Panhuis v Cooke
[2019] NZHC 563
•25 March 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-001188
[2019] NZHC 563
UNDER the Administration Act 1969 and the Trustee Act 1956 IN THE MATTER
of the Estate of NAOMAI JOAN COOKE
BETWEEN
ANNE PATRICIA PANHUIS
Plaintiff
AND
BRIAN JOHN COOKE
Defendant
Hearing: 8 March 2019 Appearances:
G C Jenkin for the Plaintiff
A W Johnson for the Defendant
Judgment:
25 March 2019
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Monday, 25 March 2019 at 3:00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:Wardill Pasley Law (D R Pasley), Auckland for the Plaintiff Martelli McKegg (A W Johnson), Auckland for the Defendant
Counsel: G C Jenkin, Auckland
PANHUIS v COOKE [2019] NZHC 563 [25 March 2019]
Introduction
[1] The plaintiff and defendant are sister and brother. They are co-executors and co-trustees in terms of the will of their mother, who died on 30 March 2017. The deceased left two properties in her name and a bank account.
[2] The plaintiff applies to have her brother removed as an administrator of their mother’s estate and have an independent executor and trustee appointed in his place. She also seeks an order that her brother vacate the estate property in which he is living within three weeks to enable its sale, as directed by their mother in her will.
[3] The orders are sought on the basis that the defendant refuses to complete the administration of their mother’s estate and that the delay in having the property he lives in listed for sale has been inordinate and detrimental to the plaintiff’s interests.
Preliminary issue – “without prejudice” communications
[4] The defendant has sworn an affidavit dated 31 January 2019. Attached as exhibits are 20 pages of letters and emails between his solicitors and plaintiff’s counsel and/or his instructing solicitors. The plaintiff submits that those letters and emails are part of a chain of communications between the parties’ solicitors and counsel and/or instructing solicitors, which were “without prejudice” communications. The plaintiff seeks to have these communications ruled inadmissible.
[5] The defendant submits that there was no intention by him that the documents written on his behalf attached to the affidavit would be confidential. Where there was such an intention, the defendant submits communications on his behalf were marked as “without prejudice”. Those documents have not been specifically referred to, other than in the plaintiff’s submissions.
[6] The defendant says it is important that communications sent out on his behalf (not marked “without prejudice”) are able to be provided as evidence. The defendant seeks to rely on the letters and emails at issue to counter the allegations that he has been refusing to complete administration of the estate and that the delay in having the property presented for sale was caused by him.
[7] I am of the view that the 20 pages of letters and emails are inadmissible. Section 57(1) of the Evidence Act 2006, which states that privilege exists where a communication was intended to be confidential, and was made in connection to an attempt to settle or mediate a dispute for which relief may be given in a civil proceeding. It is not important that “without prejudice” communications are labelled as such.
[8] Counsel for the defendant acknowledges that later letters from him explicitly marked “without prejudice” are privileged and that the email dated 11 September should not have been included in the affidavit. He also accepts that correspondence not marked “without prejudice” can be privileged and that a letter dated 7 November 2018 from counsel for the plaintiff which was not so marked, is privileged.
[9] Counsel for the defendant nonetheless submits that an earlier letter dated 27 August 2018 from him which was not marked “without prejudice” is not privileged because it was not intended to be confidential. The letter commences:
Thank you for your letter of 17 August 2018. In your letter you set out a proposal to resolve the current proceedings and normalise the administration of the estate. Although the offer is not accepted, it is a step in the right direction. Our client proposes the following to resolve matters…
It falls within the terms of s 57(1) in that it was a “communication … made in connection with an attempt to settle … the dispute between the persons.” The sole issue is whether it “was intended to be confidential.” In enquiring into the objective purpose of a communication, specific items of correspondence should be viewed in their context.1 The letter dated 17 August 2018 from counsel for the plaintiff, to which the letter from 27 August responded, was marked “without prejudice”. I do not consider that the counsel for the defendant’s reply was written on an open basis simply because it had not been marked “without prejudice” when that would be at odds with other letters in that chain of communication.
[10] I am also of the view that ruling the 20 pages of letters and emails as inadmissible will not prejudice the defendant in the presentation of his case. His
1 Body Corporate 199883 v Auckland Council [2017] NZHC 2042 at [47]-[48].
affidavit dated 31 January 2019 clearly sets out the steps he says he has taken to advance the administration of his mother’s estate.
Administration of the estate
[11] Naomai Joan Cooke died on 30 March 2017. Probate of her will was granted on 19 July 2017. The only matter outstanding in the administration of the deceased’s estate is the sale of her home at 60 Pohutukawa Avenue, Orewa. The deceased directed it to be sold, with the proceeds to be divided equally between the plaintiff and the defendant.
[12] Shortly after their mother’s death, the plaintiff agreed that, because of the defendant’s personal circumstances, he could temporarily occupy the property. This was conditional on him assisting in the preparation of the property for sale on the open market and then vacating the property at the commencement of the agency period to promote its sale.
[13] By letter dated 7 November 2017, the estate solicitors wrote to the defendant requesting he sign an appropriate listing agreement. The estate solicitors wrote again to the plaintiff and defendant by letter dated 6 December 2017. The solicitors enclosed a copy of a statement of account advising them that administration was almost complete and seeking instructions regarding the sale of the property, noting that they could not progress the sale further without instructions from each of them as executors. They also sought instructions from the plaintiff and defendant as executors of the estate for the funds held by them on behalf of the estate to be distributed according to the will.
[14] On 2 January 2018, the defendant advised the estate’s solicitors that he did not authorise the release of any money. Subsequently, the plaintiff received a text from her brother as follows:
I’m livin in my half of the property u either live in your half or rent I. My half ain’t for sale so u want your money find someone to buy your half. From now on I AINT INTERESTED IN DOIN ANYTHINY FOR U.
[15] These proceedings were issued by the plaintiff on 21 June 2018. I am advised by counsel that the plaintiff and defendant have not subsequently spoken to each other, but rather have only corresponded through their lawyers.
[16] The defendant has filed an affidavit dated 8 August 2018. From his affidavit it appears that he has agreed that the property ought to be sold, but says some modest remedial work ought to be carried out beforehand. He annexes a list of work which was recommended by a real estate agent to be undertaken before the property was marketed for sale.2
[17] The defendant confirms that he is not intending to make a claim against the estate. He accepts that there is an impasse which needed to be resolved. He suggests that both parties should appoint a builder to provide quotes and funds held in trust for the defendant’s children could be borrowed by the estate to pay for the work.3
[18] In his most recent affidavit dated 31 January 2019, the defendant acknowledges the continuation of the impasse, which he says is due to the plaintiff and the defendant being unable to reach agreement as to the extent of renovations to be carried out and delays caused by the difficulty of obtaining quotes from tradesmen for the work.
[19] The defendant says he attempted to contact over 20 contractors, with little or no response. He denies that he is deliberately delaying and obstructing the marketing and sale of the property. He says what is lacking is goodwill on both sides, but acknowledges that the matter is not advancing at the moment.
The law
[20] The plaintiff’s application is made in reliance on s 21 of the Administration Act 1969 and ss 51 and 66 of the Trustee Act 1956. Section 21 of the Administration Act provides:
21 Discharge or removal of administrator
2 This was accepted by the plaintiff in her reply affidavit dated 20 August 2018.
3 The plaintiff subsequently expressed her disapproval of the grandchildren’s trust money being used for this purpose and suggested that the parties should share the cost equally between themselves.
(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.
…
[21] In Farquhar v Nunns, Heath J summarised the principles applicable to an application under s 21:4
(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.
(c)The wishes of the testator/settlor (evidenced by the appointment of a particular executor) 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 is not itself a reason for removal, but hostility will assume relevance if and when it risks prejudicing the interests of the beneficiaries.
…
[22] Sections 51 and 66 of the Trustee Act 1956 provides an alternative route to appoint a new trustee. They provide:
51 Power of court to appoint new trustees
(1)The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
(2)In particular and without prejudice to the generality of the foregoing provision, the court may make an order appointing a new trustee in substitution for a trustee who—
(a)has been held by the court to have misconducted himself in the administration of the trust; or
4 Farquhar v Nunns [2013] NZHC 1670 at [13].
(b)is convicted of a crime involving dishonesty as defined by section 2 of the Crimes Act 1961; or
(c)is a mentally disordered person within the meaning of the Mental Health (Compulsory Assessment and Treatment) Act 1992, or whose estate or any part thereof is subject to a property order made under the Protection of Personal and Property Rights Act 1988; or
(d)is a bankrupt; or
(e)is a corporation which has ceased to carry on business, or is in liquidation, or has been dissolved.
(3)An order under this section, and any consequential vesting order or conveyance, shall not operate further or otherwise as a discharge to any former or continuing trustee than an appointment of new trustees under any power for that purpose contained in any instrument would have operated.
(4)Nothing in this section shall give power to appoint an executor or administrator.
(5)Every trustee appointed by the court shall, as well before as after the trust property becomes by law, or by assurance, or otherwise, vested in him, have the same powers, authorities, and discretions, and may in all respects act as if he had been originally appointed a trustee by the instrument, if any, creating the trust.
66 Right of trustee to apply to court for directions
(1)Any trustee may apply to the court for directions concerning any property subject to a trust, or respecting the management or administration of any such property, or respecting the exercise of any power or discretion vested in the trustee.
(2)Every such application shall be served upon, and the hearing may be attended by, all persons interested in the application or such of them as the court thinks expedient.
Discussion
[23] For whatever reason, administration of the deceased’s estate is at a standstill. The plaintiff and the defendant do not speak to each other and acknowledge that they are at an impasse. The relationship between the parties is such that they cannot work together and it has proved impossible to resolve outstanding issues. Goodwill is necessary to complete administration of the estate. It is not evident.
[24] In those circumstances, I am of the view that the threshold of expedience in terms of s 21 of the Administration Act is met. It is a lower threshold than necessity. It is also does not require misconduct, breach of trust, dishonesty or unfitness on the
part of an administrator to be established. It is enough that the mistrust of an administrator is antithetical to the effective management of the estate.5
[25] Leaving aside any issue of the defendant’s misconduct or unfitness, I am however of the view that there exists a clear conflict of interest between his continuing occupation of the property and his role as an administrator of his mother’s estate. His mother directed the sale of the property and division of the sale proceeds between himself and his sister. The defendant’s occupation has, however, become more permanent. He has not paid any rent to the estate, which is to his direct benefit and to ultimate detriment of the plaintiff. His counsel says that no demand has, however, been made for the payment of rent. Notwithstanding the lack of any formal demand, the defendant has a very real financial incentive, namely rent-free occupation of the property, to delay the completion of administration of his mother’s estate. Accordingly, the plaintiff’s rent-free occupation of the property may prejudice the interests of the estate’s beneficiaries.
[26] The plaintiff seeks the removal of the defendant as an administrator of their mother’s estate and his replacement with an appropriate independent trustee to act alongside the plaintiff as a co-administrator of the estate. However, counsel for the plaintiff acknowledged in argument that if the defendant is removed as an administrator, it may be appropriate for her to be removed too, because the enquiry is about expedience rather than misconduct or unfitness. Counsel acknowledged that in the present circumstances it may be preferable if the administration of the estate was in completely independent hands. Even the most competent administrators can be removed under the s 21 expedience ground, if their position provokes controversy between the parties to an estate.6 It is undesirable for the administration of this estate to be protracted any longer, and it is foreseeable that decisions made by the plaintiff as administrator may be distrusted by the defendant in the future. To avoid further disputes between the plaintiff and the defendant, an independent administrator can be appointed.
5 Van Goch v Van Goch [2018] NZHC 2335 at [63].
6 Hinde v Cranwell [2012] NZHC 63.
[27] If that is the case, detailed directions from the Court about the sale process would be unnecessary. An independent administrator experienced at selling testators’ property understands the obligations to obtain the best price possible for the benefit of beneficiaries. In that regard, it will make its own decisions about the remedial work to be carried out prior to the sale of the property. It is not bound to follow the wishes of the parties, nor the recommendation of a real estate agent.
[28] Finally, an independent administrator should not be constrained by a beneficiary occupying the property while the sale process is underway. For this reason, it is expedient for the Court to make an order for vacant possession of the property, as was done by Fitzgerald J in Jensen v Jensen.7
[29]The following orders are therefore made on the plaintiff’s application:
(a)Anne Patricia Panhuis (nee Cooke) and Brian John Cooke, the two executors and trustees named in the will of Naomai Joan Cooke to whom probate was granted by this Court on 19 July 2017, are both removed from the office of administrator.
(b)The New Zealand Guardian Trust Company Limited and Perpetual Trust Limited trading as Perpetual Guardian is appointed administrator of the estate of Naomai Joan Cooke in place of Anne Patricia Panhuis (nee Cooke) and Brian John Cooke.
(c)Brian John Cooke is to vacate the property at 60 Pohutukawa Avenue, Orewa, Auckland and leave the property in a clean and tidy condition ready for sale within six weeks of the date of this judgment.
(d)The costs of and associated with the application and the implementation of any orders made pursuant to it are to be paid out of the estate of Naomai Joan Cooke as no finding of misconduct or unfitness is made by the Court.
7 Jensen v Jensen [2019] NZHC 329.
(e)Leave is reserved to apply to the Court for any ancillary orders required to implement the primary orders.
Woolford J
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