Morton v Debono

[2021] NZHC 1582

ORDER PROHIBITING SEARCH OF FILE WITHOUT LEAVE OF A HIGH COURT JUDGE

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2021-412-11

[2021] NZHC 1582

UNDER

the Protection of Personal and Property Rights Act 1988

IN THE MATTER

of an appeal against a decision of the Family Court at Dunedin

BETWEEN

JOHN GEORGE GODFREY MORTON

Appellant

AND

LISA ANNE DEBONO, KRISTA CARMEL DEBONO and DANIEL JOHN DEBONO

First Respondents

continued….2

Hearing:

22 June 2021

Appearances:

J C D Guest for Appellant

D R Tobin for First Respondents
T D Gudmanz for Second Respondent

Judgment:

30 June 2021

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 30 June 2021 at 3.00 pm Pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 30 June 2021

MORTON v DEBONO [2021] NZHC 1582 [30 June 2021]

AND

JULIE ELISABETH GODFREY MORTON

Second Respondent

AND

The executors in the Estate of RONA VIOLET MORTON (deceased)

Party Reserving Rights

[1]    John Morton (John) has applied pursuant to the Family Protection Act 1955 (the FPA proceeding) in proceeding CIV-2021-412-12 for further provision from the estate of his mother Rona Violet Morton (Rona).

[2]    This proceeding (CIV-2021-412-11), is an appeal brought by John against     a decision of the Dunedin Family Court, which I will describe below.1 John applies pursuant to r 10.12 of the High Court Rules 2016 for either:

(a)consolidation of the FPA proceeding with this appeal; or

(b)an order that the two proceedings be heard together, either at the same time or one immediately after the other.

[3]The rule provides:

10.12When order may be made

The court may order that 2 or more proceedings be consolidated on terms it thinks just, or may order them to be tried at the same time or one immediately after another, or may order any of them to be stayed until after the determination of any other of them, if the court is satisfied—

(a)that some common question of law or fact arises in both or all of them; or

(b)that the rights to relief claimed therein are in respect of or arise out of—

(i)the same event; or

(ii)the same transaction; or

(iii)the same event and the same transaction; or

1      Debono v Morton [2020] NZFC 256.

(iv)the same series of events; or

(v)the same series of transactions; or

(vi)the same series of events and the same series of transactions; or

(c)that for some other reason it is desirable to make an order under this rule.

[4]The application is opposed.

Context and events leading to the Family Court Judgment

[5]    Rona and her late husband accumulated substantial real estate assets. One of the properties they owned was at Man Street in Queenstown (the Queenstown property). Rona and her husband were very close to their daughter’s children who are the first respondents. Under Rona’s Will dated 16 July 2010, the Queenstown property was to be left to the first respondents.

[6]    Unfortunately, Rona lost capacity in early 2015 and an enduring power of attorney in favour of her daughter Julie Morton (Julie), the second respondent, came into effect. Rona died on 3 April 2018.

[7]    From late 2014 interest was expressed through a Queenstown real estate agency in a developer purchasing the Queenstown property. An initial indicative offer of $1.6m was made, later increased to $1.85m. Julie rebuffed these offers. The developer’s interest continued with another approach in August 2015 and then in September 2016 the same real estate agency said the buyer was prepared to pay $2.5m. As Julie was aware the property had been earmarked for her children in Rona’s Will she consulted with them and ultimately the first respondents agreed to sell if the purchaser would pay $4.5m, excluding fees. It appears the developer wanted the property as part of an overall development and so ultimately agreed to pay a net $4.5m. The agreement for sale and purchase was signed on 22 October 2016 on that basis, with settlement on 30 April 2017.

[8]John has no issue with the sale price or the decision to sell.

[9]    Unfortunately, advice Julie received from more than one source that the sale proceeds of the Queenstown property would remain earmarked within Rona’s assets for the grandchildren, was wrong. Had the sale proceeds of the Queenstown property remained in Rona’s ownership, that cash would have fallen to residue which Julie and John share equally, subject to an adjustment in John’s favour.

[10]   Solicitors instructed on the sale identified this issue. The solution adopted was for the sale proceeds to be gifted by Julie under the enduring power of attorney to the grandchildren. However, the damage was already done as once the sale proceeds were received by Rona, Julie could be seen as having used the power of attorney for her own benefit, that is, to have sold a property to enhance the value of the residue in which she had an interest. Again, Julie’s actions appear to have been driven by incorrect legal advice.

[11]   The first respondents to the appeal applied to the Family Court under s 103 of the Protection of Personal and Property Rights Act 1988 (the Act) asking the Court to review and validate Julie’s decisions. Judge Smith in her reserved judgment made orders confirming Julie’s actions.2

Rona’s estate and the FPA claim

[12]   Rona’s Will makes substantial provision for Julie’s children, significantly less provision for John’s children, and leaves the residue for John and Julie.

[13]   Had the sale proceeds of the Queenstown property not been gifted, the value of the estate would have been in the region of $10m. At the moment the respondents to the appeal say that the value of the estate is approximately $5.5m.

[14]   Mr Guest, counsel for John, calculates if the proceeds of the Queenstown property are included John would receive approximately 24 per cent of the estate. Without those proceeds he will receive approximately three per cent of the estate.

2      Debono v Morton, above n 1.

Appeal grounds

[15]Mr Guest says the Court’s validation of the gifts had the effect of removing

$4.5m from the estate. That step materially affected the two residuary beneficiaries, Julie and John. While there are multiple grounds of appeal, the primary ground is that the Family Court Judge failed to take into account the removal of $4.5m from the estate so reduced the appellant’s inheritance as to mean Rona breached her moral duty to John under the FPA. As the Family Court was asked to review and validate the  gift after Rona’s death, Mr Guest submits the Court had to  consider the effect  of  the gift on John under Rona’s Will.

The FPA claim

[16]Mr Guest submitted as follows:

It follows from the above that as soon as the Family Court validated the gifts, the Appellant needed to protect his position under the Family Protection Act. Unless and until the Family Court validated the gifts, he was more than adequately provided for in terms of the Family Protection Act. Once the Family Court made its decision, he was not adequately provided for.

[17]   During the hearing Mr Guest confirmed if the appeal was successful that would bring the FPA claim to an end. If the appeal is unsuccessful, Mr Guest submitted the FPA claim was practically unanswerable given John will otherwise only  receive three per cent of the estate. In effect, the FPA claim is a backup in the event the appeal fails.

Discussion

[18]   It is Mr Guest’s realistic assessment of the FPA claim set out above which strongly influences my opinion that consolidation is not appropriate. If the appeal succeeds the FPA claim will become redundant as Mr Guest acknowledges.

[19]   Accordingly, to order consolidation would be to require the parties to prepare for and argue the FPA proceeding which may be unnecessary. That would not achieve the efficiencies in terms of preparation and use of judicial resources which are major

considerations under r 10.12.3 Should the appeal not succeed it is appropriate that  the parties be given a chance to settle the FPA proceeding knowing the final value of the estate.

[20]   Nor do I consider there to be a risk of inconsistent findings of fact or law which is another relevant factor.4 The high point for John  is  that  he  establishes  the Family Court Judge was required to take into account the effect of validation on his entitlement under Rona’s Will and second, that factor was such as to mean the validation application should have been declined. Again, at that point John accepts his FPA claim would come to an end.

[21]   If John’s appeal fails, that is, either this Court concludes the Family Court Judge did not need to take into account the impact of validation on John’s entitlement under Rona’s Will or if it was a relevant consideration but not determinative, John’s rights under the FPA against the estate as it will then stand, are unaffected. As the appeal will proceed on the evidence given in the Family Court where there was no cross-examination, it is highly unlikely this Court would take a different view of the facts. However, I accept that in attempting to persuade this Court as to the second factor, referred to in [20] above, the merits of John’s FPA claim will be discussed.

[22]   As to other factors relevant to a consolidation application, there is no great time saving involved in both matters being heard together. Mr Guest estimated the appeal and the FPA proceeding would each require a half day. It was not submitted that if heard together both could be dealt with in a half day. That was realistic, especially given the respondents have raised the prospect of cross-examination in the FPA proceeding. It may be that a half day for the appeal can be more readily allocated than a full day to hear both matters.

[23]   The respondents submit there will be cross-examination and extensive evidence in the FPA proceeding that will not be admissible in the appeal. The

3      Medlab Hamilton Ltd v Waikato District Health Board (2007) 18 PRNZ 517 (HC) at [8].

4      Callplus Ltd v Telecom New Zealand Ltd (2000) 15 PRNZ 14 at [51].

respondents submit such stands against consolidation.5 Certainly, this was a factor that did not favour consolidation.

[24]   Ultimately, I decline the application as it is not certain the FPA proceeding will ever be required.

Costs

[25]   I see no reason why costs should not follow the event on a 2B basis, however, if counsel wish to be heard on costs submissions not more than four pages may be filed within five working days of the date of this judgment. If no submissions are filed then the costs order shall be that the respondents are entitled to costs on a 2B basis.

[26]   The Registrar should now allocate a half day hearing for the appeal. Submissions in support to be filed 10 working days prior and in opposition five working days prior.

Associate Judge Lester

Solicitors:
Downie Stewart, Dunedin (Appellant)

Marks & Worth, Dunedin (for First Respondents) Copy to counsel: D R Tobin, Barrister, Dunedin

Home Transfer Centre, Dunedin

Copy to counsel: T D Gudmanz, Barrister, Dunedin (for Second Respondent)

5      Tutil v The Public Trustee (1990) 1 NZPC 419.