Murray-Kendall v Wilson

[2015] NZHC 1921

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-915 [2015] NZHC 1921

IN THE MATTER OF

An application for further provision out of

the Estate of Kenneth Murray Kendall, deceased, pursuant to the Law Reform (Testamentary Promises) Act 1949 and Recall of Probate.

BETWEEN

ROSALIND MURRAY-KENDALL Plaintiff

AND

PETER WEBSTER WILSON AND HELEN CATHERINE WILKINS First Defendants

PETER WEBSTER WILSON AND PETER WARWICK MACKY Second Defendants

Hearing:	21 July 2015
Appearances:	Ms Murray-Kendall in person Ms S Clapham for Defendants
Judgment:	13 August 2015

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE [Security for Costs application]

This judgment was delivered by me on

13.08.15 at 4 pm, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

MURRAY-KENDALL v WILSON Ors [2015] NZHC 1921 [13 August 2015]

Introduction

[1]      The first defendants have filed an application for security for costs dated 24

March 2015.

[2]      The first defendants say that they did not seek security for costs earlier as the plaintiff was legally aided, which was withdrawn in September 2014.

Background

[3]      Before considering the claim in detail, it is necessary to provide a summary of the background to this claim.

[4]      The claim has been the subject of two previous judgments, the first being issued on 2 May 2014 in which I considered an application which the defendants brought for summary judgment and strike-out orders.1    The second judgment was issued  on  3  March  2015  and  concerned  a further application  seeking  strike-out orders.2   Because there has already been extensive reference made to the background of this case, I will not again traverse the material set out in those judgments.

[5]      The two key issues that arise for consideration in the circumstances of this case are the financial circumstances of the plaintiff and the strength of the claims which she brings against the first defendants for orders under the Law Reform (Testamentary Promises) Act 1949 (the Act).

[6]      The relief which the plaintiff seeks is as follows:

1.A declaration  that  the  deceased  failed  to  honour  a  testamentary promise to reward the plaintiff for the services rendered to the deceased in that the deceased did not leave Whangaehu to the plaintiff.

2.An order against the first defendants (or the second defendants if the last will is recalled from probate) under section 3 of the Law Reform (Testamentary Promises) Act 1949 for judgment vesting Whangaehu

or its process in the plaintiff or for such sum as reasonable in the circumstances of the case.

[7]      The reference to the recall of probate set out above is no longer relevant because the plaintiff has abandoned arguments that the testator lacked testamentary capacity at the time when the will was signed.

[8]     The jurisdiction to make orders based upon testamentary promises was summarised by Ms Clapham in her submissions3 as follows:4

3.Estate of deceased person liable to remunerate persons for work done under promise of testamentary provision

(1)       Where in the administration of the estate of any deceased person a claim is made against the estate founded upon the rendering of services to or the performance of work for the deceased in his lifetime, and the claimant proves an express or implied promise by the deceased to reward him for the services or work by making some testamentary provision for the claimant, whether or not the provision was to be of a specified  amount  or  was  to  relate  to  specified  real  or personal property, then, subject to the provisions of this Act, the claim shall, to the extent to which the deceased has failed to make that testamentary provision or otherwise remunerate the claimant (whether or not a claim for such remuneration could have been enforced in the lifetime of the deceased), be enforceable against the personal representatives of the deceased in the same manner and to the same extent as if the promise of the deceased were a promise for payment by the deceased  in  his  lifetime  of  such  amount  as  may  be reasonable, having regard to all the circumstances of the case, including in particular the circumstances in which the promise was made and the services were rendered or the work was performed, the value of the services or work, the value of the testamentary provision promised, the amount of the estate, and the nature and amounts of the claims of other persons in respect of the estate, whether as creditors, beneficiaries, wife, husband, children, next-of-kin, or otherwise.

[9]      The first defendants, who are the trustees under the last will of the testator, have applied  for security for costs  in  the proceeding which  the  plaintiff brings against them.

Principles

[10]     An order for security for costs under r 5.45 (2) of the High Court Rules

(Rules) may be made if the Judge thinks it is just in all the circumstances.

[11]     As required by r 5.45(1)(b) of the Rules, before an order can be made, the

Court must be satisfied on the application of the defendant:

(b)       That there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s proceedings.

[12]     Security for costs will not be ordered in cases where the actions that the plaintiff complains of were the cause of the plaintiff’s impecuniousness.5

[13]     The leading authority concerning security for costs, generally, is the well- known decision of the Court of Appeal in McLachlan v MEL Network Ltd.6   The key passages from that judgment, for the purposes of the present application, are these:

[15]      The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs.   That must be taken as contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursuing the claim.   An order having that effect should be made only after careful consideration and in a case in which the claim has little chance of success.  Access to the courts for a genuine plaintiff is not lightly to be denied.

[16]     Of course, the interests of defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.

[14]     As the abovementioned quotation states, there will be cases where litigants will be denied access to the courts because they cannot provide security for costs. Such an outcome, though, should only be arrived at after careful consideration and

where the court considers that the claim has little chance of success.

5      See Highgate on Broadway Ltd v Devine [2012] NZHC 2288, where Kós J observed that there must be a linkage between the defendant’s actions – the subject of a cause of action – and the plaintiff ’s impecuniousity.

6      McLachlan v MEL Network Ltd (2002) 16 PRNZ 747 (CA).

[15]     The approach that will be adopted in this judgment is, first, to consider the financial  circumstances  of  the  plaintiff  to  determine  whether  there  is  reason  to believe that, if she does not succeed in her proceeding, she will be unable to pay the defendants’ costs.  The second issue which will be examined is the merits of the case which the plaintiff has brought.   If they are not strong, and after having regard to the other matters that need to be considered, the court may make an order because it is likely to have the effect of ending her prospects of bringing the case before the court.

[16]     The third question is whether the impecuniosity of the plaintiff, if she is impecunious, resulted from the actions of the defendants.   If that is the case, it is unlikely that the court will use its discretion to order security for costs.

Analysis

The financial circumstances of the plaintiff

[17]     The financial circumstances of the plaintiff are not favourable.  Her liabilities exceed her assets and there are also question marks about whether her income covers her outgoings, as noted below.   To complete the consideration of the plaintiff’s financial position, I would also consider a matter which she raised which was an asserted entitlement to receive funds from the K M Kendall Trust (the Trust) which was established by the testator in 1997.

[18]     The evidence which the plaintiff has provided indicates that she has only one asset of significance, which is a motor vehicle self-valued at $8,000.  She has the following liabilities:

GST 2011

$4,450.18

Court costs order made 3 March 2015

$5,814.00

Debt to Ministry of Social

Development

$6,987.48

Debt to ACC	$149.59
Student Loan	$10,562.00
Total	-$27,963.25

[19]     The income which the plaintiff said she receives is $304.85 per week, with outgoings on a weekly basis totalling $397.80.  That was assessed at the time when she gave evidence concerning her financial means in 2014.

Ability to meet costs order in the event that the plaintiff ’s claim is unsuccessful

[20]     Ms Clapham submitted that it was likely, based upon a five day trial, that in the event that the plaintiff loses the case, she would be expected to pay costs on a 2B basis, in the vicinity of $25,000 to $30,000.

[21]     Although the parties have yet to provide detailed submissions on the question of how long the trial is going to take, and how the estimates for the aggregate length of the trial might be arrived at, it may be that an estimate of five days will prove to be more than is required and that a figure closer to three days should be sufficient. However, given that the plaintiff is self-represented, I accept that the proceeding may run over into, at least, an additional hearing day.

[22]     In summary, the figure of $25,000.00 is likely to approximate the 2B costs that would be awarded.  Plainly, there is no chance that the plaintiff would be able to meet  such  costs  from  her  existing  resources  and,  therefore,  the  requirement  of r 5.45(1)(b) of the Rules is met.

[23]     I understand that the plaintiff accepts that, if consideration is restricted to her own financial resources, she would not be able to meet an order for security for costs.   The plaintiff, however,  asserted that there is  another potential  source of funding which could be used to meet the costs of the litigation and that is a distribution from the Trust.

[24]     The Trust was established in 1997.  It would appear that the plaintiff has a beneficial interest in the Trust to the extent of one fifth.   The plaintiff apparently expects that she will receive a distribution from the Trust.  How much she expects to receive was not stated.

[25]     The submission for the first defendants was that there is no basis for the contention which the plaintiff puts forward that she will benefit from the Trust.  The first defendants have produced, in evidence, the draft financial statements of the Trust.  I accept Ms Clapham’s submission that the accounts disclose that the Trust is indebted to the testator’s estate.  The circumstances in which that debt came about were that Lady Wilkins, the second named first defendant, advanced funds for the purpose of making improvements to the Wairarapa property which was partly owned by the Trust.  The trustees accept that they have a contingent liability of $391,185 to Lady Wilkins as a result.  Therefore, the decision of whether the chain of debts will be enforced is for Lady Wilkins to make.

[26]     As Ms Clapham explained it to me the result of all of this is as follows:

The Trust is indebted to Lady Helen Wilkins for monies advanced for preservation work and improvements to Trust property.   The trustees have provisionally  compromised  Lady  Wilkins’s  claim  of  $315,636  for  a negotiated amount of $135,000.   Lady Wilkins has agreed to accept that amount in satisfaction of her claim on the basis that she will otherwise be receiving a distribution as primary beneficiary under the will.   However, conscious that this litigation is depleting the estate, Lady Wilkins has, as a term of the compromise, reserved the right to revisit her claim at the conclusion  of  this  litigation  if  the  distribution  she  stands  to  receive  is depleted and may seek to prove her $315,636 claim.  In those circumstances the trustees cannot, and will not be in sufficient funds to, make any distribution to any of the four beneficiaries.  This arrangement is detailed in Note 3 to the Trust’s draft financial statements.7

[27]     Evidence has been given that Lady Wilkins will await the outcome of the present litigation and assess its effect on the estate before making a decision about whether to seek the greater or lesser sum in repayment.  If the lower figure were to be adopted, then the Trust  would  be proportionately worse off and  the amount available for distribution to  beneficiaries  would  be reduced  or,  as  Ms  Clapham

submitted, would entirely disappear.

7      Affidavit of Peter Webster Wilson sworn 23 June 2015 at Exhibit “A”.

[28]     The evidence about the financial position of the Trust is not straightforward. The accounts show that there is, even with allowance for a debt of $391,185 shown as being owing to the estate of K M Kendall, an excess of assets over liabilities of

$379,340.  Therefore, assuming that Lady Wilkins reserves her position in regard to the larger debt, there would still be an amount available for distribution amongst the beneficiaries.

[29]     As a matter of arithmetic, one fifth of that amount produces a figure of approximately $75,000.

[30]     I accept, though, that there are uncertainties about whether any distribution will in fact be forthcoming and what the amount of it will be.  Even if it is accepted in favour of the plaintiff that she has some entitlement (on the assumption that her present net deficit of liabilities against assets is, based on the figures which the plaintiff has provided, approximately $20,000) then, if a costs order of $25,000 is made, the total indebtedness of the plaintiff would still be some $45,000 which would not be covered by the proposed distribution from the Trust.   As well, the timing of any distribution, even if made, has not been established. The only date that is known with certainty is that of the final distribution date, which is to occur in

2077.

[31]     Ms Clapham also referred to the fact that the Legal Services Agency (LSA) has written off a substantial debt, which is in excess of $60,000.  She said that the possibility could  not  be  excluded  that,  if  the  plaintiff  did  receive  a  substantial distribution from the Trust, that the agency might revive its claims.  My conclusion is that the prospect of the LSA taking that step is far from clear.  It is not even certain that having written off the amount, the LSA could change course to assert that it is in fact still owing.

[32]     But  even  excluding  the  issue  about  the  debt  to  the  LSA,  my  overall conclusion in regard to the asserted entitlement under the Trust is that it does not justify the Court treating the plaintiff other than as impecunious in the sense of being unable to meet an order for the likely costs of the litigation should she fail.

[33]     The worst case scenario from the point of view of the plaintiff would be that, if she failed, it is likely that a costs order would be made against her.  If she failed, there would not be the apprehended depletion of the estate and its ability to repay the debt to Lady Wilkins.  It may be that Lady Wilkins would accept the lesser amount of the debt from the Trust.  However, it would not be correct to view the increase in the assets of the Trust as translating into an assumed right on the part of the plaintiff to a distribution which would cover the amount of the costs order.

Merits of the plaintiff ’s case

[34]     The next matter to be considered is the issue of whether the plaintiff ’s claim

lacks merit.

The plaintiff ’s claim

[35]     In the fourth amended statement of claim, the plaintiff sets out the fact that the testator invited her to become involved with him in a retreat house in the Wairarapa region.   She said that she helped find the property.   She said that she carried out various personal services for the testator in 1997 including helping him to sell his property, managing his sculptures and so on.  She said that from April 1997:

There commenced a number of discussions between the plaintiff and the deceased which lead the deceased to make a testamentary promise to the plaintiff  to  leave  [the  property]  to  [the  plaintiff]  when  he  died  in consideration of the services performed by the plaintiff for the deceased.

[36]     It is alleged that the way in which the testator framed his promise was by making statements to the plaintiff along the lines of the following example, which he is alleged to have communicated to her when they were talking about removing the ivy from the property:

Its [sic] not yours yet …. You can do what you like when it is … I know you love the place, you found it for me, but you will have to leave it till its [sic] your home.  Its [sic] not your turn yet.

[37]     The claim which the plaintiff makes is that the plaintiff promised to leave the

Wairarapa property to her.

[38]     There is no doubt that the relationship between the plaintiff and the testator was of variable quality at different times.  Before the testator acquired the Wairarapa property, the relationship appeared to be a fairly close one, having regard to the fact that the testator seemed to have assumed the involvement of the plaintiff and the retreat project.  That would have involved not just the testator but also the plaintiff moving to rural Wairarapa to live, which represented a major change of direction for both of them.  It would seem to be the case that the plaintiff did help the testator and he had the benefit of her company, which he apparently enjoyed.  This suggests that the testator had considerable confidence in the plaintiff, at least at that stage in their relationship.   He clearly trusted her and had affection for her.   Unfortunately, the quality of the relationship degraded over time until the point where there was a complete rupture.  But the important point is that the relationship, viewed at its high point, would be consistent with the testator making promises to the plaintiff.  It does not prove that he made them but it at least provides an explanation for why he might have made them.  The evidence that I assume that the plaintiff will give, if the matter goes to trial, would therefore be reinforced by inferences to be drawn from the surrounding circumstances on which the Court would be able to draw when considering the question of whether promises were in fact made.

[39]     The  timing  of  when  the  alleged  promises  were  made  is  another  critical question.   If it is assumed that promises of a kind which the plaintiff claims were actually made, and if they were forthcoming at a point before the testator had the benefit of services or had the expectation that there would be services provided in the future, then it might be that the assurances he gave were not linked to any quid pro quo emanating from the plaintiff’s side.  In such a situation there would not be present the required nexus between the services from the promisee, on the one hand, and the promise of testamentary benefits, on the other.

[40]     Then there is the issue of the scale of assistance given and whether it went beyond what might inherently have been expected from the familial relationship between the two, and the closeness that appears to have existed between them at least at the stage before the retreat property was purchased.   As well, the proportionality between the alleged promises and the extent of the services provided is another area which will no doubt be subject to close examination if the matter

proceeds to trial.  The final matter to which reference is made is the relevance of the fact that the plaintiff is representing herself.   In McLachlan, the Court of Appeal considered that it would be premature to make an order for security for costs at the point which the proceeding had then reached.  The view of the Court was that the claim in that case was not a strong one but noted that discovery had  yet to be

completed. Against that background, the Court observed:8

On the other hand, should it transpire that the claims are not clearly defined, or if Network and the other defendants face a trial in which the plaintiffs’ case is to be presented by Mr McLachlan in person (as has been hinted at) with the risk that it will be unfocussed and prolonged, any order will be able to take those matters into account.

[41]     I infer from the matter that was referred to in the excerpted passage from McLachlan the possibility that the claim would be presented by a litigant in person contributed to a risk that the trial would be unfocused and prolonged.   Exactly that risk is present here.  The statement of claim is discursive and unfocused.  The claim is now to be brought by the plaintiff in person.

[42]     In the end, it is possible to discern the outlines of the claim that the plaintiff wishes to bring.  Whether or not she can succeed depends upon resolution of factual issues. These include whether she came to live with her uncle with a view to looking after him or whether the proposed arrangement was hoped to be mutually advantageous.  It depends upon assessment of matters of degree such as the extent of the services the plaintiff allegedly provided, whether they are correctly to be viewed as no more than what would be expected in the context of the familial arrangement that existed between the parties and whether any services provided was sufficiently substantial to justify the court taking the view that provision for the plaintiff from the estate is reasonable.

Plaintiff ’s impecuniosity

[43]     I have deferred dealing with the question of impecuniosity until after setting out the nature of the plaintiff’s claim.  That will enable better a consideration of the argument which the plaintiff puts forward that it is the actions and omissions of the

defendants which have caused her to be impecunious.

8 Above n 6, at [28].

[44]     As  a  generalisation,  it  can  be  assumed  that  because  of  the  nature  of testamentary promises, it is unlikely that, for the purposes of security for costs, breach  of  the  obligation  stated  in  the Act  can  amount  to  a  relevant  cause  of impecuniosity of the plaintiff.

[45]     There may be different factual contexts imaginable in which a claimant has voluntarily alienated  property,  for  example,  in  reliance  upon  the  making  of  the testamentary promise.  This case is, however, different.  The failure to honour the alleged testamentary promise has not caused the impecuniosity of the plaintiff. What the plaintiff is really saying is that if the trustees of the estate honoured the promises which the testator allegedly made, then that would bring to an end her state of impecuniosity.  In my view, the plaintiff is unable to lay her impecuniosity at the feet of the testator and his personal representatives by such a chain of reasoning.  The alleged breach of obligation did not cause the impecuniosity of the plaintiff.

Conclusion

[46]     The plaintiff ’s claim in this case is not a strong one.  There is a lack of clarity about the exact elements of the claim which the plaintiff brings.   There are real doubts about whether statements on the part of the deceased about possible ways in which the plaintiff might benefit in the long term, linked to the provision of services on her part, were motivated by familial instincts.  There are questions about whether the possibility of the plaintiff receiving benefaction from the deceased were made against a background where the testator expected that she would be participating with him in a religious retreat-house scheme which never eventuated.

[47]     As well, the plaintiff asserts an entitlement to substantial rewards which may be regarded  as  possibly excessive and  do  not  account  for the benefits  that  she received from the testator in terms of contributions to expenses and provision of board and lodgings.  Further, the trial Court may well take the view that any services which the plaintiff provided to the testator were nothing more than being motivated by the affection that one could expect to observe between an elderly uncle and his niece.

[48]     Apart  from  the  substance  of  the  claim,  there  are  concerns  about  the procedural aspects of it.  The statement of claim is unsatisfactory and will inevitably cause the hearing to take longer than it would if there was a willingness on the plaintiff’s part to shear off irrelevancies and material that is of marginal value and which she insists on including in her statement of claim.

[49]     The concern is that any order for security for costs will virtually inevitably result in the plaintiff not being able to put forward her claim before the Court. As the Court put the matter in McLachlan:9

Access to the Courts for a genuine plaintiff is not lightly to be denied.

[50]      The reference to a genuine claim does not mean that any claim, no matter how misdirected or even deluded, is to be allowed to proceed on the basis that the plaintiff is sincere in his or her belief in the righteousness of the cause pleaded.  A genuine plaintiff is one who has a claim which has hallmarks of substance and who makes a real effort to comply with Court rules and directions to ensure the efficient disposal of his or her claim.  He, she or it would be concerned with claims that are put forward with appropriate brevity and clarity – meaning, the issue presented to the Court would be well-focused.  The Court will more readily perceive the injustice of denying access to a person of that kind.

[51]     By a narrow margin, I consider that the desirability of the plaintiff being able to progress her claim to trial ought not to be denied notwithstanding the concerns about the effect on the defendants of allowing that outcome.

Results

[52]     The result, therefore, is that the application is dismissed.  The plaintiff was not represented by counsel and is not entitled to costs.10     In any case I consider that the applications, while not successful, were properly brought and were contributed to

by  inadequacies  in  the  pleadings  which  the  plaintiff  has  filed.    As  well,  the

9 Above n 6, at [15].

10     Re  Collier  (A  Bankrupt)  [1996] 2 NZLR 438 (CA); Commissioner  of  Inland  Revenue  v

Chesterfields Preschools Ltd (No 1) [2010] NZCA 400 at [162].

defendants could not be criticised for bringing the application having regard to the

poor financial position of the plaintiffs. There will be no costs order.

J.P. Doogue

Associate Judge