Porter v Fordham
[2021] NZHC 3445
•14 December 2021
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2021-412-000027
[2021] NZHC 3445
BETWEEN PRISCILLA AINSLEY PORTER
Plaintiff
AND
EMILY CLAIRE FORDHAM and MEREDITH ANNE MITI
Defendants
Hearing: 27 August 2021 Appearances:
D J More for the Plaintiff
L A Andersen QC for the Defendants
Judgment:
14 December 2021
JUDGMENT OF NATION J
[1] The plaintiff (Ms Porter), was for a number of years in a relationship with Reid William McNaught (Mr McNaught). Mr McNaught died on 9 October 2019.
[2] The defendants (the beneficiaries) are Mr McNaught’s daughters and the residuary beneficiaries of Mr McNaught’s estate. At the time of Mr McNaught’s death, he owned a property at 89 Reef Road, Middlemarch (the property). The executor of Mr McNaught’s estate transferred the property to the beneficiaries.
[3] In April 2021, Ms Porter, understanding there had been a conditional sale of the property, applied without notice and obtained a freezing order requiring the proceeds of sale to be held in the trust account of the solicitor of the estate. The freezing order was to:
… remain in place until any proceedings issued by the plaintiff under the Property (Relationships) Act 1976 have been determined or other order of this
PORTER v FORDHAM & MITI [2021] NZHC 3445 [14 December 2021]
Court is made, provided that any order will lapse if the plaintiff has not filed her proceedings within 20 working days of the date of the freezing order.
[4] On 15 May 2021, Ms Porter filed an application for leave to issue the Property (Relationships) Act 1976 (PRA) proceedings in the Family Court.
[5] On 20 May 2021, the beneficiaries filed an interlocutory application for an order setting aside the freezing order. Ms Porter opposed that application.
[6] After the initial scheduled hearing as to that application had been delayed by COVID-19 lockdown restrictions, the hearing took place on 27 August 2021.
[7] In a minute of 19 November 2021, I asked for further submissions from counsel on certain limitation issues that had not been addressed at the hearing.
[8] In an interim judgment of 22 November 2021, I set aside the freezing order as to $150,000 of the $470,722.02 that had been subject to the original freezing order. This followed Ms Porter’s counsel acknowledging that Ms Porter’s claim under the PRA could, at most, be for only half of the proceeds of sale of the property.
Chronology
[9]Evidence in affidavits filed with the Court indicates:
(a) In or about 1996, Ms Porter and Mr McNaught began a relationship.
(b) On 31 January 2002, they signed a s 21 agreement under the PRA. It recorded Mr McNaught’s then residential property was to be his separate property.
Mr McNaught’s separate property included residential property in Porirua City, proceeds from the sale of that property, any property purchased in substitution for it, any increase in value of it and any property acquired by Mr McNaught in his sole name after the agreement. The agreement stated separate property was not to be affected by use of the property or any direct or indirect contributions either party might make to it.
(c) In 2008, Mr McNaught’s Porirua property was sold. He and Ms Porter decided to move to the South Island and build an “off the grid” house on the Middlemarch property.
(d) In March 2009, Ms Porter’s sister (Mrs Hamilton) loaned approximately
$20,000 to help finish the house at Middlemarch, of which AUD13,000 remained owing at the date of Mr McNaught’s death.
(e) On 23 December 2010, Ms Porter and Mr McNaught married.
(f) On 10 July 2013, a loan agreement between William Ian Welch (a friend of Mr McNaught), Mr McNaught and Ms Porter was signed by all parties. The loan agreement records loans from Mr Welch to Ms Porter and Mr McNaught of $30,000 for them to “complete their new house” on the property.
(g) In March 2019, Ms Porter and Mr McNaught started living apart but Ms Porter continued to help Mr McNaught.
(h) On 2 October 2019, Mr McNaught made his last will. No provision was made for Ms Porter. The residue of the estate was to go to the two beneficiaries. The administrator was Mr Grant Craig.
(i) On 9 October 2019, Mr McNaught died.
(j) On 23 December 2019, probate of Mr McNaught’s last will was granted to Mr Craig.
(k) On 28 March 2020, Ms Porter paid $7,500 off the Welch loan.
(l) On 25 May 2020, Ms Porter paid a further $15,000 off the Welch loan.
(m) On 22 June 2020, a solicitor for Ms Porter, Ms Clair Elder, wrote to the solicitors acting in the administration of Mr McNaught’s estate, advising that Ms Porter intended to make a claim under the PRA.
(n) On 23 June 2020, the solicitor filed notice with the probate office that Ms Porter had chosen Option A under the PRA to make a claim under that Act.
(o) On 16 November 2020, Mrs Porter paid a further $2,500 off the Welch loan.
(p) On 23 December 2020, the one year time limit under the PRA for Ms Porter to file the PRA claim expired.
(q) On 3 February 2021, Mr Craig’s lawyer, Antony Hamel, emailed Ms Elder asking if proceedings had been filed, because the time for making a claim had expired. Mr Hamel said the beneficiaries were seeking to have the estate distributed. No response from Ms Elder was received.
(r) On 16 February 2021, a transmission of the title to the property to Mr Craig as executor was registered.
A transfer of the title to the property to the beneficiaries in equal shares was also registered, with a mortgage to Mr Craig as security for any liability he might have if Ms Porter issued court proceedings.
(s) On 19 February 2021, Ms Porter, through her solicitor, lodged notice with LINZ of her PRA claim against the title to the property.
(t) On 5 March 2021, the Registrar-General of Land gave notice to Ms Porter, addressed to her solicitor’s PO Box, that the beneficiaries had applied to lapse the notice of claim, advising that Ms Porter’s notice of claim would lapse 10 days after the delivery of that notice unless LINZ received notice that application had been made to the relevant court for an order that notice not lapse. The solicitor said she did not receive the notice of lapse of claim.
(u) On 22 April 2021, the High Court made freezing orders largely as sought.
(v) On 30 April 2021, the property was transferred from the beneficiaries to the purchasers of the property and the mortgage to Mr Craig registered against the title to the property was discharged.
(w) On 15 May 2021, Ms Porter applied to the Family Court at Dunedin under the PRA seeking orders extending the time for her to make an application under the Act and for division of relationship property between her and Mr McNaught.
Submissions for the beneficiaries
[10] On 20 May 2021, the beneficiaries filed an application on notice for an order setting aside the freezing order on the grounds that: proceeds from the property, the subject of the freezing order, were distributed to the beneficiaries on 16 February 2021 by way of final distribution of Mr McNaught’s estate; time for bringing a PRA claim against the estate had expired on 23 December 2020; and Ms Porter has no ability to claim against the estate of Mr McNaught and has no other claim in respect of the property.
[11] In summary, Mr Andersen QC, for the beneficiaries, submitted there was no basis for the freezing order to remain in place because no claim had been made under the PRA within 12 months of probate (that is, before 23 December 2020). Pursuant to s 90(4) of the PRA, leave to file an application under the PRA after 23 December 2020 had to be made before the final distribution of the estate. He submitted an estate is finally distributed when the administrator has completed the administration and occurs when the administrator holds assets not already distributed as trustee for the beneficiaries of the estate.1 The estate was finally distributed on 16 February 2021. No application for leave to file for an extension beyond the required one year period had been filed before that date. Even if the distribution on 16 February 2021 was not a final distribution, Mr Andersen argued the Family Court has no power to set aside the distribution as it was made more than 12 months after probate and before an application was made under s 90(2).
1 Citing Re Magson [1983] NZLR 592 (CA); Lilley v Public Trustee [1978] 2 NZLR 605 (CA), affirmed in Lilley v Public Trustee [1981] 1 NZLR 41 (PC).
[12] Through an affidavit sworn by one of the beneficiaries, Emily Fordham, the beneficiaries have undertaken that they would refund to Ms Porter the $25,000 she paid to Mr Welch in respect of the loan he made to both Ms Porter and Mr McNaught. She also said, if the Court accepts the beneficiaries are entitled to the proceeds of the sale of the property, they would pay the balance of AUD13,000 that is still owed to Mrs Hamilton.
[13] Mr Andersen submitted that Ms Porter could have had no claim to a share in the property or its proceeds of sale because the s 21 PRA agreement protected the property and its proceeds of sale as Mr McNaught’s separate property.
Submissions for Ms Porter
[14] On behalf of Ms Porter, Mr More submitted that the way in which the property was transferred to the beneficiaries before sale, when one beneficiary resided in Canada and the other in Australia, departed from the orthodox approach of selling the property while title was held by the executor with the proceeds then to be distributed. He submitted this was an attempt to ensure the estate was finally distributed before Ms Porter could apply to extend time to bring her PRA claim. He submitted the estate was not finally distributed because of debts still owed by Mr McNaught’s executor and his estate.
[15] Ms Porter claimed there was a debt of AUD13,000 due to Mrs Hamilton in respect of a loan made by Mrs Hamilton to Mr McNaught.
[16] In her affidavit of 5 July 2021, Ms Porter claimed $10,000 was due to her on account of Mr McNaught’s half-share of the loan they had obtained from Mr Welch. In support of that claim, she referred to correspondence from Ms Fordham to Mr Welch in which Ms Fordham confirmed that Ms Porter had repaid $25,000 of the loan and Ms Fordham would be paying $5,000, meaning Ms Porter had a claim for $10,000 to ensure that each would have repaid $15,000 of that loan.
[17] Mr More submitted that, as between Ms Porter and Mr McNaught, their liability to pay Mr Welch was as to one-half each, and Ms Porter had paid $10,000 of
Mr McNaught’s half. He submitted this was due to her from the estate, as acknowledged in an email from Ms Fordham, and that debt remained unpaid.
[18] Ms Porter claimed there was also a debt to her for $6,788 for the cost of a container for storing chattels at the property which she had acquired when the administrator required her to clear chattels from the property pending its sale.
[19] Mr More submitted it was “abundantly clear” that, at the time Ms Porter obtained her freezing order, the estate had not been finally distributed and that it has still not been finally distributed. He appears to have made this submission on the basis there were unpaid debts remaining in the estate at the time the freezing order was made.
[20] Mr More acknowledged that, at the time he filed the application for a freezing order and filed a memorandum in support, he had not adverted to the provisions of s 74 of the PRA and thus the potential for that provision to prohibit any court from disturbing the distribution of the property to the beneficiaries. He submitted this possibility was not relevant to the application to set aside the freezing order because the application was concerned solely with preserving the freezing order and not whether it would disturb the distribution of the property to the beneficiaries. He submitted that whether Ms Porter’s PRA application would disturb a distribution under the Act was a matter solely for consideration in the Family Court PRA proceedings.
Analysis
[21]As stated in McGechan on Procedure:2
Essentially, there are three requirements for a freezing order: a good arguable case on the substantive claim; assets to which the order can apply; and a real risk that the respondent will dissipate or dispose of those assets. In endorsing those requirements in Shaw v Narain … the Court of Appeal stressed the importance of preserving the flexibility of the remedy, and the need to consider the overall justice of the case, balancing the need to protect the applicant so as to ensure any judgment is not rendered barren against any prejudice or hardship to the respondent or a third party.
2 Andrew Beck and others McGechan on Procedure (online ed, Thomson Reuters) at [HR 32.2.03], citing Shaw v Narain [1992] 2 NZLR 544 (CA) at [548].
[22] The substantive proceedings to which the freezing order relates are the potential PRA proceedings in the Family Court that Ms Porter has sought leave to bring. To preserve the freezing order, Ms Porter must thus establish she has a good arguable case that she will obtain leave to bring the PRA proceedings in the Family Court and a good arguable case that, through such proceedings, a court will hold she was entitled to a share in the property and thus to a share of the proceeds from its sale.
[23]Section 90 of the PRA states:
90 Time limits for commencing proceedings
(1) Proceedings must be commenced within the following time limits:
(a)if the estate of the deceased spouse or partner is a small estate (as defined in section 2), the proceedings must be commenced—
(i)no later than 12 months after the date of the death of the deceased spouse or partner; or
(ii)if administration of the estate is granted in New Zealand within that period, no later than 12 months after the grant of administration,—
whichever is the later:
(b)in any other case, the proceedings must be commenced no later than 12 months after administration of the estate of the deceased spouse or partner is granted in New Zealand.
(2) Regardless of subsection (1), but subject to subsection (3), the court may extend the time for commencing proceedings after hearing—
(a)the applicant; and
(b)any other persons who have an interest in the property that would be affected by the order sought and who the court considers should be heard.
(3) The court’s power under this section extends to cases where the time for commencing proceedings has already expired, including cases where it expired before the commencement, on 1 February 2002, of the Property (Relationships) Amendment Act 2001.
(4) The court may not grant an extension of time under subsection (2) unless the application for the extension is made before the final distribution of the estate of the deceased spouse or partner.
[24] It was not suggested that Mr McNaught’s estate was a small estate. Accordingly, pursuant to s 90(1)(b), proceedings under the PRA had to be commenced
no later than 12 months after probate had been granted of Mr McNaught’s last will on 23 December 2019, that is by 23 December 2020. Pursuant to s 90(2), the Court has the power to extend the time for commencing proceedings but, pursuant to s 90(4), the Court cannot grant an extension of time unless the application for the extension is made before the final distribution of the estate of the deceased spouse.
[25] Section 90(4) refers to “the final distribution of the estate”. It does not deal with the distribution of a particular asset in the estate. There is clear authority that, in interpreting provisions similar, if not identical, to that in s 90(4), final distribution occurs when the executor ceases to hold the assets in that capacity and holds them as trustee.
[26] Lilley v Public Trustee concerned an application for leave to bring proceedings under the Law Reform (Testamentary Promises) Act 1949.3 That legislation gave the court power to extend the time for bringing proceedings under that Act provided application was made “before the final distribution of the estate”. The Court of Appeal and the Privy Council held that the “final distribution of the estate” refers to the point of time at which the executor, having completed the administration of the estate, becomes the trustee.4
[27] In Re Magson, a widow sought leave to bring proceedings out of time under the Family Protection Act 1955 and the Matrimonial Property Act 1963. The widow sought to bring proceedings on 20 January 1982. Probate of her husband’s will had been granted on 19 September 1974. Under both Acts, the time for commencing proceedings as of right expired on 19 September 1975. The Court of Appeal held the Judge in the High Court had been right:5
… in holding that there had been a final distribution of the estate, in the sense that the executors’ duties had been completed and that thenceforth they held the assets as trustees, by 30 June 1979 at the latest.
3 Lilley v Public Trustee (PC), above n 1.
4 Lilley v Public Trustee (PC), above n 1, at 42-43; Lilley v Public Trustee (CA), above n 1, at 607; and Re Magson, above n 1.
5 Re Magson, above n 1, at 594.
[28]Cooke J for the Court stated:6
A line of New Zealand authorities culminating in the decision of the Privy Council in Lilley v Public Trustee … settles conclusively that, in the absence of the special provision, in the Family Protection and Testamentary Promises legislation “final distribution” refers to the point of time at which the executor, having completed the administration of the estate, becomes the trustee … An intention to use the same words in a different sense could not reasonably be attributed to the New Zealand Parliament when (in 1968) it enacted s 5A of the Matrimonial Property Act 1963. Consistency of decision requires the same meaning to be placed on the material words in that section. Accordingly we think that Casey J was right in holding that he had no jurisdiction to extend time under the 1963 Act.
[29] I must thus determine whether Ms Porter has an arguable case that final distribution, in the sense referred to by Cooke J, had not occurred before the application for leave to bring the proceedings was filed in the Family Court on 15 May 2021.
[30] In Re Magson, the Court of Appeal said the governing principles in making that determination were explained by Somers J in his judgment in the Court of Appeal in Sullivan v Brett.7
[31]In that case, Somers J stated:8
The whole of the estate of his [sic] deceased is available to an executor for the payment of debts and testamentary expenses and his other functions in the administration of the estate. The testator's property reaches the executor as such "in full ownership, without distinction between legal and equitable interests". Those interested in residue under the will have no true beneficial interest in the assets in the hands of the executor during the course of administration — their right is to require and to enforce the due administration of the estate. The reason, at least in part, is that until it can be seen what
exists as residue after administration there are no specific assets to which a trust can attach.
…
Whether the executor’s functions have been completed so that the actual assets which comprise that residue to which the trusts of a will may attach have been ascertained depends upon the course of the administration and is normally only within the executor’s knowledge.
…
6 At 597.
7 Re Magson, above n 1, at 594, citing Sullivan v Brett [1981] 2 NZLR 202 (CA).
8 Sullivan v Brett, above n 7, at 206-207.
An assent may be express or it may arise by implication. … It is a question of fact …
…
The issue is not what the executor believes or intends to be the case. It is what the facts demonstrate. Where a formal assent is given there is no further argument – it is treated as irrevocable …
Where as is usually the case there is no formal assent the circumstances are considered to see whether an inference of assent can be drawn. In the case of residue that will usually depend upon whether all claims against the estate for debts legacies, testamentary and administration expenses have been paid. For it is not until that stage has been reached that the existence and nature of the residue can be ascertained. … Actual assent may be viewed as evidence against the executor that such a state of affairs has been reached. But if in fact reached assent will be inferred. Assent is evidence; the actual fact of ascertainment of residue will import assent.
[32] In Sullivan v Brett, Somers J said the question was whether the estate had been distributed when the appellant, Mrs Brett, filed her application for leave.9 His Honour said:10
There being no formal assent that depends upon whether an assent is to be inferred; that in turn depends upon whether in the circumstances revealed by the evidence it can be said that the executor had by the relevant date completed all those activities which it was his function to perform and the residue of the estate had been ascertained.
[33] Barker J expressly agreed with Somers J’s consideration of the facts. In doing so, he also agreed with a statement made by the High Court Judge that there was an onus on an applicant to show that the estate had not been distributed but, nevertheless, he would have expected an executor intending to raise the point to have presented the Court with precise evidence on which a finding could be made.11 Barker J said he agreed “that there is a duty on an executor in these circumstances to present the facts to the Court since they are peculiarly within his knowledge”.12
[34] Consistent with the Court’s judgment in Sullivan v Brett, the question of whether the estate has been distributed depends:13
9 At 208.
10 At 208.
11 At 212.
12 At 212.
13 At 208.
… upon whether in the circumstances revealed by the evidence it can be said that the executor had by the relevant date completed all those activities which it was his function to perform and the residue of the estate had been ascertained.
[35] In his will, Mr McNaught appointed Mr Craig as his executor and trustee. He made a gift of railway models, other railway paraphernalia and photographic collections to Mr Craig. He gave his half share in “Triple M Publications” to the other partner in that business. There was then a gift of residue:
5. My Trustee shall hold the balance of my estate upon trust to sell and convert into money so much as my Trustee may think necessary and to pay my debts, funeral expenses and any taxes and then to hold the residue of my estate for such of my children being Emily Claire Fordham of Calgary, Alberta, Canada Meredith Anne Miti of Sydney, NSW, Australia as shall survive me and if more than one as tenants in common in equal shares.
[36] So, the beneficiaries’ entitlement to share in the proceeds of sale of the property arose out of their entitlement to benefit equally from the residue. As in Sullivan v Brett, that residue could be ascertained only when the residue to which the beneficiaries were entitled had been ascertained.
The debt to Mrs Hamilton
[37] On 2 November 2019, Ms Porter’s brother-in-law messaged Mr Craig via Facebook on behalf of himself and his wife stating that Mrs Hamilton had made a loan of $20,000 to Ms Porter to help finish the property of which about $3,000 had been repaid. He said they did not wish to pursue Ms Porter for the balance but did not want “our money [disbursed] elsewhere”. Mr Craig responded on 3 November 2019 confirming he knew “about a loan as [Mr McNaught] has it recorded”.
[38]On 8 November 2019, Mr Hamilton emailed Mr Craig and said:
Our records show $13,030 outstanding. [Ms Porter] borrowed $NZ20,000 (approximately). That cost us $16,000 plus $30 costs. [Mr McNaught] repaid us $(AU)3,000.
[39]On 9 November 2019, Mr Hamilton emailed Mr Craig again stating:
There is no loan contract. It was a request [made] by [Ms Porter] to [Mrs Hamilton] on [Mr McNaught’s] behalf. It was totally on trust, in emotional circumstances, as the builders were going to blacklist [Mr McNaught] and [Ms Porter] unless they paid more money.
Mr Hamilton went on to refer to the financial circumstances he and Mrs Hamilton were in and concluded “[f]or us, the loan is better either repaid or written off”. Mr Craig replied saying thank you and that he would pass that on to a lawyer.
[40] In an affidavit of 19 May 2021, in support of his application to discharge the freezing order, Mr Craig referred to knowing of a potential relationship property claim. He referred to his solicitor’s enquiry of Ms Porter’s solicitor as to whether a claim had been filed but no response was received. His solicitor advised that, because no PRA proceedings had been filed within 12 months of the grant of probate, the beneficiaries were entitled to have the estate distributed. He said there was a final distribution on 16 February 2021 “as all the estate liabilities had been paid”. He said, as a precaution to ensure he would be protected if Ms Porter issued proceedings, he obtained an indemnity from the beneficiaries which was secured by a mortgage on the property. He made no mention in that affidavit of any actual or potential debt due from the estate to Mrs Hamilton.
[41]In an affidavit of 5 July 2021, Mrs Hamilton said:
In March 2009 I received a telephone call from a desperate [Ms Porter] who told me [Mr McNaught] and she needed money to avoid being blacklisted by tradesmen working on their home at Pukerangi. I asked her how much and heard [Mr McNaught] in the background say $16,000.00 would be enough.
[42] Mrs Hamilton went on to explain and provide documents showing a payment of AUD16,000 and Mr McNaught repaying her AUD3,000 in January 2015 when she was staying with Ms Porter and Mr McNaught.
[43]In her affidavit of 5 July 2021, Ms Porter said:
The debt of AU$13,000.00 to my sister, Gail Hamilton, was also a loan from her to [Mr McNaught] and me to assist us with the cost of the fitout of our home at Pukerangi.
She said the money was paid directly into Mr McNaught’s bank account.
[44] In an affidavit of 15 July 2021, in reply to affidavits from Ms Porter and Mr and Mrs Hamilton, Mr Craig said:
While I received a text message on 2 November [2019] from David Hamilton, nothing further happened in relation to the debt and my understanding of the matter was that, although Gail Hamilton wanted to be repaid from the estate (and not from Ms Porter) the loan had actually been made to Ms Porter. Consequently, I did not consider the loan was an estate debt and did not attend to payment of it.
[45]In an affidavit of 15 July 2021, Ms Fordham said:
Neither my sister or I had any communication about the money advanced by Gail Hamilton which appears to be a loan to Priscilla Porter. Now that we are aware of it, we undertake to the Court that if the Court accepts that we are entitled to the proceeds of sale of the house then we will make payment of
$A13,000 to Mrs Hamilton.
[46] On the evidence before the Court, I am not satisfied that, as at 16 February 2021 or as at 15 May 2021 when Ms Porter filed the application for leave to bring PRA proceedings in the Family Court, the executor had decided there was no debt due from him as executor to Mrs Hamilton. There was no reference to the debt in the accounting which took place on 19 February 2021 when Ms Fordham provided a statement of all estate liabilities that she had paid and when legal costs incurred in the administration of the estate were paid. There was no mention of the executor considering this liability as a potential debt in the estate in Mr Craig’s first affidavit of 19 May 2021. In her affidavit of 15 July 2021, Ms Fordham said she knew nothing about this debt. That is consistent with neither Mr Craig nor the solicitor discussing this with the beneficiaries as a potential debt at the time they purported to distribute the estate on 16 February 2021.
[47] Consistent with Somers J’s observation in Sullivan v Brett, an arrangement could have been made with the beneficiaries for them to assume any responsibility for this debt and for the residue in the estate available to be ascertained and so made available for distribution on that basis. However, there was no such arrangement. The executor, Mr Craig, did obtain a mortgage from the beneficiaries securing any liability the executor might have as a result of the property being transferred to the beneficiaries but Mr Craig said that was to secure any liability that might arise out of PRA proceedings.
[48] Mr Craig did say in his second affidavit that he did not consider the debt to Mrs Hamilton was Mr McNaught’s liability. The evidence does not establish, to my
satisfaction, that he had come to that view at the time he purported to distribute the estate. The evidence is equally consistent with him simply forgetting about or ignoring that liability at the time he purported to make the distribution. With the way that loan was referred to, it was arguable that it was a loan to Ms Porter. However, it was equally arguable that it was a loan either to Mr McNaught or to both Mr McNaught and Ms Porter jointly so that it was a debt in whole or in part of the estate.
[49] Ms Fordham’s undertaking that the beneficiaries would repay that loan is consistent with that being the position. However, their undertaking to pay it, even now, is conditional on the Court accepting that they are entitled to the proceeds of sale from the property.
The loan from Mr Welch
[50] As at 16 February 2021, I am satisfied Mr Craig, as the executor, was on notice that Ms Porter was making a claim against the estate for one-half of the debt to Mr Welch, and that she had repaid $25,000 of that loan with the payments on 28 March, 25 May and 16 November 2020.
[51]The loan agreement dated 10 July 2019 recorded:
LOAN AGREEMENT Dated 10-7-2013
Between: William Ian Welch of […]
And: Reid William McNaught and Priscilla Ainsley Porter – both of 89 Reefs Road, Pukerangi, RD2, Middlemarch, 9597.
That on the 9th July 2008 and 10th October 2008, Ian loaned to Reid and Priscilla the two sums of $10,000.00 and $20,000.00 NZD. So Reid and Priscilla could complete their new house at 89 Reefs Road, Pukerangi, RD2, Middlemarch 9597.
The loan was made in good faith with no limit on time or interest payments required.
It was further agreed that if REID and or Priscilla were unable to repay the loan prior to the death of either party that the loan would be repaid to Ian or his estate immediately or as soon as possible, upon Reid or Priscilla’s demise from the proceeds of their joint estate.
Repayment to Ian or his estate to take precedent [sic] prior to distribution to family members and any other debts.
Signed … Reid William McNaught....................... Dated 10.07.2013
Signed … Priscilla Ainsley Porter......................... Dated 10.7.2013
Signed … William Ian Welch................................ Dated 10.7.2013
Witness …………….. (J B Burke)........................ Dated 10/7/2013
Witnessed at Porirua
[52] In that document, Mr McNaught and Ms Porter had agreed that, if the loan was not repaid prior to the death of either party, the loan would be repaid “upon Reid or Priscilla’s demise from the proceeds of their joint estate”. Mr McNaught had died. The agreement was signed by all parties with the contemplation that the new house on the property would be the property of both Mr McNaught and Ms Porter. Mr McNaught and Ms Porter agreed that “[r]epayment to [Mr Welch] or his estate to take precedent [sic] prior to distribution to family members and any other debts”.
[53] In her correspondence with Mr Craig of 24 November 2020, Ms Porter made it clear that she considered Mr McNaught was liable for half of the debt to Mr Welch and that she expected to be paid $10,000 on account of what she had paid for his liability. Given the agreement Ms Porter and Mr McNaught had entered into, her entitlement to such a payment from the estate could not be dismissed out of hand. It had to be dealt with in order for the residue in the estate to be ascertained.
[54]On 19 February 2021, the estate did pay to Mr Welch $5,000 from the
$29,412.27 that had been paid to the estate from the beneficiaries. This was the balance then due to Mr Welch. At that time, the executor had made no arrangement to deal with the $10,000 Ms Porter had claimed for Mr McNaught’s share of the payments that she had made to Mr Welch. Again, there was no mention of how the executor had resolved to deal with this debt in his first affidavit of 19 May 2021. There was no suggestion in that affidavit that he had considered Ms Porter’s claim in this regard or had considered or been advised that the estate had no liability in respect of that payment.
[55] In his second affidavit of 15 July 2021 however Mr Craig said, after he had been invoiced by Ms Porter for $16,788 on 23 November 2020, he did not consider the amount was payable by the estate. He said:
(a) I was advised that the estate’s liability for the loan to William Ian Welch was limited to the unpaid portion of the joint loan and I attended to payment of this;
(b) I did not ever ask Ms Porter to make any payment on behalf of the estate and did not understand the estate to have any obligation to repay her because she had paid $25,000 and the estate had paid $5,000 of the balance owing at the date of death.
[56] Although I need not conclusively determine the point, there is reason to believe this was an ex-post facto justification for his failure to deal with her claim for $10,000. He says these were the reasons for not paying the amount Ms Porter had claimed of
$10,000 after she had invoiced him for it on 23 November 2020. The payment of
$5,000 was not however made until 19 February 2021. There was also no correspondence from either Mr Craig or the solicitor acting in the administration of the estate consistent with the executor denying any liability for the payment for a debt to Ms Porter of $10,000. The payment of $5,000 on 19 February 2021 was consistent with the estate recognising it had a liability in respect of that loan.
[57]In the 15 July 2021 affidavit, Mr Craig also said:
I was not concerned about the disparity in the payment of the amounts because I was assured by Emily Fordham prior to the final distribution of the estate that she and Meredith Miti would pay Ms Porter $10,000 from the proceeds of sale of the house (when it was eventually sold) to even up the contributions.
There was no mention of such an arrangement in Mr Craig’s first affidavit of 19 May 2021.
[58]In an affidavit of 15 July 2021, Ms Fordham said:
My sister and I had agreed that we would pay Ms Porter the $10,000 that she had paid of our father’s share of the estate to William Ian Welch once the house was sold.
In light of the fact that Ms Porter is not receiving any of the estate then we consider it fair that she should also be refunded the $15,000 that she paid to William Ian Welch and, if it is determined that she has no claim to the estate because the estate has been distributed, then we undertake to the Court that we will pay Ms Porter $25,000 from the money that has been frozen.
[59] Importantly, amongst the documents annexed to an affidavit of Ms Porter was an email from Ms Fordham to Mr Welch dated 9 February 2021 (prior to 16 February 2021) in which Ms Fordham thanked Mr Welch for his confirmation that Ms Porter had paid $25,000 to date, leaving $5,000 outstanding. Ms Fordham said:
Ok, thank you for confirming. Richard and I are looking at securing a loan so if you could please provide your bank account details so that we can pay you the outstanding $5,000 that would be great. Priscilla will get the $10,000 that she paid on dad’s behalf.
[60] Mr Welch responded by saying: “Delighted to learn you will pay the $10,000 back directly to Priscilla.”
[61] In Sullivan v Brett, Somers J referred to the possibility that transactions might “warrant the inference that at some point of time the beneficiaries and the executor agreed that the former would discharge out of their own monies such liabilities as remained”.14
[62] Here, however, it could not be concluded on the basis of the above exchange of correspondence that Mr Craig, as executor, could reasonably have assumed that Ms Fordham had accepted she or the beneficiaries would be responsible for any liability that the estate might have to Ms Porter relating to the loan from Mr Welch. Ms Porter’s claim for reimbursement of $10,000 was made on the basis Mr Welch’s loan had been made to them jointly in the context of their joint ownership of the home for which the loan was required. In terms of the written agreement, it was at least arguable that the whole of that loan had to be repaid from Mr McNaught’s estate. It was also reasonably arguable that it was implicit from the agreement that the estate would be responsible for the whole of that debt if Ms Porter had no interest in the home. Consistent with that interpretation, Ms Fordham said in her affidavit of 15 July 2021 that, if it was determined that Ms Porter had no claim to the estate, the beneficiaries would undertake to pay Ms Porter $25,000 from the money that had been frozen.
[63] As to the $30,000 loan to Ms Porter and Mr McNaught, Ms Porter claims she and Mr McNaught were equally responsible for the debt. Mr Andersen submitted the
14 Sullivan v Brett, above n 7, at 209.
statements made by Ms Fordham were not in terms that acknowledged there was any liability from Mr McNaught’s estate to Ms Porter on account of the repayments she had made in respect of that loan. Mr Andersen submitted the liability of the estate (jointly with Ms Porter) was for only the unpaid portion of the joint debt. He submitted Ms Porter had paid $25,000 without any consultation with the estate and without any agreement that the estate would reimburse her for any money paid.
[64] I am not however satisfied that this is necessarily correct or that the executor had decided this was the position before transferring the property to the beneficiaries on 16 February 2021.
[65] To ascertain the residue in the estate, the executor thus had to establish whether Ms Porter did have an interest in the property and whether she should be reimbursed for either half or the whole of the repayments she had made to Mr Welch after Mr McNaught’s death. There is no evidence that the executor had done either as at 16 February 2021 when title to the property was transferred to the beneficiaries, or at any time before 15 May 2021 when Ms Porter filed her application for leave to bring PRA proceedings in the Family Court.
The claimed debt to Ms Porter for the hire of a container
[66] The further debt Ms Porter says remained in the estate which was not brought into account before proceedings were filed in the Family Court was Ms Porter’s claim for $6,788 for the cost of the Royal Wolf container in which she stored chattels that had to be removed from the property.
[67] In her affidavit of 5 July 2021, Ms Porter says, following Mr McNaught’s death, the property had to be prepared for sale. She was instructed by the executor that all the chattels in the property had to be removed. She said Mr Craig refused her permission to store the chattels in the container that she and Mr McNaught had purchased. She said she told Mr Craig that she had no place to store the chattels, that she would need to purchase a container and she expected the estate to reimburse her. She said in the affidavit “[h]e did not say no to that”. Ms Porter paid $6,788 to Royal Wolf for a container.
[68] Ms Porter emailed the executor on 24 November 2020 with her invoice for the estate of $16,788. This included the $10,000 referred to earlier and, as she said, “$6,788 paid to Royal Wolf for a container as I was told by yourself that I couldn’t have the container on my property.” She received no response. There is nothing in the correspondence or in the affidavits to indicate that Mr Craig, as executor, accepted the estate would have a liability for this cost.
[69] On 3 February 2021, Mr Craig’s solicitor, Antony Hamel wrote to Ms Porter’s lawyer. The letter referenced a meeting in July 2020 where issues around the house had been discussed but no resolution reached. The letter advised that the trustee had decided to list the property for sale. The letter referred to the contents of the property but said little progress had been made in resolving issues as to the contents. The letter required Ms Porter to remove “all her items” from the house by 19 February 2021. The letter advised that, if this did not occur, the items would be packed, at her cost, and stored temporarily in the house until the house was sold.
[70] I am not determining now whether Mr Craig, as administrator, could be liable to Ms Porter for costs she incurred in storing chattels that had to be removed from the home or in selling chattels she had purchased with the property. It is possible that the expense Ms Porter incurred in hiring a container could have been brought into account under the PRA as a post-separation contribution by Ms Porter. Nevertheless, the information before me is not sufficient to establish that the estate definitely had a liability to Ms Porter for the costs she incurred in storing chattels. I do not consider the potential for a dispute over this was such as to require the administrator to take into account Ms Porter’s potential claim over this in deciding what residue was in the estate and available for distribution to the beneficiaries as at 16 February 2021 or at any other time before 15 May 2021.
The potential PRA claim
[71] The s 21 PRA agreement was not necessarily a bar to Ms Porter having an entitlement to a share in the estate of Mr McNaught, particularly a share in the property. But for the s 21 agreement, the property, as the family home, would have been relationship property in which they were entitled to share equally. The agreement
did say that it was to be binding on the parties in all circumstances including marriage or the death of one of them. The s 21 agreement could be interpreted as protecting the property as Mr McNaught’s separate property but Ms Porter and Mr McNaught had obviously made a joint decision to sell Mr McNaught’s Porirua property and move to Middlemarch where they jointly had the challenge of building a new home off the grid. Crucial to their being able to do that, was a loan Ms Porter obtained on generous and favourable terms from her sister. Both parties had also obtained, again on generous terms, the loan from Mr Welch. In the loan agreement with Mr Welch, Mr McNaught acknowledged that the home they were building was to be “their new house”. The loans obtained from Mr Welch were for both Mr McNaught and Ms Porter. Their agreement was also framed in terms of the property being part of “their joint estate”. Ms Porter would, at least, have had a good arguable case in terms of s 21J of the PRA that to give effect to the s 21 agreement so as to deprive Ms Porter of any interest in the property would cause a serious injustice.
[72] The residue in the estate could also not be ascertained until the executor had established the extent to which Ms Porter might have a PRA claim against the estate. Given the estate had the prima facie benefit of a s 21 PRA agreement, it was likely any such entitlement could be established only through PRA proceedings filed in the Family Court. Such proceedings had to be filed within 12 months of probate being granted. Mr Hamel, for Mr Craig, enquired of Ms Porter’s then solicitor with a letter of 3 February 2021 as to whether proceedings had been filed, pointing out that 12 months had already elapsed since probate had been obtained. There was no response to that letter and proceedings had not been filed. Mr Craig, at that time, believed Ms Porter could not file a PRA claim. With that belief, I do not consider the possibility she might seek an extension of time to file such a claim prevented him from then holding assets in the estate as a trustee for the beneficiaries.
Other assets
[73] Amongst the correspondence produced with an affidavit of Mr Craig was a letter of 26 January 2021 from the real estate agent handling the sale of the property. In that letter, the agent referred to Ms Porter having notified her that the house needed to be cleared and cleaned. The agent suggested that all belongings could be stored
temporarily in the garage. There is no information to indicate there had been any division of chattels as between those belonging to Mr McNaught and items which Ms Porter might have claimed were hers.
[74] In submissions, Mr More advised that Ms Porter considers she now has a claim against Mr Craig for the fact that, when he transferred the property to the beneficiaries, he included chattels which belonged to Ms Porter, including $11,720.30 for batteries and $3,600 for a diesel generator.
[75] I do not have affidavit evidence on the point but I also note there was no evidence from Mr Craig as executor and nothing in the correspondence from the solicitor acting in the administration of the estate to indicate that particular chattels referred to in the will or Mr McNaught’s half-share in Triple M Publications had been distributed in the manner required by the deceased’s will. There was also no information to indicate that other assets in the estate, such as Mr McNaught’s interest in chattels associated with the property or any bank account or other assets, had been sold or brought into account as the will required in order to establish the residue available for the beneficiaries.
[76] The beneficiaries have thus not satisfied me that, at the time Ms Porter filed her application for leave to issue PRA proceedings on 15 May 2021, Mr McNaught’s estate had been finally distributed. Had the potential final distribution of the estate been the only barrier to Ms Porter being able to pursue a PRA claim to a share of the proceeds of sale of the property, I would have held that Ms Porter had a good arguable case justifying the continuance of the freezing order, at least in part. However, it became apparent, in my consideration of the whole situation, that the possibility of there having been a final distribution of the estate was not the only impediment to a potential PRA claim to the proceeds of sale.
Section 74 of the PRA
[77]Section 74 states:
74 Distribution of estate not to be disturbed
(1) This section applies where any part of the estate of a deceased spouse or partner has been distributed—
(a)before the personal representative of that spouse or partner receives notice that an application has been made to the court—
(i)under section 62(2) for an extension of the time for choosing option A or option B; or
(ii)under section 69 for the setting aside of a choice of option A or option B; or
(iii)under section 77 for an order that a surviving spouse or partner who has chosen option A may also take under the will of the deceased spouse or partner or on his or her intestacy or partial intestacy; or
(iv)under section 89(2) or section 90(2) for an extension of the time for making an application; and
(b)after every notice (if any) of an intention to make an application has lapsed in accordance with section 48(1) of the Administration Act 1969.
(2) Where this section applies,—
(a)the making of the application does not disturb the distribution; and
(b)no order made in respect of the application may disturb the distribution; and
(c)no action lies against the personal representative for having made the distribution.
[78]Section 72 of the PRA states:
72 Distribution of estate after choice made but before proceedings commenced
(1) If a surviving spouse or partner chooses option A, the administrator or trustee of the estate of the deceased spouse or partner must not distribute any part of the estate before—
(a)the surviving spouse or partner applies for a division of relationship property under this Act; or
(b)the expiry of the period specified in section 62(1) (or any extension of that period granted under section 62(2)),—
whichever happens first.
(2) Despite subsection (1), a distribution may be made in any of the cases referred to in section 71(2).
[79] Sections 62(1) and 62(2) refer to a surviving spouse’s right to apply for an extension of time to make a choice as to either option A or option B. Whether s 72 permitted the distribution of the property to the beneficiaries when this occurred depends on whether the Family Court could grant an extension of the period for bringing a PRA claim under s 90(2) of the PRA. That turns again on whether there had been a distribution of the estate before the application for leave to bring a PRA claim was filed with the Family Court on 15 May 2021.
[80]There is thus an issue as to whether s 72 is subject to s 74.
[81] If s 74 applies in the circumstances of this case, I needed to consider whether, in PRA proceedings, no court could disturb the transfer of the property to the beneficiaries on 16 February 2021 through ordering that the whole or part of the proceeds of sale of the property held in their names should be paid to Ms Porter.
[82]The submissions I received as to this at the hearing were brief.
[83] Mr Andersen referred to it through, as an alternative ground for the lifting of the freezing order, submitting that, as the transfer was a distribution made more than 12 months after probate and before an application was made under s 92, it could not be set aside by the Family Court.
[84] In his memorandum for Ms Porter filed shortly before the hearing, Mr More acknowledged that, in obtaining a freezing order, he had not considered or advised the Court of s 74 of the PRA. He said: “On the face of it, s 74 of the Act applies”. He nevertheless submitted this was of no moment because this Court was dealing just with an application for the lifting of the freezing order and it would be for the Family Court to decide if and how it would deal with the distribution of the property to the beneficiaries.
[85] I did not consider s 74 was irrelevant in the manner Mr More suggested. The freezing order is in place to secure the proceeds of sale so they are available to satisfy
a claim Ms Porter might have under the PRA. To retain the freezing order, she needs to establish she has a good arguable case that she is entitled to a share of the proceeds of sale. If, pursuant to s 74, the Family Court could not require any of those funds to be paid to her, there would be no justification for the freezing order to continue.
[86] I was conscious that, in dealing with this issue, I would potentially be deciding that Ms Porter cannot make any claim for a share of what had been a family home in all the circumstances of her marriage to Mr McNaught and what would appear to have been the significant challenge they faced in building a new home together during their relationship. I called for and received from Mr More further submissions as to the potential relevance of s 74.
[87] Section 2 of the PRA says the term “distribution, in relation to an estate, has the meaning given to it by section 46 of the Administration Act 1969”.
[88] Section 46 of the Administration Act does not set out what is meant by the term “distribution” in the Administration Act but says the term includes particular dispositions pursuant to an option, and a forgiveness of debt or other liability where those benefits are transferred for less than full valuable consideration.
[89] In his further submission, Mr More has accepted that, here, there was a distribution of part of Mr McNaught’s estate, namely the property, to the beneficiaries.
[90] Section 74 of the PRA also applies where part of an estate has been distributed before the administrator receives notice that an application has been made to the Court under ss 89(2) or 90(2) of the PRA.15
[91] On 15 May 2021 or shortly afterwards, the administrator received notice that Ms Porter was making an application under s 90(2) of the PRA to extend the time for a surviving spouse to commence PRA proceedings after the death of her spouse.
[92]In his further submission, Mr More accepted this was such an application.
15 Section 74(1)(a)(iv).
[93] But, for s 74 to apply, pursuant to s 74(1)(b), the distribution of the estate had to occur after any notice of an intention to make an application had lapsed in accordance with s 48(1) of the Administration Act.
[94] Through reference to s 47 of the Administration Act, s 48(1) of the Administration Act applies to any application under the PRA. Pursuant to s 48(1), where a notice in writing has been given to an administrator of an intention to make an application under the PRA, such notice lapses three months from when the administrator received notice in writing of the intention to make the application, if the administrator has not, within that time, been served with a copy of the application or received notice in writing that the application has been made to the Court.
[95] Here, Ms Porter’s then solicitor had given written notice to the administrator on 22 June 2020 of Ms Porter’s intention to make a PRA claim. She did not file such proceedings until 15 May 2021.16 So, pursuant to s 48(1) of the Administration Act, the notice of an intention to claim had lapsed. In the circumstances, s 48(1) says there will be no liability on the administrator in respect of a distribution made before the administrator has received notice of the court proceedings.
[96] That being the case, Mr Craig, as administrator, could have no liability to Ms Porter by reason of the distribution of the property to the beneficiaries on 16 February 2020. This was some eight months after the expiry of the three month period just referred to.
[97] The proviso to s 48(1) however says that nothing in s 48(1) prevents the subsequent making of the relevant application (here, a PRA claim) within the period allowed by law. As I have decided there had not been a final distribution of Mr McNaught’s estate, nothing in s 48(1) would have prevented Ms Porter from applying for leave to extend the time to make a PRA claim, and thus pursuing proceedings through which she might have obtained a share of the proceeds of sale.
16 Ms Porter’s then solicitor has said in her affidavit that Ms Porter was not responsible for the failure to file the PRA application within time.
[98] However, in a situation where s 74(1) of the PRA applied and the notice of an intention to make a PRA application had lapsed, s 74(1) was subject to s 74(2)(b).
[99] Section 74(2) of the PRA says, where s 74(1) applies (as I have found it does) and there has been a distribution of part of an estate:
…
(a) the making of [a PRA] application does not disturb the distribution; and
(b) no order made in respect of the application may disturb the distribution;
…
[100] In his further submission for Ms Porter, Mr More has accepted that the ability of the Family Court to give leave extending the time for Ms Porter to bring PRA proceedings is subject to the provisions of s 74(2) and it is unable to order any disturbance of a distribution already made through the transfer to the beneficiaries of the property.
[101] In his further submissions, Mr More somewhat tentatively suggested that, here, the transfer of the property to the beneficiaries had been effected and they had sold the property. He suggested it was only the proceeds of sale that were being held in the trust account so, in seeking a share of those proceeds, Ms Porter would not be seeking to disturb the distribution of the property to the beneficiaries.
[102] I do not accept that is a realistic way of applying s 74(2). Through the distribution of the property to the beneficiaries, they received the full benefit and value of owning that property. In seeking a share of the proceeds, Ms Porter would be seeking a share of its value. In that way, she would be seeking to disturb the distribution that had already been made.
[103] I accordingly consider that, through the application of s 74(2), Ms Porter has no prospect of obtaining a share of the proceeds of sale through the PRA proceedings she is seeking to pursue. It is not seriously arguable otherwise. Accordingly, that basis for the freezing order has gone.
Section 49 of the Administration Act 1969
[104] It was necessary for me to consider whether Ms Porter might be able to trace or follow a potential share in the proceeds of sale against the beneficiaries personally.
[105] Section 49(1)(a) of the Administration Act permits the Court to make various orders requiring a person who has received assets in a distribution from an estate to transfer assets or make a payment to those who can establish they have suffered a loss through such a distribution. The ability of the Court to do this is however limited by the qualification on that power set out at the start of s 49:17
49 Following of assets, etc
(1) In any case where an administrator or trustee has made a distribution of any assets forming part of the estate of any deceased person or subject to any trust and there is nothing in any Act to prevent the distribution from being disturbed, the court may— …
make the various orders for a payment or other form of compensation as referred to in s 49(1)(a)-(d).
[106]I sought further submissions on this issue.
[107] Mr More accepted Ms Porter “may have a problem in terms of the opening paragraph of s 49(1)” in respect of the highlighted expression. He was referring to s 74(2)(b) of the PRA which specifically provides “no order made in respect of the application may disturb the distribution”.
[108] In Re Bimler, there had been a final distribution of the estate on 12 December 1991.18 On 25 June 1993, two of the deceased’s children made applications to the High Court, one was for an order under s 49 of the Administration Act requiring the transfer of the former matrimonial home, which had been earlier transferred to the deceased’s widow as a beneficiary, back to her as trustee and executrix of the estate. The other application was for an order under s 9 of the Family Protection Act extending the time for making an application for provision out of the estate. The Court of Appeal
17 Emphasis added.
18 Re Bimler [1994] 3 NZLR 13 (CA).
held, with the application of the proviso in s 49(1) of the Administration Act, the Court could not, with special leave, grant an application for tracing or following orders under s 49(1). The Court of Appeal held there was thus no jurisdiction for the Court to consider the applications that had been made under s 49 of the Administration Act.
[109] In McConkey v Clarke, a partner of the deceased wished to bring a PRA claim some two years after letters of administration had been granted and more than a year after there had been a deed of family arrangement which had resulted in agreement between the deceased’s four children, in their capacities both as administrators and residuary beneficiaries, and an earlier transfer of two farm properties in the estate.19 This was held to have been a final distribution of the estate.
[110] In the Family Court and again on appeal to the High Court, it was held Ms McConkey could not apply for an extension of time. In the High Court, Ellis J considered there was a statutory prohibition against any extension of the limitation period beyond the date of final distribution and that prohibition was of an absolute nature. In support of this, the Judge referred to the judgment of the Court of Appeal in R v Stewart.20 There, with regard to the second proviso to s 9 of the Family Protection Act, the Court said:
[23] In order to be of practical assistance to the first respondents, it would furthermore be necessary for the Court not merely to ignore the first portion of the second proviso to s 9, by extending the 12 month period notwithstanding the prior making of a final distribution, but also to disturb that distribution when Parliament has said it shall not be disturbed … It is, however, plain enough that Parliament was intending that no distribution made in terms of the will (or, in the case of an intestacy, in terms of the Administration Act 1969) should be disturbed. The distribution in this case was in terms of the will. The statutory language leaves no room for disturbance because of a circumstance that has not vitiated the provisions of the will. The same Parliamentary intention of protecting otherwise valid distributions can be seen in ss 47 to 49 of the Administration Act, which apply, inter alia, to Family Protection Act claims, especially in s 48(2).
[111] The Court of Appeal in McConkey v Clarke declined leave to appeal on the basis there was no realistic prospect of success. The Court said:21
19 McConkey v Clarke [2020] NZCA 83, [2020] NZFLR 207.
20 McConkey v Clarke [2019] NZHC 924, [2019] NZFLR 170, citing R v Stewart [2004] 1 NZLR 354 (CA).
21 McConkey v Clarke, above n 20, at [8].
The time to make this election and to pursue a claim under the [PRA] cannot now be extended, the estate having been distributed. There is simply no jurisdiction for the Court to make the order Ms McConkey seeks directing that the estate assets be ‘brought back’ so that she can start over and advance her claim under the [PRA]. Section 74 of the [PRA] makes clear that no application for an extension of time can affect a distribution already made.
[112] Although that case concerned an attempt to make a PRA claim after a final distribution, the Court of Appeal said the strictness of the limitation period applied in terms of s 74 also in respect of “a distribution”.
[113] I consider that the specific provisions of s 74 of the PRA (specifically, s 74(2)(b)) impose an absolute prohibition on Ms Porter being able to pursue, by way of following or tracing, recovery of a share of the proceeds of sale from the beneficiaries.
Summary
[114] Ms Porter sought and obtained a freezing order on the basis it would ensure the proceeds from the sale of a property would be available to meet a claim she might be able to make in PRA proceedings in the Family Court. That order was made with counsel inadvertently not advising the Court of the potential relevance of s 74 of the PRA and the way it would prohibit a Court from disturbing a distribution that had already been made in the administration of the estate.
[115] The beneficiaries applied to the Court for an order lifting the freezing order on the basis Ms Porter would not be able to obtain any share of the proceeds of sale because there would be no jurisdiction for the Family Court to extend the time for her to make a PRA claim as the estate had been finally distributed. That contention was addressed fully by the parties in affidavits filed in support of the application and in the submissions of counsel at the hearing. It was implicitly recognised that, if Ms Porter could not pursue her PRA claim, she would not be able to seek part of the proceeds of sale belonging to the beneficiaries following the sale of the property transferred to them as beneficiaries under the deceased’s will.
[116] For all the reasons set out earlier, I have held that, at the time the property was transferred to the beneficiaries and at the time Ms Porter filed an application with the Family Court under the PRA, there had not been a final distribution of the estate.
[117] However, prior to the hearing of the application, Ms Porter’s counsel responsibly brought to the attention of the Court that s 74 of the PRA, on the face of it, applied to the distribution of the property to the beneficiaries. The Court thus had to consider whether that section would prohibit Ms Porter from being able to recover the whole or part of the proceeds of sale through a claim under the PRA. If, in any PRA proceedings, the Family Court would have no jurisdiction to interfere with the distribution of the property to the beneficiaries and thus their entitlement to the proceeds from the sale of the property, then the Family Court would be unable to award Ms Porter a share of those proceeds of sale. The position would be the same if the Family Court had no jurisdiction to require this because there has been a final distribution of the estate.
[118] Because there has not been a final distribution of the estate, the Family Court could allow Ms Porter to bring proceedings there. It may be that she will want to continue with those proceedings, although it would appear there is likely to be little in the estate which might be of value to her. The freezing order was however made to ensure she would be able to recover the whole or part of the proceeds of sale of the property if, in the PRA proceedings, it was held she was entitled to a share of those proceeds. For the Court to allow the freezing order to continue, I must be satisfied that Ms Porter has at least a good arguable case that she is entitled to an order that a share of those proceeds of sale be paid to her.
[119] The time limits for bringing the necessary Court proceedings are strict. The Court cannot ignore those time limits simply because it might be seen that the consequences of applying them could result in some unfairness to Ms Porter.
[120] Having considered the matter and having heard further from counsel as to the application of s 74 of the PRA, I am clear that no Court will, through the contemplated PRA proceedings, be able to order that any part of the proceeds of the sale of the property be paid to Ms Porter. For the Court to make such an order would be to disturb
a distribution of part of an estate that had already been made by the administrator, a step which the Court is not permitted to do. That is so even when I have held there has not been a final distribution of the estate as a whole.
[121] I acknowledge Ms Fordham’s assurance to Mr Welch that Ms Porter would be paid the $10,000 that Ms Porter claimed for half of the repayments she had made to him and the undertaking the beneficiaries gave through Ms Fordham’s affidavit of 15 July 2021 that they would repay the balance of the loan from Mrs Hamilton of AUD13,000. In that affidavit, Ms Fordham also indicated the beneficiaries had decided Ms Porter should be refunded the further $15,000 she had paid to Mr Welch. The beneficiaries undertook to the Court that they would pay Ms Porter $25,000 from the money that had been frozen if it was determined she has no claim to the estate because the estate has been distributed. I expect them to honour that undertaking, although my determination has necessarily been that she has no claim to the estate because there has been a distribution of part of the estate rather than a final distribution.
[122] As I have decided Ms Porter will not be able to pursue proceedings to obtain any portion of the proceeds of sale which have been frozen, pursuant to the order made on 22 April 2021, it is appropriate for me to make an order that the freezing order be lifted. I now make such an order.
Costs
[123] In his further submission, Mr More acknowledged that the question as to whether the Family Court has jurisdiction to grant Ms Porter leave to bring proceedings is common to both the current application and the proceedings Ms Porter filed in the Family Court which currently stand adjourned. It may be that, with that issue being fully addressed in these proceedings, the parties will be spared the cost of continuing proceedings in the Family Court.
[124] Through the strict adherence to limitation provisions, the beneficiaries may well be receiving something of a windfall.
[125] The application for the setting aside of the order was made and allowed largely on grounds alternative to those on which the application was advanced.
[126] My tentative view is that costs should lie where they fall. If there is no agreement as to this, a memorandum is to be filed for the beneficiaries by 8 February 2022. A memorandum for Ms Porter is to be filed by 18 February 2022. A memorandum in reply can be filed within a further seven days. The memoranda are to be no longer than four pages. I will determine any issue of costs on the papers.
Solicitors:
LA Anderson QC, Barrister, Dunedin D J More, Barrister, Dunedin.
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