’ claim is that the defendants have breached their duties as executors and trustees of Laurie’s estate by refusing to return the Omaha Property to Laurie’s estate consistent with his will and instead transferring it to themselves. The difficulty for the plaintiffs is that this claim relies on their disputed interpretation of the terms of Laurie’s will. If their interpretation is correct, the defendants may have breached their duties (subject to their argument that they have acted in good faith). If the plaintiffs are wrong, the defendants have acted consistently with the terms of Laurie’s will and have not breached their duties. Because the correct interpretation of Laurie’s will is unclear, it is not possible for the Court to determine whether the defendants have acted in breach of their duties as trustees and executors by refusing to return the Omaha property to Laurie’s estate and instead transferring it to themselves.
[82] Furthermore, even if the defendants are wrong, they appear to have acted in good faith and in accordance with advice and their understanding of Laurie’s intentions. I have already referred to the evidence of Mr Jackson. Sue has deposed that she spoke with Mr Jackson after Laurie passed away, and that he provided advice to her on what the will meant:
[18] … Clive told us that the will gave Mum complete use of the estate, and that she could do whatever she wanted with it. He said that after her death the remainder would be distributed among the beneficiaries.
[83] Sue has provided contemporaneous records that confirm this was her understanding of the will. In her instructions to Mr Jackson prior to a trip to Australia, she states:
If anything happened to me while in Port Douglas, please have Dad’s will executed as per HIS WISHES sell everything up – Mum to live on interest and capital if needed….
[84] The plaintiffs also claim that the defendants have breached their duties by failing to recover a debt owed by Doreen’s estate to the Company; and neglecting to provide the plaintiffs with disclosure of information about the estate and to distribute the assets of Laurie’s estate within a reasonable time.
[85] The allegation with relation to the debt was not addressed by the defendants in evidence nor in submissions. I understand the plaintiffs’ allegation to be based on their review of the 2023 financial statements of Laurie Evans Holding Ltd, which notes that Doreen owed $490,838. This is provided without any further context or explanation. Argument failed to traverse the issue to further assist me. Accordingly, I cannot conclude that this forms a sufficient ground for removal.
[86] At the hearing, I was taken through the correspondence between the plaintiffs and the defendants. I have reviewed this correspondence again. I do not agree that the defendants have breached their duties by failing to provide the plaintiff with disclosure of information about the estate within a reasonable period. I am persuaded particularly by Sue’s comments that neither she, nor Owen, were professional executors and were merely doing their best to administer the estate according to Laurie’s wishes. The delay in provision of the sought after documents is unfortunate. However, I cannot identify deliberate obstruction on either Sue or Owen’s part. This is further supported by the fact that they have provided the plaintiffs with the financial accounts for the estate. They have not provided the bank statements but offer to do so now.
[87] As to delay in distributing the estate, the defendants are ready and willing to distribute the remainder of Laurie’s estate in the shares prescribed by the terms of his will. The plaintiffs are effectively refusing to accept the distribution because of the dispute about the Omaha Property.
[88] Having said all the above, I do consider that the present dispute over the proper construction of Laurie’s will places the defendants in a conflicted position. The conflict is between their role as executors and trustees of Laurie’s estate and their personal interest as beneficiaries of Doreen’s estate. As executors of Laurie’s estate,
their duty is to propound and maintain the will by which they have been appointed;15 and as trustees, their primary duty is to administer a trust in accordance with its terms and the provisions of general law, for the benefit of the beneficiaries.16 Now that there is a clear dispute about the meaning of Doreen’s life interest as it concerns the Omaha Property, these duties conflict with their personal interests.
[89] However, that does not mean that the Court should immediately move to remove and replace the defendants from their roles. As I have said, there is no evidence that the defendants have acted other than in good faith and according to their understanding of Laurie’s will, based on legal advice. Further, there is no immediate candidate to replace the defendants. Appointing an independent trustee and executor will cause delay and expense. In that sense, it is neither expedient nor “necessary and desirable” to replace the defendants at this stage.
[90] I prefer the solution proposed by Ms Taefi at the hearing. This is that the defendants will make an originating application to the Court for a declaration as to the interpretation of Laurie’s will. Such a declaration will resolve the central dispute between the parties. I see this as a sensible way forward that avoids the delay and expense that appointing an independent administrator would involve.
Result
[91]The plaintiffs’ application for summary judgment is dismissed.
[92]I order:
(a)The defendants to provide disclosure of all bank statements for Laurie’s estate to the plaintiffs within 30 days.
(b)The defendants to make an originating application within 30 working days for:
15 Re Stewart [2003] 1 NZLR 809 (HC) at [24].
16 This underpins the common law duties imposed upon trustees as well as those set out in ss 22 to 38 of the Trusts Act.
(i)a declaration as to the interpretation of the last will and testament of Laurie Owen Evans; and
(ii)associated orders as to how the costs of the application are to be met.
(c)The proceedings are stayed pending resolution of the originating application.
(d)The parties have leave to seek further directions in relation to the conduct of the proceedings.
Gardiner J
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