Parbhu v Parbhu
[2022] NZHC 3116
•25 November 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-0060
[2022] NZHC 3116
UNDER The Administration Act 1969 and the Trusts Act 2019 IN THE MATTER
of the Estate of Mohan Parbhu
BETWEEN
MAHESH PARBHU, KOKILA RUPA AND HEMLETA PARBHU
Applicants
AND
LILAWATI MOHAN PARBHU
Respondent
Hearing: 16 May 2022 Appearances:
G A Ireland for Applicants
J R Billington KC and H P Short for Respondent
Judgment:
25 November 2022
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 25 November 2022 at 4.15 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors: McVeagh Fleming, Auckland
Neilsons Lawyers Ltd, Auckland
Counsel: J R Billington KC, Auckland
H P Short, Auckland
PARBHU v PARBHU [2022] NZHC 3116 [25 November 2022]
[1] I issued a results judgment in this matter on 9 June 2022, appointing Mr William Malcolm Patterson of Auckland, Solicitor, as executor and trustee of the estate of the deceased, Mr Mohan Parbhu (“estate” and “deceased”), in place of the respondent.1 These are my reasons.
Background
[2] By originating application of 3 February 2022, the applicants seek orders removing the respondent as executrix and trustee of the estate and substituting Mr Patterson as executor in her place, together with ancillary relief. The respondent opposes the application.
[3] The applicants are the children of the deceased’s first marriage. The respondent is the deceased’s second wife. The respondent and the deceased had one child, Sonika Parbhu.
[4] The deceased died on 13 February 2021, leaving a will dated 28 January 2014. Probate was granted on 10 June 2021. The deceased appointed the respondent as executrix and trustee, gave his interest in a specified partnership to Sonika Parbhu, and left the residue of his estate to the respondent. The evidence before me is to the effect that the deceased gifted his interest in the partnership some years before the date of death.
[5] The deceased made no provision for the applicants in his will, and they propose to bring a claim against the estate under the Family Protection Act 1955 (“FPA”).
[6] Evidence provided to date by or on behalf of the estate is to the effect that such a claim would be pointless, as the estate’s only asset is a modest cash sum. The applicants reserve their position on whether this is so. In particular, they note that the respondent has not deposed that there was no relationship property as at the date of the deceased’s death. Discovery has not taken place. Nor has an affidavit of assets and liabilities in the estate been provided.
1 Parbhu v Parbhu [2022] NZHC 1360.
[7] The applicants intend that the new executor would investigate what if anything the estate comprised at the date of death. If the answer to that is “nothing of consequence”, they wish the executor to take such steps, particularly under the Property (Relationships) Act 1976 (“PRA”), as may be open to enlarge the value of the estate.
[8] The applicants contend that the respondent, as executrix, would not bring a claim to enlarge the estate under the PRA, and also that she would not act impartially in any proceedings that the applicants might commence under the FPA. This is because her personal interests are opposed to the applicants’.
[9] Given that, the applicants submit that it is expedient to remove the respondent as executrix and appoint Mr Patterson in her place. There is power to do so under s 21(1) of the Administration Act 1969, which provides:
21 Discharge or removal of administrator
(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.
[10] The respondent opposes the application, essentially because to remove the respondent would be pointless. As I have said, the respondent’s evidence is that the value of the estate is de minimis. The respondent also submits that there is no route to a successful claim by any executor under the PRA.
Estate
[11] The information before the Court as to the assets in the estate is contained in an affidavit of Mr Brian Hill, Solicitor, of Auckland, sworn 24 March 2022. Mr Hill acted for the deceased and respondent for many years, and his firm continues to act for the respondent.
[12] Mr Hill states the only asset of the estate (presumably as at the date of death) was $19,086.17 in cash, from which various sums are due or have been paid, leaving a balance of $4,421.69. Subsequently, Mr Billington KC, who appeared for the respondent, filed a memorandum of 16 June 2022, advising the estate was indebted to Mr Hill’s firm and that there had been a full distribution of the estate.
[13]Other relevant information appearing from the affidavit evidence is as follows.
[14] First, as at the date of death, the deceased was a joint tenant with his daughter and her husband in a residential property situated in Epsom, Auckland. It appears this property passed to the other two joint tenants by survivorship. The applicants contend this interest may be subject to a claim under the PRA.
[15] Secondly, the deceased and respondent are said to have gifted three other properties, which formed part of their relationship property, to the trustees of a family trust in 2020. The deceased and the respondent settled the trust in 2019. At all material times, they and Sonika Parbhu were the trustees. The respondent has given discovery of the deed of trust and deeds of gift. The applicants are not beneficiaries of the trust.
[16] Transfers of the properties to the trustees were registered after the deeds of gift were executed, and in two instances very close in time to the date of death. The affidavit evidence for the respondent is to the effect that the trust was settled and the properties disposed of to put the properties beyond the applicants’ reach in any proceeding under the FPA.
[17] I did not hear argument on whether the deeds of gift were effective to dispose of the properties to the trustees but, as I say, the applicants have reserved their position on the estate’s asset position pending discovery. Whether a transaction comprises a gift depends on all the relevant circumstances of the transaction.2 Moreover, in this case the donors, that is the deceased and the respondent, were to have the continued enjoyment of the properties. This appears from cl 3 of the deeds, which provides:
2 Church of Jesus Christ of Latter-Day Saints Trust Board v Commissioner of Inland Revenue
[2020] NZCA 143, [2020] 2 NZLR 647.
3. Notwithstanding the legal and beneficial ownership of the assets have been transferred to the Donees by this Deed, the Donors are authorised to have the full use and enjoyment of the assets without limitation, provided the Donors meet all reasonable costs and expenses in respect of the assets and provided the Donors maintain the asset at their costs.
[18] Accordingly, it cannot be ruled out that there will be a dispute as to the assets, if any, which fall within the estate.
Claim under the Family Protection Act/Property (Relationships) Act
[19] It is common ground that the deceased was estranged from the applicants. Why this is so is a point of dispute but irrelevant to the issues before me. What can be said with certainty is that the applicants wish to bring a claim, have standing to do so, and that an executor has an obligation to act even-handedly to potential claimants against the estate.3
[20] The argument before me focused principally on whether, if the estate is of no value because of the disposition of relationship property, the executor could bring a claim to enhance the value of the estate under the PRA. The submissions centred on particular provisions in the PRA, which are attached as an appendix.
[21] Counsel for the applicants, Mr Ireland, submits the executor could bring a claim under s 25 of the PRA. The executor would require leave for any claim under s 25(1)(a), as to which see s 88(2), but not under s 25(1)(b) or (3). From there the executor might make a claim under s 44 and/or s 44C of the PRA. Broadly speaking, those provisions permit the Court to set aside, or ameliorate the effect of, a disposition of property, subject to certain qualifying criteria. These claims, if successful, would see value restored to the estate, and thus available to meet any claim by the applicants.
[22] Mr Billington submits any such claim faces insuperable difficulty. His principal submissions may be summarised as follows.
[23] First, even if leave were granted to the executor under s 88(2), there is no prospect of a successful claim under s 25(1)(a). This is because the Court’s jurisdiction
3 Sadler v Public Trust [2009] NZCA 364.
under s 25(1)(a) is confined to making orders in respect of “the relationship property or any part of that property”. Mr Billington submits the Court could not make an order under s 25(1)(a) as there was no relationship property as at the date of death.
[24] Mr Ireland submits that is to construe s 25(1)(a) too narrowly, and that any claim under s 25(1) first requires classification of any property in dispute. Mr Ireland referred to Chambers v Chambers and Adams v Adams in support of this proposition.4 Mr Ireland also submits that the opening words of s 44B anticipate that a claim under s 44C (and there is no apparent reason to treat s 44 differently in this respect) may be brought as part and parcel of a claim under s 25(1)(a). Moreover, any claim by the executor might be brought under ss 25(1)(b) and 25(3), which are in different terms.
[25] Next Mr Billington submits there is no prospect of any order under s 44. Section 44(1) requires a disposition of property made “in order to defeat the claim or rights” of the other spouse or partner. In this case the disposition was made by the deceased and the respondent, not to defeat either’s rights but to defeat any claim by the applicants. Mr Billington submits this takes the case outside s 44.
[26] In response to this, Mr Ireland referred me to a decision of Judge Ullrich in the Family Court, JCF v DWG, in which the Judge set aside, under s 44, a disposition of property that both partners had made to trustees of a trust.5 The Judge did not accept that the transfer had not been made “in order to defeat” the rights of the plaintiff, simply because that plaintiff had been a party to the transfer. I note, however, that Miller J expressed some reservations about this aspect of the judgment on appeal.6
[27] In any event, Mr Ireland submits that, whatever the primary motivation for the disposition, the deceased and the respondent would have known that by the transfers of the properties referred to in [15], each was depriving the other of their interest in those properties. This may not have been their primary motivation for the disposition
4 Chambers v Chambers [2016] NZHC 583 at [73]; and Adams v Adams [2013] NZHC 2420 at [38]
– [39].
5 JCF v DWG [2012] NZFC 5854.
6 DWG v JCF [2013] NZHC 650 at [21].
but Mr Ireland submits that it will suffice to bring the case within s 44(1). Mr Ireland referred me to Sutton v Bell as authority for this proposition.7
[28] Turning to s 44C, this provides that the Court may grant relief in the event of a disposition of relationship property to trustees that has the effect of defeating the claim or rights of one of the spouses or partners. It is not necessary that the disposition be made “in order to defeat” as in s 44.
[29] However, Mr Billington submits that there can be no prospect of a claim under s 44C, given s 10C of the PRA. He submits that s 10C lists the provisions of the PRA that apply if a party to the relationship has died, and a claim other than one strictly for division of relationship property (as to which see s 10B) is intended. Section 10C permits a claim under s 44, but not s 44C.
[30] Again, Mr Ireland does not agree that an executor is unable to bring a claim for relief under s 44C. He submits such a claim is available by virtue of s 10B, which provides for the application of the PRA in its entirety in respect of the division of relationship property in circumstances where a party to the relationship has died. I have already referred to the differences between the parties as to what proceedings for “division of relationship property” may encompass.
Discussion
[31] In Farquhar v Nunns, Heath J set out the principles which apply when the Court is asked to exercise its powers under s 21 of the Administration Act 1969:8
(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 or trustee) are to be given consideration, but ultimately the question is as to what is expedient in the interests of the beneficiaries.
7 Sutton v Bell [2021] NZCA 645, [2022] 3 NZLR 152 at [93].
8 Farquhar v Nunns [2013] NZHC 1670 at [13] (citations omitted).
(d)Expedience is a lower threshold than necessity, and imports considerations of suitability, practicality and efficiency. Misconduct, breach of trust, dishonesty, or unfitness need not be established.
(e)Hostility as between administrators/trustees and beneficiaries is not of itself a reason for removal, but hostility will assume relevance if and when it risks prejudicing the interests of the beneficiaries.
[32] Having regard to these principles, I am satisfied that it is expedient in the sense of s 21 to remove the respondent as executrix and to appoint Mr Patterson in her place. The circumstances of this particular case, when the personal interests of the applicants and respondent are in such conflict, require that the executor of the estate be independent.
[33] As I have indicated above, the first task required of the executor is to ascertain the assets of the estate as at the date of death. The applicants have already signalled that they see those assets as including the deceased’s joint tenancy in the Epsom property. Then there is the issue as to the properties said to have been gifted to the trustees. With respect to the respondent, it cannot be expected that she would undertake that task in an impartial manner. Nor could the respondent be expected to deal impartially with any claim by the applicants under the FPA.
[34] These matters are sufficient to make it expedient to replace the respondent as executor. However, if more is required, I am not able to rule out that an executor might make a claim under the PRA so as to restore value to the estate. Whether any disposition there may have been falls within s 44(1), and/or whether a claim is open under s 44C, might prove to be significant and even determinative issues. However, I am unable to say now that Mr Ireland’s submissions, as to why such claims are available, are untenable and bound to fail. And, in the context of the application before me, there is no prospect of the respondent bringing any such claim under the PRA.
[35] Lastly, I add that Mr Patterson, being an experienced, expert practitioner in this field, is a suitable and independent substitute for the respondent. He can be relied on to make his own decisions as to the appropriate course to follow.
Result and costs
[36] I make the orders sought in [1.1](a), and [1.1](b) of the originating application dated 3 February 2022, but substituting in [1.1](b) Mr William Malcolm Patterson of Auckland, Solicitor, for the Public Trust, as initially proposed.
[37] This matter is at a very early stage. Costs on this application are to lie where they fall.
Peters J
Appendix — Property (Relationships) Act 1976 Provisions
10AApplication of Act to division of relationship property where both spouses or partners alive
This Act (other than Part 8) applies to the division of relationship property between the spouses or partners when a situation described in section 25(2) arises while both spouses or partners are alive.
10BApplication of Act to division of relationship property on death of spouse or partner
(1)This Act (including Part 8) applies to the division of relationship property between spouses or partners when—
(a)one of the spouses or partners dies on or after 1 February 2002 (except in the situation described in section 10D(1)); or
(b)in the case of spouses, one of them dies before 1 February 2002 and, at the date of that spouse’s death, no proceedings have been commenced between the spouses under this Act or the Matrimonial Property Act 1963.
(2)Subsection (1) applies whether or not a situation described in section 25(2) arose while both spouses or partners were alive.
10C Application of Act in other circumstances
This Act also applies—
(a)in the circumstances described in sections 4(4), 4(6), 21H, 43(1), 44(1), 45(1), and 51(2), while both spouses or partners are alive and after the death of one of the spouses or partners:
(b)in the circumstances described in sections 25(3) and 28(1), while both spouses or partners are alive and after the death of one of the spouses or partners (although the sections are modified in proceedings commenced after the death of one of the spouses or partners):
(c)in the circumstances described in sections 20 to 20F,—
(i)while both spouses or partners are alive; and
(ii)if a spouse or partner is subject to sections 20 to 20F at the date of his or her death, after the death of the spouse or partner; and
(iii)if a surviving spouse or partner is declared bankrupt after the death of the other spouse or partner, after the death of the other spouse or partner:
(d)in the circumstances described in sections 58 and 59, after the death of one of the spouses or partners:
(e)in the circumstances described in section 87, after the death of one of the spouses or partners.
25 When court may make orders
(1)On an application under section 23, the court may—
(a)make any order it considers just—
(i)determining the respective shares of each spouse or partner in the relationship property or any part of that property; or
(ii)dividing the relationship property or any part of that property between the spouses or partners:
(b)make any other order that it is empowered to make by any provision of this Act.
(2)The court may not make an order under subsection (1) unless it is satisfied,—
(a)in the case of a marriage or civil union,—
(i)that the spouses or civil union partners are living apart (whether or not they have continued to live in the same residence) or are separated; or
(ii)that the marriage or civil union has been dissolved; or
(b)in the case of a de facto relationship, that the de facto partners no longer have a de facto relationship with each other; or
(c)that one spouse or partner is endangering the relationship property or seriously diminishing its value, by gross mismanagement or by wilful or reckless dissipation of property or earnings; or
(d)that either spouse or partner is an undischarged bankrupt.
(3)Regardless of subsection (2), the court may at any time make any order or declaration relating to the status, ownership, vesting, or possession of any specific property as it considers just.
(4)To avoid any doubt, but without limiting subsection (3), if proceedings under this Act are pending, the court, if it considers it appropriate in the circumstances, may make an interim order under that subsection for the sale of any relationship property, and may give any directions it thinks fit with respect to the proceeds.
(5)This section is subject to the other provisions of this Act.
(6)In proceedings commenced after the death of one of the spouses or partners, this section is modified by section 91.
44 Dispositions may be set aside
(1)Where the High Court or the District Court or the Family Court is satisfied that any disposition of property has been made, whether for value or not, by or on behalf of or by direction of or in the interests of any person in order to defeat the claim or rights of any person (party
B) under this Act, the court may make any order under subsection (2).
(1A) The court may make an order under this section on the application of party B, or (in any proceedings under this Act or otherwise) on its own initiative.
(2)In any case to which subsection (1) applies, the court may, subject to subsection (4),—
(a)order that any person to whom the disposition was made and who received the property otherwise than in good faith and for valuable consideration, or his or her personal representative, shall transfer the property or any part thereof to such person as the court directs; or
(b)order that any person to whom the disposition was made and who received the property otherwise than in good faith and for adequate consideration, or his or her personal representative, shall pay into court, or to such person as the court directs, a sum not exceeding the difference between the value of the consideration (if any) and the value of the property; or
(c)order that any person who has, otherwise than in good faith and for valuable consideration, received any interest in the property from the person to whom the disposition was so made, or his or her personal representative, or any person who received that interest from any such person otherwise than in good faith and for valuable consideration, shall transfer that interest to such person as the court directs, or shall pay into court or to such person as the court directs a sum not exceeding the value of the interest.
(3)For the purposes of giving effect to any order under subsection (2), the court may make such further order as it thinks fit.
(4)Relief (whether under this section, or in equity, or otherwise) in any case to which subsection (1) applies shall be denied wholly or in part, if the person from whom relief is sought received the property or interest in good faith, and has so altered his or her position in reliance on his or her having an indefeasible interest in the property or interest that in the opinion of the court, having regard to all possible
implications in respect of other persons, it is inequitable to grant relief, or to grant relief in full, as the case may be.
44BCourt may require party to disclose information about dispositions of property to trust
(1)In any proceedings for an order under section 25(1)(a), the court may make an order requiring a spouse or partner to disclose to the court such information as the court specifies relating to the disposition of relationship property by either or both spouses or partners to a trust since the marriage, the civil union, or the de facto relationship began.
(2)The court may make an order under this section on the application of either party to the proceedings or on its own initiative.
44C Compensation for property disposed of to trust
(1)This section applies if the court is satisfied—
(a)that, since the marriage, the civil union, or the de facto relationship began, either or both spouses or partners have disposed of relationship property to a trust; and
(b)that the disposition has the effect of defeating the claim or rights of one of the spouses or partners; and
(c)that the disposition is not one to which section 44 applies.
(2)If this section applies, the court may make 1 or more of the following orders for the purpose of compensating the spouse or partner whose claim or rights under this Act have been defeated by the disposition:
(a)an order requiring one spouse or partner to pay to the other spouse or partner a sum of money, whether out of relationship property or separate property:
(b)an order requiring one spouse or partner to transfer to the other spouse or partner any property, whether the property is relationship property or separate property:
(c)an order requiring the trustees of the trust to pay to one spouse or partner the whole or part of the income of the trust, either for a specified period or until a specified amount has been paid.
(3)The court must not make an order under subsection (2)(c) if—
(a)an order under subsection (2)(a) or (b) would compensate the spouse or partner; or
(b) a third person has in good faith altered that person’s position—
(i)in reliance on the ability of the trustees to distribute the income of the trust in terms of the instrument creating the trust; and
(ii)in such a way that it would be unjust to make the order.
(4)The court may make 1 or more orders under subsection (2) if it considers it just to do so, having regard to—
(a)the value of the relationship property disposed of to the trust:
(b)the value of the relationship property available for division:
(c)the date or dates on which relationship property was disposed of to the trust:
(d)whether the trust gave consideration for the property, and if so, the amount of the consideration:
(e)whether the spouses or partners, or either of them, or any child of the marriage, civil union, or de facto relationship, is or has been a beneficiary of the trust:
(f)any other relevant matter.
88 Who can apply
(1)The following persons may apply for an order under section 25(1)(a) or (b) or an order or declaration under section 25(3):
(a)the surviving spouse or partner:
(b)any person on whom conflicting claims in respect of property are made by the surviving spouse or partner and the personal representative of the deceased spouse or partner.
(2)The personal representative of the deceased spouse or partner may, with the leave of the court, apply for an order under section 25(1)(a). The court may grant leave only if it is satisfied that refusing leave would cause serious injustice.
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