Moleta v Moleta
[2020] NZHC 2680
•13 October 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-000858
CIV-2019-404-001469 [2020] NZHC 2680
UNDER Part 18 of the High Court Rules 2016 BETWEEN
DELLISSE MOLETA
Plaintiff
AND
DELLISSE MOLETA sued as executor and
trustee of the estate of Janette Dianna Moleta First Defendant
JOLENE SCHOLLUM
Second DefendantLORRAINE MOLETA
Third Defendant
Hearing: 22 July 2020 Appearances:
Peter Napier and Nicholas Coyle for the Plaintiff James Little for the First Defendant
Rebecca Davies for the Second Defendant Greg Kelly for the Third Defendant
Judgment:
13 October 2020
JUDGMENT OF MOORE J
This judgment was delivered by me on 13 October 2020 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar Date:
MOLETA v MOLETA & ORS [2020] NZHC 2680 [13 October 2020]
Contents
Paragraph Number
Introduction.............................................................................................................. [1]
The issue................................................................................................................... [7]
Factual background................................................................................................. [8]
Testamentary instruments..................................................................................... [28]
Procedural history................................................................................................. [32]
Legal principles...................................................................................................... [60]
Application for removal of trustee....................................................................... [61]
Section 33A of the Trustee Act 1956.................................................................... [66]
Discussion and analysis
Application to remove......................................................................................... [68]
Section 33A application....................................................................................... [97]
Result.................................................................................................................... [102]
Costs...................................................................................................................... [107]
Introduction
[1] By her last Will, Janette Moleta (“Janette”) named her daughter Dellisse Moleta (“Dellisse”) as sole beneficiary and executor and trustee (“administrator”)1 of her estate.
[2] The estate is primarily comprised of three of residential properties Janette owned either solely or with Dellisse.
[3] Two of Janette’s other daughters, Jolene Schollum (“Jolene”) and Lorraine Moleta (“Lorraine”), have made claims in the Family Court for further provision under the Family Protection Act 1955 (“the FPA claims”). Dellisse has, in her personal capacity as the sole beneficiary under the Will, filed a notice of defence to those claims.
[4] After Jolene and Lorraine’s claims were filed, Dellisse brought a claim in this Court against the estate alleging that various estate properties are held on constructive trusts for her (“the constructive trust claim”). The FPA claims have been transferred to this Court and consolidated with the constructive trust claim. If Dellisse’s constructive trust claim is proved in respect of any or all of the estate properties, these will become unavailable to meet the other sisters’ FPA claims in the event those claims are successful.
[5] Lorraine and Jolene complain that Dellisse’s conduct throughout the litigation has been characterised by delays, failures to make adequate disclosure, changes of legal representation and egregious conflicts of interest. As a consequence, Lorraine, supported by Jolene, has brought an application for Dellisse’s removal as executor and/or trustee of Janette’s estate and the appointment of an independent executor and trustee in the form of a senior Auckland practitioner. This course is opposed by Dellisse.
1 For convenience I use the term “administrator” interchangeably with trustee and executor/executrix even though there is, of course, a clear difference and distinction between the terms.
[6] Correspondingly, and subsequent to the filing of Lorraine’s application for removal, Dellisse, in her capacity as trustee and executor, was directed by the Court to file an application under s 33A of the Trustee Act 1956 (“the Trustee Act”) seeking directions as to her role and involvement in the proceedings as executor of Janette’s estate. This is because, as plaintiff in the constructive trust claim, she is suing herself in her capacity as trustee and executor. Section 33A mandates that in such circumstances a trustee must apply to the Court for directions as to the manner the opposing interests are to be represented. Dellisse, who is now separately legally represented in her dual capacities, seeks directions that:
(a)first, as executor, she takes a neutral stance in the proceedings between her, as plaintiff, and Jolene and Lorraine;
(b)secondly, that she abides by the decision of the Court on all substantive matters in dispute and otherwise limits her involvement to providing the Court with such assistance as it might direct; and
(c)thirdly, that in this role she be indemnified by the trust property for costs incurred.
The issue
[7] The primary issue for determination is how the orderly and proper progress of this litigation to trial in May 2021 is best served. Are the interests of the parties adequately protected by the making of the orders sought by Dellisse under s 33A, or is it necessary to go further and remove her as trustee and executor and appoint in her place an independent and appropriately qualified party?
Factual background
[8] Janette died in Auckland Hospital on 15 July 2017. Her last Will was dated 22 December 2016. Probate was granted out of the Wellington High Court on 20 November 2017.2
2 Under CIV-2017-485-616198.
[9] Janette had seven children, three of whom pre-deceased her. The survivors include Lorraine, now aged 64, Dellisse, now aged 57 and Jolene, now aged 56. The youngest surviving child, Leon, is not involved in the proceedings.
[10] In the 1950s Janette, who had formerly been a sole charge teacher in the Marlborough Sounds, married a local sheep and beef farmer. They lived on the family farm. It is common ground that Janette worked extremely hard supporting the family and helping on the farm. However, it was not a happy marriage.
[11] In late November 1971 Janette left her husband taking with her the couple’s four youngest children, which included Dellisse and Jolene.3 The others, including Lorraine, remained with their father.
[12] In 1973, having first moved to Nelson, Janette and the three children resettled in Auckland.
[13] Again, it is common ground that Janette made very considerable personal and economic sacrifices to maintain the home and pay for the education of the children.
[14] Dellisse claims that during this time she and her mother developed a special bond and they became and remained extremely close until Janette’s death. Dellisse trained and qualified as a pharmacist. She disputes her siblings’ claims that they too were close with and supported their mother.
[15] According to Lorraine, despite their physical dislocation from when her mother moved out of the family home when she was 15, she and her mother maintained a close and special relationship. She attributes this to being the first born and the surviving twin. Lorraine says they corresponded frequently by letter and telephone. Lorraine says that she often visited her mother in Auckland.
[16] A broadly similar claim is made by Jolene. On Jolene’s account, she too enjoyed a special and loving bond with her mother.
3 According to Dellisse, Leon later returned to Takaka to live with his father.
[17] In contrast, Lorraine and Jolene both describe Dellisse as manipulative, deceptive and cruel; both towards them and their mother who, particularly in her later and declining years, Dellisse effectively isolated them from.
[18] According to Jolene, her mother had some success in obtaining a matrimonial settlement which allowed her to buy her first home in Epsom in 1978. Approximately three years later she sold this and purchased a new home at 120 Norman Lesser Drive, St Johns where the family lived.
[19]In December 1986 Dellisse moved to Australia to work as a pharmacist.
[20] In September 1987 Janette purchased, as a rental investment, a townhouse at 1-97 Michaels Avenue, Ellerslie. This property was retained and is one of three which form part of the deceased’s estate. This was followed in 1988 by another purchase when Dellisse and her mother jointly acquired a unit at 9 Maaka Place, St Johns.
[21] In February 1989 Janette joined Dellisse in New South Wales where she remained for the next eight years. During that time, they bought and sold five rental properties together, including a retail pharmacy in Newcastle which Dellisse worked from, assisted by her mother, between 2000 and 2003. It is believed that two of these properties have been retained by Dellisse.
[22] According to Dellisse, a combination of her mother’s deteriorating health and Dellisse’s decision to leave practice because, she claims, the pharmacy profession was changing, led them to return to Sydney.4 From 2004 Dellisse says she was self- employed, working with her mother to learn about the property and share markets.
[23] In 2010 Janette and Dellisse returned to Auckland. During that year they purchased a unit at 2M Alpers Avenue, Epsom which they jointly owned and lived in until Janette’s death. This property also forms part of the deceased’s estate.
4 She was later found to be not fit to be registered as a pharmacist by the New South Wales Pharmacy Board on the grounds that for 15 months between 2002 and 2003 she supplied nearly 60,000 packages of pseudoephedrine products other than in accordance with recognised therapeutic practice.
[24] In August 2012, five years before she died, Janette suffered a debilitating stroke which rendered her unable to stand, walk or talk. The sisters’ evidence relating to this period, in particular Janette’s hospitalisation and return to Alpers Avenue, is starkly conflicting. All claim to have enjoyed a very loving, close and trusting relationship with their mother, albeit from very different perspectives.
[25] Jolene and Lorraine depose that despite persistent attempts to visit their mother, Dellisse effectively obstructed them. She deliberately kept them at arm’s length and resisted all attempts by them to engage with their mother. Both describe their hurt and frustration. They say it was only through a third party, that is their aunt, Janette’s sister, that they learned of their mother’s admission to hospital shortly before her death.
[26] In contrast, Dellisse claims that her sisters were generally uninterested in what their mother was doing. Dellisse not only rejects her sisters’ claims that she was deceptive and controlling, but she asserts that she and her mother worked together, scrimping and saving to build their capital investments and that at all times she had her mother’s best interests at heart. Dellisse says that she single-handedly nursed her mother through her last years of declining health; that she met all Janette’s financial, emotional and physical needs until her final admission to hospital. She steadfastly rejects her sisters’ accounts.
[27] Without descending into detail, the competing affidavit evidence of the parties may be characterised as vituperative, intensely combative and deeply mutually mistrustful. It is neither possible nor appropriate to reconcile the starkly competing accounts at this stage of the proceedings. That is a matter for trial.
Testamentary instruments
[28] According to Dellisse, her mother made four wills between 1987 and 2016. In broad summary, each left Janette’s estate to Dellisse, although in two, some modest recognition of a moral duty was made in favour of Jolene.5 As earlier noted, the last
5 As well as another of Janette’s children, Michelle, who died of cancer in 2009.
Will, which was made seven months before Janette died, left her entire estate to Dellisse.
[29] In that document Janette expressly recorded her reasons for favouring Dellisse over her siblings. These were that Dellisse had cared for her since her stroke in 2012. She said she had received legal advice and had given careful consideration to her family responsibilities and her moral duties before determining to make the dispositions she had in her Will, which she said she regarded as just and equitable.
The estate
[30] For all practical purposes, the estate is comprised of three residential properties situated at 21A Balfour Road, Parnell, 120 Norman Lesser Drive, St Johns and 1/97 Michaels Avenue, Ellerslie. On the incomplete material before the Court the combined approximate net value would appear to be between $4 million and $5 million.
[31] The Australian properties do not form part of the present estate although on 16 August 2018 Lorraine filed a claim for further provision from Janette’s Australian estate under the Australian equivalent of the Family Protection Act 1955 (“the FPA”).
Procedural history
[32] In order to properly understand the basis for both applications it is necessary to set out the rather convoluted background and procedural history of these proceedings.
[33] On 2 March 2018 Jolene filed an application in the Family Court under the FPA seeking an order that Janette had breached her moral duty by failing to make adequate provision for Jolene in her last Will.
[34]On 3 July 2018 Lorraine brought a similar application.
[35] Dellisse filed notices of defence in respect of her capacities as both the sole beneficiary under the Will and as executor/trustee.6
[36] On 26 September 2018 Jolene sought an order that Dellisse, in her capacity as the executor, file and serve an affidavit of the estate’s assets and liabilities.
[37] On 1 October 2018 Dellisse’s new solicitors requested an extension of time for her to file her narrative affidavit (as beneficiary and interested party) and her executor’s affidavit as to the estate’s assets and liabilities.7
[38] On 2 October 2018 Judge Moss of the Family Court directed the file to be transferred to the North Shore Court and directed a judicial conference, noting that “…progress needs to be made, rather more speedily than the request of [Dellisse’s then lawyer] would dictate”.
[39] On 19 November 2018 Judge Maude noted that “…progress has been slow…” and noted Dellisse’s then lawyer’s request that the filing of her evidence should be further delayed until the evidence in the Australian proceedings had been filed. He directed that the executor’s affidavit be filed by 5 December 2018 and Dellisse’s narrative affidavit be filed by 19 December 2018.
[40] By 19 December 2018 no evidence had been filed by Dellisse pursuant to the timetabling directions.
[41] On 8 January 2019 Judge Lindsay considered Dellisse’s non-compliance. She noted there had been a change of legal representation in respect of Dellisse in her capacity as beneficiary and interested party and extended the time for filing the narrative affidavit to 11 February 2019.8
[42] On 22 February 2019 Dellisse applied for a further extension of time to file her narrative affidavit. In her supporting affidavit she explained her dissatisfaction and
6 Filed by Davenports West, solicitors. Counsel acting noted as Michael Locke. In later correspondence counsel was noted as W Templeton, barrister.
7 Filed by Nigel G. Cooke, solicitor. Counsel acting noted as Daniel Gardiner.
8 This Minute followed a memorandum dated 17 December 2018, filed by Holmden Horrocks, solicitors with J E McLennan recorded as counsel acting.
loss of confidence in previous legal representation and her reasons for dispensing with their services. She described her difficulties in obtaining fresh representation. She advised that she had engaged the services of Rennie Cox, solicitors, who had instructed G C Jenkin, barrister, to act. Filed with the application was her narrative affidavit noted “as beneficiary and interested party”.
[43] On 5 March 2019 Dellisse filed a notice of change of representation and address for service. Her new solicitors were recorded as Wynn Williams. The solicitor acting was J W A Johnson. Also filed that day was her notice of opposition to Jolene’s 7 February 2019 application for discovery.
[44] On 16 April 2019 Dellisse’s solicitor advised by memorandum that Dellisse would be filing a claim in the High Court seeking a declaration that certain assets of the estate were held on a constructive trust for her.
[45] On 7 May 2019 Jolene filed a notice for Dellisse to answer interrogatories and an application for further discovery.
[46] On 8 May 2019, that is about 14 months after Jolene had commenced her FPA proceedings, Dellisse filed her constructive trust claim in this Court. Lorraine and Jolene filed defences.
[47] On 9 July 2019 the parties agreed to transfer the FPA claims to this Court to be consolidated with the constructive trust claim.
[48] On 2 September 2019 Jolene sought an order that Dellisse file an application for directions pursuant to s 33A of the Trustee Act in respect of the constructive trust proceeding. This was followed by Lorraine’s support of her sister’s s 33A application.9
[49] On 31 October 2019 Associate Judge Andrew made various orders following what appears to have been a case management conference. By consent he ordered the constructive trust proceedings be consolidated with Jolene’s and Lorraine’s FPA
9 By way of counsel’s memorandum 4 September 2019.
proceedings. He made directions as to the description of the parties.10 He noted that Dellisse’s counsel acted for her both as plaintiff in the constructive trust proceedings and as the respondent beneficiary in the FPA claims. He observed that to date Dellisse had taken no steps to instruct independent solicitors to represent her in her capacity as executor/trustee of the estate. He made orders directing representation by 22 November 2019 and ordered that the costs of such representation be met from the estate. In particular, he noted:
“[13] …It is the expectation of the Court that the independent solicitors will address the issue of whether Ms Dellisse Moleta should continue to be the sole executor and trustee of the estate or whether, in the circumstances, an additional executor and trustee should be appointed with [Dellisse] simply abiding the decision of the newly appointed executor.
[14] I record that the defendants remain concerned about what they see as the conflicting roles of [Dellisse] and the number of different counsel she has engaged to date. In the event [Dellisse] fails to take steps by 22 November 2019 to appoint independent solicitors for the first defendant then the appropriate steps for the parties to take may be to seek an order pursuant to s 21 of the Administration Act 1969 for the removal of [Dellisse] as executor and trustee or the appointment of an additional executor and trustee. The application of s 33A of the Trustee Act 1956, a provision which Mr Kelly referred to in his memorandum, might also need to be addressed.”
[50] On 22 November 2019 Dellisse confirmed by counsel’s memorandum that she had taken steps to engage a solicitor to act for her in her capacity as executor and trustee.
[51] On 19 December 2019 Lorraine’s solicitors requested advice from Dellisse’s solicitors as to who Dellisse had instructed to act for her in her capacity as executor and trustee. No reply was received.
[52] On 29 January 2020, Lorraine’s solicitors, by memorandum, observed that various procedural steps, including discovery and the setting down of a fixture could not be addressed while Dellisse’s legal representation remained unresolved. The solicitors advised they were preparing papers to have Dellisse removed as executor and replaced by an independent solicitor. A case management conference was sought.
10 As reflected in the intituling of these proceedings.
[53] By memorandum dated 31 January 2020, Dellisse’s solicitors advised that an independent solicitor from whom advice had been sought was unable to act. The subsequent delays were a result of the intervention of the Christmas break. It was noted that Mr Little, barrister, had accepted instructions.11 The memorandum addressed other issues including discovery, modes of evidence, the order in which the various claims should be heard and suggested timetabling orders.
[54] On 3 February 2020, Mr Little confirmed by memorandum he was acting for Dellisse in her capacity as trustee and executor. He advised he intended to file an application under s 33A seeking directions that she abide the Court’s decision on all substantive matters and otherwise limit her involvement to providing the parties with any documents relevant to matters in issue pursuant to her discovery obligations and providing the Court with any other assistance as directed.
[55] On 4 February 2020 a case management conference was convened before Associate Judge Andrew. The Judge ordered Dellisse to make a s 33A application by 24 February 2020 and directed any application for removal by Jolene and Lorraine be filed by the same date. He set the substantive consolidated proceeding down for a seven day hearing commencing 10 May 2021. He ordered a further case management conference to deal with other pre-trial issues.
[56] On 20 February 2020 Lorraine filed her application for the removal and replacement of Dellisse as executor and trustee.
[57] On 24 February 2020 Dellisse filed her s 33A application. There followed the filing of notices of opposition to both applications and the filing of evidence. On 17 June 2020 Associate Judge Andrew directed that both applications were to be heard together. A one day fixture was allocated for 22 July 2020.
[58] On 9 June 2020 Mr Johnson of Wynn Williams advised on notice that on or around 30 April 2020 Dellisse had terminated the firm’s retainer and that Mr Johnson ceased to act for her. Her Alpers Avenue address was given as her new address for service.
11 Later correspondence recorded that Shieff Angland were the solicitors on the record.
[59] By memorandum dated 10 July 2020 Mr Napier of Keegan Alexander solicitors, advised he was now acting for Dellisse as plaintiff.
Legal principles
[60] This judgment deals with both applications. I shall deal with each in turn; first the application for removal and secondly, because the result on the first will inform the reasoning on the second, the s 33A application.
Application for removal of trustee
[61] The test for the removal of a trustee and/or executor in s 21 of the Administration Act 1969 (“the Administration Act”) and s 51 of the Trustee Act is the same. It is one of expedience.
[62] As a matter of common sense, “expedient” means expedient for the trust and beneficiaries as a whole; not just some.12 The Courts have not differentiated between cases involving the appointment of a replacement administrator and those involving a replacement trustee.13 The following principles are applicable:14
(a)the starting point is the Court’s duty to ensure estates are properly administered and trusts properly executed;
(b)this jurisdiction involves a large discretion which is heavily fact- dependent;
(c)the wishes of the testator/settlor (evidenced by the appointment of a particular executor or trustee) are to be given consideration, but ultimately the question is as to what is expedient in the interests of the beneficiaries;
12 Hall v Radich-Chaytor [2020] NZHC 409 at [46].
13 At [45].
14 Farquhar v Nunns [2013] NZHC 1670 at [13], approved in Frickleton v Frickleton [2016] NZCA 406, [2017] 2 NZLR 154 at [29], Tod v Tod [2015] NZCA 501 at [22].
(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; and
(e)hostility as between administrators/trustees and beneficiaries is not of itself a reason for removal, but hostility will assume relevance if and when it risks prejudicing the interests of beneficiaries.
[63] The Court of Appeal in Sadler v Public Trust recognised that an executor owes duties to potential claimants.15 The Court held:16
“(a) A duty of even-handedness extends to potential claimants against an estate where an executor is aware that they wish to make a claim.
(b) This duty extends to ensuring that an executor does not actively and dishonestly conceal relevant material about the estate from potential claimants who seek information about the estate….”
[64] The breadth of the class of people to whom executors owe such a duty may be seen in Bupa Care Services NZ Limited v Gillibrand.17 This case involved an application for removal by a creditor of the estate. Bupa, the rest home operator where the testator had lived until his death, sought arrears for unpaid fees from the estate. Liability for these costs was disputed by the testator’s son as executor. The only asset of the estate was a loan to a trust of which the son was a trustee. Heath J accepted that an executor owes duties not only to beneficiaries and potential beneficiaries, but also to creditors. In so finding he observed:18
“The authorities suggest strongly that where there is a conflict between the duty of an administrator and the beneficiaries, removal is likely.”
15 Sadler v Public Trust [2009] NZCA 364.
16 At [41].
17 Bupa Care Services NZ Ltd v Gillibrand [2013] NZHC 2086.
18 At [19], citing Farnsworth v Farnsworth HC Auckland M1767/97, 12 January 1999; Tearaki v O’Reilly (1992) 9 PRNZ 51 (HC); Harvey v Harvey HC Auckland CP736/95, 10 June 1996.
[65] Heath J noted that Bupa involved a creditor, rather than a beneficiary, but the terms of the Will obliged the executor to meet the estate’s liabilities. Heath J found that that a removal order was necessary because:
“(a) a removal order was required to ensure the estate is properly administered. An executor is required to execute the terms of the Will. The late Mr Gillibrand’s Will requires all debts of the estate to be paid before distributions are made to beneficiaries;
(b) an independent and impartial mind must be applied in assessing whether a debt is validly claimed. Decision-making should not be clouded either by emotion or (personal) financial considerations;
(c) Mr Gillibrand’s ability to bring an independent mind to the question of whether the debt is valid was questionable, to say the least. He has demonstrated strongly held views… about the impact of Bupa’s care on his father, believing it was causative of death. He also has a financial interest to protect; both as sole beneficiary of the estate and the trustee (and beneficiary) of a Trust, a debt from which is the only source from which money could be recovered to pay Bupa; and
(d) in any event, even if the Bupa claim were permitted to proceed to trial, with Mr Gillibrand defending it on behalf of the estate, a successful claim would undoubtedly require Mr Gillibrand to retire as personal representative, given that he would need to sue himself to recover any debt owed by the Trust. Questions have also been raised about whether that debt was forgiven by Mr Gillibrand senior. They too require independent consideration.”
Section 33A of the Trustee Act 1956
[66] Section 33A provides that despite any rule of law or practice to the contrary, a trustee in that capacity may sue, and be sued by, the trustee in any other capacity, including the trustee’s personal capacity. However, in every such case the trustee must obtain the directions of the Court in which the proceeding is taken about the way in which the opposing interests are to be represented.
[67] As Mr Little submitted, there is little caselaw on s 33A, but there is a considerable body of legal principle on the proper conduct of executors and trustees in litigation. Most often, the issue arises in the context of Beddoe applications where a trustee seeks indemnity from the trust fund in respect of costs a trustee will incur in a proceeding, given that a trustee is indemnified against expenses properly incurred.
Discussion and analysis
Application to remove
[68] Mr Napier, for Dellisse in her capacity as plaintiff, made two preliminary submissions in opposing the removal application and I shall deal with each before considering his substantive submissions.
[69] The first went to the issue of standing which Mr Napier raised in oral argument. As I understood his submission on this point, it was to the effect that it is not correct that where a duty is owed by a trustee it follows there must be an ability to remove that trustee. His submission is that if a breach of duty is alleged it may be sued upon for enforcement or loss. But there is no separate or automatic right to remove the trustee.
[70] I cannot accept that submission is correct. No authority was cited to support it. Furthermore, for the reasons which follow later in this judgment, I am satisfied that such a power does exist both under statute and as part of this Court’s inherent and supervisory jurisdiction. The question here is not whether such a power exists but rather whether it would be expedient to exercise that power. It would be an odd result indeed if the only remedies available to Jolene and Lorraine would be limited to suing Dellisse for enforcement or loss after the event.
[71] The second preliminary point raised by Mr Napier is that if Jolene and Lorraine have standing, the only jurisdiction available to make the orders sought is under s 51 of the Trustee Act. He submits that s 21 of the Administration Act is inapt. That is because the section governs the discharge or removal of administrators of estates. It applies where the Will has been proved and the administrator subsequently desires to be discharged. It does not apply where no administration has been granted. Thus, he submits, the proper course is to proceed under s 51. However, while plainly that provision empowers the Court to remove and substitute a trustee, the Court may only do so where there is no dispute of fact. In that event an action must be instituted.19 Mr Napier submits that pt 18 of the High Court Rules 2016 (“the Rules”) governs
19 Re Tangihanga No. 1 A Block [1918] NZLR 51; [1918] GLR 54 and Sapio v Carter [1959] NZLR 848.
proceedings in which the relief claimed is wholly within the equitable jurisdiction of the Court. Rule 18.4 sets out how such proceedings are to be commenced, that is by way of statement of claim. Mr Napier submits that this requirement is consistent with the earlier caselaw under the Trustee Act which held that disputes as to the conduct of trustees should be determined by an action being instituted.
[72] To support this proposition, Mr Napier referred me to the recent Court of Appeal decision in Jones v O’Keeffe.20 Although those proceedings involved an application to replace a trustee, that issue was resolved before the hearing. The only remaining question was costs. The High Court Judge ordered Mr Jones to pay indemnity costs, on the basis of adverse inferences he drew from the affidavit evidence. Mr Jones appealed that decision on the grounds that there had not been a defended hearing at which allegations and counter-allegations had properly been tested. Mr Jones had initiated the proceedings by way of originating application. The Court of Appeal observed that applications under the Trustee Act are generally required to be brought under pt 18 of the Rules and the originating application procedure is not appropriate where factual issues are in dispute.
[73] Mr Napier submitted that the comments of the Court of Appeal are of direct relevance and application to the present case. This is because this Court is being asked to resolve questions of fact which are hotly contested. In that event the application to remove Dellisse was required to have been brought under pt 18 of the Rules. Because it was not, this Court cannot determine the application.
[74]I cannot accept that submission for several reasons.
[75] First, it is a point which is removed from the context of these, particular, proceedings. I agree that the pt18 procedural pathway is appropriate where the issue of removing a trustee is a stand-alone application as it was in Jones. However, as I observed in argument, this Court routinely deals with applications for removal initiated by way of originating application. This includes cases where for health or other reasons that course is expedient.
20 Jones v O’Keeffe [2019] NZCA 222 at [51].
[76] Secondly, for the reasons which follow later in this judgment, I do not accept that the resolution of this case requires me to resolve hotly contested issues of fact without the benefit of cross-examination. The decision is restricted to whether the interests of the parties, including the estate, are better protected by the appointment of an independent executor and trustee.
[77] Thirdly, the application to remove Dellisse in the present circumstances is essentially interlocutory in nature. Neither it, nor the s 33A application, is stand-alone as it was in Jones. The consolidated proceedings include Dellisse’s constructive trust claim which was initiated by way of statement of claim. It has since been joined by the other sisters’ pre-existing FPA claims. The application to remove Dellisse and the necessity for the Court to order Dellisse to file a s 33A application only arose after she had issued the constructive trust proceedings. Given that context, it is unsurprising that Lorraine initially brought the removal application by way of interlocutory application. It was converted to an originating application by Associate Judge Andrew,21 who noted that the distinction might assume some importance as to whether a High Court Justice and not an Associate Judge would be required to hear the matter.
[78] For these reasons I am not satisfied that the procedural mechanism by which these proceedings have been brought operates as a bar to me determining the application.
[79] Mr Napier’s next submission is that the majority of case law dealing with the removal of executors/trustees involves disputes as to the administration of the estate or trust which is different from the present. The estate is now largely administered. The only issue which remains to be determined is the litigation.
[80] Mr Napier submits that the case most similar to the present circumstances is Farquhar v Nunns where the application for removal was refused by this Court.22 Ms Farquhar sought the removal of her two step-daughters, being the children of the testator from an earlier marriage. Ms Farquhar had brought proceedings against the estate under the FPA, the Law Reform (Testamentary Promises) Act 1949 and pursuant
21 By Minute dated 17 June 2020.
22 Farquhar v Nunns [2013] NZHC 1670.
to a constructive or resulting trust in respect of an interest claimed in certain real property. In refusing the application, Heath J found there was nothing in the evidence to suggest misconduct on the part of either of the daughters, observing that they appeared to have undertaken the administration of the estate competently and the proper execution of the terms of the Will was not at risk. He also noted that there was no material difference between the personal interests of the daughters in preserving their inheritance and their duty as administrators to protect the estate for the benefit of those to whom it has been left. While noting that Ms Farquhar believed the sisters were exhibiting a degree of hostility towards her, the Judge was satisfied the evidence did not go far enough to persuade him of that. He pointed out that in the context of contested litigation they were entitled to take a robust approach in defending their right to property left to them by their father and so, as far as the estate’s defence of the proceedings was concerned, he was satisfied they had identified reasons why the claim was opposed.
[81] I agree with Mr Napier that the majority of the caselaw on removal is of limited assistance in the present case, other than the helpful discussion of principle. This case does not involve a challenge to the way Dellisse has administered the estate. However, the present case is also materially different from Farquhar. In Farquhar the daughters had a real interest in defending the claims because they were beneficiaries under the Will. They were protecting their own position which was aligned to the interests of the estate.
[82] However, in the present case, as Mr Kelly was at pains to emphasise, Dellisse has every incentive as administrator not to defend the constructive trust claim which she has brought against the estate. The consequence of her constructive trust claim being wholly or partly successful will be to reduce the assets of the estate to the detriment of the potential claimants, being Lorraine and Jolene. The potential for her to face an application for removal must have been known to Dellisse at the time she filed her constructive trust claim. And while I do not attribute to her the cynical strategic motives Mr Kelly does, there seems little room but to conclude that this step was in response to her sisters’ FPA claims and is designed to reduce the assets of the estate and thus their availability to meet any FPA award.
[83] A further point of difference between the present case and Farquhar is that it would appear that the respective levels of animosity between the parties is quite different. As noted earlier, the affidavits filed by Dellisse, Lorraine and Jolene reveal mutual deep-seated, hostility and mistrust going back many years.
[84] There is also some force in Ms Davies’ submission that as potential, but unnamed, beneficiaries Lorraine and Jolene will be expected to carry the burden of effectively defending the estate from Dellisse’s constructive trust claim in the event an independent administrator is not appointed.
[85] Mr Napier’s next submission is that as administrator, Dellisse intends to maintain a neutral position relative to claims against the estate, including her own. Mr Napier submits that now independent legal representation has been retained the Court can have confidence that Dellisse, in her capacity as administrator, will maintain a principled and neutral position relative to the litigation.
[86] This submission may be answered in relatively short order, both as a matter of general principle and by reference to the procedural history of this matter.
[87] First, as Mr Kelly and Ms Davies, for Jolene, emphasise, while the appointment of a separate set of lawyers to represent Dellisse as administrator is a positive, albeit somewhat belated step, it cannot be overlooked they remain her legal representatives. While I naturally have no doubt they will conscientiously observe their duties as officers of the Court, they are constrained by Dellisse’s instructions. Important decisions such as how and to what extent the claims on the estate are to be defended will necessarily be driven by Dellisse. Furthermore, Dellisse’s lawyers will be reliant on the correctness and completeness of the information Dellisse provides them in meeting their obligations. In the context of estate litigation and, in particular, determining the true value and extent of the estate’s assets, the trust’s administrator must act with absolute candour, independence and objectivity. Disclosure must be comprehensive and full.
[88] Even now, the evidence filed by Dellisse in respect of the extent of the estate appears deficient. She has undertaken to file more comprehensive evidence closer to
the hearing. However, on the evidence filed to date, it would seem none of the properties has been the subject of a valuation by a registered valuer. Instead, the evidence of current value takes the form of a recommended sale price provided by various real estate agents. For example, the valuation of the Balfour Road property consists of a recommended sale range of between $1,015,000 and $1,520,000, apparently based on a comparative market analysis and the current rating valuation. There are also borrowings on some of the properties but no up-to-date details of what those liabilities are. All properties are tenanted and yet the rental income disclosed by Dellisse seems remarkably modest given the indicative value of the estate. Indeed, Dellisse describes the cash income generated by the estate as negligible. Additionally, although Dellisse deposes that she manages these properties herself and that they are her primary source of employment and income, the evidence is silent on what income she actually receives.
[89] These events give the Court no confidence Dellisse will act in accordance with the duties of even-handedness and independence so necessary in these circumstances.
[90] Furthermore, although I place less weight on this factor, there is some evidential basis justifying concern that the present arrangements for Dellisse’s legal representation may not be maintained through to the hearing next year. This concern is reflected in the procedural history set out earlier in this judgment. Dellisse accepts that there has been a succession of changes in her lawyers. She explains her reasons for dispensing with their services; some were not sufficiently experienced, some proved difficult to work with and others were unable to deal with the volume of material in a timely way. It is, of course, any litigant’s right to change lawyers as they see fit. However, when this feature is combined with the others discussed in this judgment, it does give the Court some pause for concern that the present representation may not endure through to the fixture next year.
[91] Finally, Mr Napier submits that the appointment of an independent trustee will incur additional, unnecessary costs which will erode the estate and deny Dellisse her right to natural justice given her mother’s clear testamentary directions. It will erode the estate which she, through her efforts with her mother over many years, contributed to. He submits that in all probability Dellisse will be successful to some degree in her
constructive trust claim. That being the case, the cost of engaging an independent trustee will fall largely on her rather than her siblings who carry no such risk.
[92] Mr Kelly’s proposal, if Lorraine’s application for removal is successful, is for the Court to appoint Christopher Darlow to assume the role of administrator. Mr Darlow is a highly respected, senior Auckland lawyer. He possesses particular experience and expertise in trust administration. This Court has previously appointed him to act as a trustee in situations of conflict. Mr Darlow has confirmed his preparedness to act as the sole executor should the Court so order, subject to certain conditions including an order that the estate meets his costs which he sets at $600 plus GST per hour.
[93] In argument, I explored with counsel whether there were any effective, less costly, alternatives to engaging Mr Darlow. The Public Trustee was mentioned but I have no evidence of what the likely costs of engagement would be or for that matter any other appropriate alternative trustee. In any event, there is some force in Mr Kelly’s submission that Mr Darlow’s fee reflects his experience and, in consequence, his ability to deal with any issues he confronts in a timely and efficient way. I am satisfied that in all the circumstances it is an entirely reasonable and cost- effective option.
[94] In doing so, I do not overlook that the testator’s wishes must be considered. So too must the interests of potential, unnamed beneficiaries in determining what is expedient.
[95] Thus, in summary, I am satisfied that the expedience test is met and the application for removal should be granted. Dellisse is materially conflicted in her dual capacities as a litigant suing the estate of which she is also the trustee. As trustee she owes a duty of even-handedness to her sisters as potential beneficiaries who seek further provision under the FPA. As trustee she has a duty to defend the estate against claims made against it. On the material before me I am far from satisfied Dellisse will comply with these duties as these proceedings evolve. Mr Darlow will be appointed to replace her.
[96] It will be for Mr Darlow to assume the trustee’s duties of even-handedness in the continuing administration of the estate. While this is largely complete, it cannot be finalised until the present proceedings have run their full course. It will be for Mr Darlow to meet any outstanding or future obligations the estate owes or will owe to others, including the Court, as this litigation progresses to the hearing. In doing so, he may be required to engage legal representation to advise him and to act for him. In discharging his duty of even-handedness, he will need to consider whether to take a neutral stance or a more active role, given his obligation to defend and protect the trust’s assets. Decisions will need to be made as to the stance the estate will adopt in relation to the claims against it. Some may require an assessment of litigation risk and the careful balancing of competing interests, such as the cost of defending the estate against a particular claim versus the likelihood of success. Decisions of this sort may well be difficult and nuanced. These are all matters which properly fall within Mr Darlow’s area of responsibility. His particular expertise in these matters will be of assistance.
Section 33A application
[97] At the hearing I canvassed with counsel what the status of the s 33A application would be in the event I granted the application to remove Dellisse as administrator.
[98] Mr Kelly’s position is that because the essential purpose of the s 33A application is to put in place Court-imposed controls on Dellisse in the execution of her duties as administrator, the application would be rendered otiose in the event the removal application is successful. In other words, and perhaps self-evidently, there is no need to make orders defining Dellisse’s responsibilities as trustee if she is removed from that role.
[99] Mr Little, for Dellisse as administrator, submits that s 33A is not what gives the Court its jurisdiction to make directions to a trustee who is suing himself/herself as is Dellisse. The Court already has the jurisdiction. He submits that in the event the removal application succeeds, the issue as to how the trustee should conduct themselves in the proceeding will remain a live issue and for that reason, it would
assist the trustee if the Court was to give directions as to how they should conduct themselves.
[100] The directions which Mr Little submits would have been appropriate had the s 33A application succeeded were that Dellisse maintain a neutral stance in the proceedings between her, as plaintiff, and Jolene and Lorraine as defendants with the estate, that she abide the decision of the Court on all substantive matters in dispute and otherwise limits her involvement to providing the Court with such assistance as it might direct. Orders were also sought that she be indemnified from the trust property for costs incurred.
[101] In discharging his duty of even-handedness, Mr Darlow may elect to maintain a neutral stance in the proceedings. But he also has a duty to protect the assets of the estate. For that reason, neutrality is not necessarily a synonym for even-handedness in the context of this case. Accordingly, I am not prepared to make an order that Mr Darlow adopts a neutral stance in the proceedings. It also follows that I am not prepared to direct Mr Darlow to abide the decision of the Court on all substantive matters in the dispute or limit his involvement to providing the Court with such assistance as it might direct. Those will be decisions for him to make. Again, the reasons for adopting that approach have been discussed.
Result
[102] Lorraine’s application to remove Dellisse as executor/trustee of Janette’s estate is granted.
[103] Christopher Darlow is appointed executor and trustee of Janette’s estate subject to Kiwibank, mortgagor over two of the estate properties, confirming he will not be required to assume unlimited liability for mortgages on the titles to estate properties.
[104] Mr Darlow is authorised to sell any one of the estate properties if required to pay his fees.
[105]The application for directions under s 33A of the Trustee Act is dismissed.
[106] Leave is reserved to Mr Darlow to apply for such further directions or orders as he determines are necessary to give effect to this judgment and the performance of his duties relative to the estate.
Costs
[107] Lorraine, as applicant on the application for removal, being the successful party, is entitled to costs. I encourage the parties to consult with a view to agreeing on costs. In the event agreement is not reached, the parties are to file memoranda, not exceeding five pages each, no later than 5:00 pm on Wednesday, 25 November 2020. I shall then determine the matter of costs on the papers.
Moore J
Solicitors:
Mr Napier, Auckland Mr Coyle, Napier
Mr Little, Auckland Ms Davies, Auckland Mr Kelly, Auckland
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