Public Trustee as Executor of the estate of Sallen (deceased) v Williams

[2015] NZHC 2624

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-2703 [2015] NZHC 2624

BETWEEN

PUBLIC TRUST AS EXECUTOR OF

THE ESTATE OF CORNELIA MARY SALLEN (DECEASED)

Plaintiff

AND

ELVIE CHRISTINE WILLIAMS Defendant

Hearing:	12 October 2015
Appearances:	A R Gilchrist for Plaintiff S R G Judd for Defendant
Judgment:	23 October 2015

JUDGMENT OF KEANE J

This judgment was delivered by me on 23 October 2015 at 4.30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Public Trust, Christchurch

Morrison Kent, Auckland

PUBLIC TRUST v WILLIAMS [2015] NZHC 2624 [22 October 2015]

[1]      Cornelia Sallen died on 7 September 2011, aged 92, one month after she made her last will appointing her daughter Elvie Williams her executrix and trustee. Under the will Elvie Williams, one of Mrs Sallen’s four children, received 40 per cent of her residuary estate, as did another daughter, Beverly Lang.  Her son and her third daughter each received 10 per cent.

[2]      On 13 October 2011 Ms Williams obtained probate.  As a result, however, of an application made by Ms Lang, this Court made an order on 31 October 2013, by consent, under which Ms Williams ceased to be executrix and the Public Trust was appointed in her place.

[3]      By then Mrs Sallen’s half share in her Epsom family home had already passed to Ms Williams as executrix on 19 October 2011.   More materially, Ms Williams had held the other half share in her own right since 19 April 2005, as a result of agreements she and Mrs Sallen had entered into first on 1 July 2003 and then on 6 August 2005.  Furthermore, the property had already been sold for $1.3M. That had occurred on 26 April 2012 when Mrs Lang withdrew a caveat she held over the property.

[4]      In this present case the Public Trust advances five causes of action against Ms Williams, contending globally in the fifth that as a result of the 2003 and 2005 agreements, and a loan obtained in 2009 from Sentinel Limited, all three of which Ms Williams initiated, she unjustly enriched herself at her mother’s expense, and thus at the expense of her mother’s estate, by at least $187,473.72.

[5]      In its first cause of action the Public Trust contends that Ms Williams unconscionably acquired her half interest in the property on 19 April 2005, under the agreement made then, at a price fixed by valuation for the purpose of the 2003 agreement, $575,000, and without paying any interest on the payments she had since made, $261,000, as the 2003 agreement required.  The Public Trust seeks to have both agreements set aside and an account taken.

[6]      In its next three causes of action, and also its fifth, the Public Trust contends that in 2009 Ms Williams unconscionably obtained from Sentinel Limited a reverse

annuity loan, secured by mortgage registered against the title to the Epsom property on 16 April 2009, and acquired or converted to her own use, equally unconscionably, four loan advances between 16 April 2009 – 18 July 2011 totalling $85,000.  On the sale of the property and the discharge of the mortgage Ms Williams paid half the sum owed to Sentinel.   The Public Trust looks to her for the other half, which with interest to the date of the claim amounted to $49,973.72.

[7]      A five day fixture has been given, to commence on 22 February 2016.  But before then an application for particular discovery, which the Public Trust made on 2

September 2015, must be resolved.  It is opposed and must first be set against the disclosure Ms Williams has made thus far.

Ms Williams’ disclosure

[8]      On 24 February 2015 Sargisson AJ made an order for tailored discovery on the agreed basis that there had already been discovery in the earlier case resulting in the appointment of the Public Trust.  By consent, she limited the duty of disclosure to any documents, which had not already been disclosed, on which either party relied or which were adverse to their case, or which adversely affected or supported the case of the other.

[9]      In her affidavit of documents, dated 11 June 2015, Ms Williams said that in the initial case she had already disclosed all the invoices and receipts that she had relating to the renovations of Mrs Sallen’s home up until the end of 2005.  She had no others.  Between 2005 – 2011 she had not needed to retain any.  She had not had any need to account for her expenditure.

[10]     As to any documents recording her shared living expenses with Mrs Sallen between April 2009 – August 2011, again she said that she had not retained any and that she had not had any need to.  She had disposed of any soon after such expenses were incurred and she was unable to list any.

Two document categories

[11]     In  an  attempt to fill that void, the Public Trust made its application  for particular discovery on 2 September 2015, seeking four categories of documents; and primarily those in the two immediately pertinent categories:

(i)       Receipts and invoices for any payments related to villa renovations by Ms Williams or her companies for 2005 – 2009.

(ii)      Receipts and invoices as above for 2009 – 2011 (during the period of the Sentinel advances).

[12]     The Public Trust now accepts that it is fixed, as to those first two categories, by Ms Williams’ affidavit of documents in this case, dated 11 June 2015, in which she had already denied that she holds any such documents.   It also accepts that documents in another of its four categories, concerning expenditure on the construction of a garage, are irrelevant.

[13]     As a result, the Public Trust now pursues its application only as to its fourth category of document, “Records of personal income and company activities for 2010

– 2011” (which, to be consistent, ought to be 2009 – 2011).  However, it wishes as well  to  amend  its  application  to  include  documents  in  a  yet  further  category, “Records of personal income and company activities for 2003 – 2005”.

[14]     Ms Williams opposes this application.  She contends that documents in both these categories are irrelevant and that the category the Public Trust identified for the first time at the hearing itself is doubly disqualified. As to that category, she has had no notice and is prejudiced.

Necessity for relevance

[15]     HCR 8.19 permits an order for particular discovery to be made “at any stage in the proceeding”:

if  …  it  appears  to  a  Judge,  from  evidence  or  from  the  nature  or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered 1 or more documents or a group of documents that should have been discovered.

[16]     As will be apparent from the rule, the fact that the Public Trust only identified the further category at the hearing is not necessarily fatal.   The essential issue is whether documents in that category, and those in the category as to which the Public Trust did give notice, are relevant to a “live and pleaded issue”; a material “matter in dispute”.1

Personal income and company activities: 2003 – 2005

[17]     The Public Trust contends that the category of documents it first identified at the hearing, those concerning Ms Williams’ personal income and company activities between 2003 – 2005, is relevant to its first cause of action, and the related aspect of its fifth cause of action, on the issue of unconscionability.

[18]     There is no issue on the pleadings as to those two causes of action that on 1

July 2003 Mrs Sallen and Ms Williams agreed in writing that Ms Williams was to buy a half share in Mrs Sallen’s Epsom property for $288,000 based on a valuation dated 10 June 2003; that Mrs Sallen was to gift Ms Williams $27,000; and that Ms Williams was to pay to Mrs Sallen $261,000 by 31 March 2005.  The only issue is as to whether that agreement was more than an agreement in principle.

[19]     Nor is there any issue that on 6 April 2005 Ms Williams and Mrs Sallen entered into the second agreement confirming their 2003 agreement, whatever its status may be, or that they then confirmed that Ms Williams had by then paid to Mrs Sallen $261,000, leaving $27,000 due, to be the subject of the deed of gift.   Nor is it contested that Mrs Sallen also then gifted $27,000 to Ms Williams by deed and transferred to her a half interest in her property.

[20]     The issue to which Ms Williams’ personal income and company activities between 2003 – 2005 is said to be relevant goes to whether, or to what extent, she benefited unconscionably as a result of the two agreements; and in a limited sense

only.

1      Attorney-General v Dotcom [2013] NZCA 43; (2013) 21 PRNZ 406.

[21]     As to that issue the Public Trustee first says in paragraph [12] of its amended statement of claim that Ms Williams did not make the payments directly to her mother and that she did not make all of them herself:

… the payment of $261,000 was not made direct to the deceased, but was made by the defendant and/or companies of which she is a director or associated with towards renovations and other improvements to the property for the benefit of both of the anticipated owners of the property.

[22]     In  her  statement  of  defence  Ms  Williams  admits  those  allegations  but, implicitly, contends that the expenditure was entirely hers:

… at that time all of the expenditure she incurred and the personal labour that she expended on the addition was for the benefit of the deceased and the defendant took all of the risk because she had no security over the property or  any other security for  the financial  expenditure she incurred  and  the labour she expended.

[23]     The Public Trustee then says at paragraph [24] of its amended statement of claim:

… by paying the sums due under the 2003 agreement on a periodic basis up to  2005,  the  defendant  obtained  the  benefit  of  making  payments  on  an interest free basis for over a two year period, and acquiring a property in

2005 at a price, if paid in full to the deceased, that reflected its 2003 value.

[24]     In denying those allegations outright Ms Williams adds this:

(a)       By payment of the sums that she paid to renovate the property the defendant  incurred  expenditure  for  the  benefit  of  the  deceased which,  otherwise,  the  defendant  could  have  invested  in  other property or deposited in the bank or invested in other securities and received a return on that investment.

(b)       The defendant and the deceased did not know in 2003 whether the land value of the property would go up or down in the future and the defendant took all of the risk by spending her own money and incurring substantial labour on improving the property for the benefit of her mother with no security.

[25]     The Public Trust contends that Ms Williams can only claim to have foregone the benefits she speaks of in paragraph (a), if she made the payments personally.  She cannot make that claim if they were made by companies of hers, subject to her direction.    Thus,  the  Public  Trustee  contends,  to  establish  whether  she  acted

unconscionably, it is relevant to establish the source of the payments she made, if only by inference.

[26]     Ms Williams contends in response that the distinction the Public Trust makes is immaterial to whether or not she acted unconscionably.  The Public Trust accepts that she made, or caused to be made, the payments the 2003 agreement required, as the 2005 agreement confirms.  It does not matter, she contends, whether she made them personally or they were made by a company subject to her direction.  In either event, she lost the ability to deploy those funds elsewhere; and that self evident point is the only one she seeks to make in paragraph (a).

[27]     I agree with Ms Williams’ response.  Whether she acted unconscionably will turn primarily, if not exclusively, as the Public Trust pleads, on whether the 2003 and

2005 contracts were inherently unconscionable for the reasons I have already outlined.  It is unlikely to be of any moment whether Ms Williams made payments the Public Trust concedes she did make personally or directed a company to make them.  In either event she lost the ability to deploy them for benefit elsewhere.  That is self evident.

[28]     Furthermore, while I am unaware of the scale of disclosure, which might be called for, potentially it could prove quite disproportionate to the significance of the distinction the Public Trust seeks to make in the first and fifth causes of action.

Personal income and company activities: 2009 - 2011

[29]     The Public Trust then contends that the second category of documents, which Ms Williams does have notice of, “Records of personal income and company activities for 2009 – 2011”, is highly relevant to the issue arising under the four causes of action concerning the Sentinel loan: whether she obtained that loan and used the advances made under it unconscionably for her own purposes.

[30]     The Public Trustee contends that the first advance on 16 April 2009, $25,000, was for the ostensible purpose of the property renovation but there is no evidence as to how it was used.  The second, on 18 November 2009, $20,000, was also for that purpose and for concrete work, but Ms Williams used it for her own purposes.  The

two $20,000 advances on 15 November 2010 and 18 November 2011 were to cover Ms Williams’ living expenses, while looking after Mrs Sallen, and to meet the cost of nursing help and a wheel chair. They too were misappropriated by Ms Williams.

[31]     Ms Williams denies outright that she used any of these advances for any purpose  other  than  those  for  which  they were  made,  to  finish  off  the  property renovation and to care for Mrs Sallen.  She also says that she has already met her only liability under the loan, as to a half share of the advances made, by repaying that liability when the property was sold.

[32]     To sheet home any of its four causes of action against Ms Williams, relating to the Sentinel loans, the Public Trust must establish that she did indeed use the advances for her own purposes and not the purposes for which the advances were made.  To do that it must establish how Ms Williams deployed the funds advanced and it cannot do so by direct documentary evidence.   Ms Williams has said that she retains none of the invoices and receipts.

[33]     The result is that the Public Trust is thrown back on inference.   To establish that Ms Williams must have misappropriated the advances the Public Trust hopes to establish  from  records  relating to  her personal  income and  the activities  of her companies, during the years 2009 – 2011, that her means were negligible.  The more negligible they were, the Public Trust contends, the more likely it is that she obtained the loan unconscionably and misapplied the advances.

[34]     I accept that documents within the category that the Public Trust seeks to have disclosed could have that possible relevance and, in the absence of better direct evidence, I consider, Ms Williams should disclose to the Public Trustee any documents she holds relating to the years 2009 – 2011 going to her then income or other sources of funds for her own use.

[35]     The Public Trust should have recourse to any documents establishing Ms Williams’ declared income during those years; her tax returns, and any other documents verifying her sources of income.  She should also disclose any advances made to her by companies in which she had an interest.  Any wider disclosure as to

the  activities   of  any  such   companies,   on   the  evidence   I  have,   would   be disproportionate.

Orders

[36]     I grant the Public Trust’s application for particular discovery in part only:

(a)      I grant leave to the Public Trust to amend its application to seek disclosure of documents establishing Ms Williams’ personal income and company activities for the years 2003 – 2005, but decline that aspect of her application.

(b)I grant the Public Trustee’s application as to the second category of documents concerning Ms Williams’ personal income and company activities between 2009 – 2011, but only to the extent that I have just prescribed in paragraph [35].

(c)      I  require  Ms Williams  to  comply with  the  order  I have  made  in paragraph (b) within 10 working days of the issue of this decision.

[37]     Normally costs would follow the event.  In this instance, however, both the

Public Trust and Ms Williams have had mixed success, and I will not make any award of costs either way.

P.J. Keane J