Ridley v Mulholland
[2022] NZHC 1007
•12 May 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-419-196
[2022] NZHC 1007
BETWEEN CATHERINE JANE RIDLEY
Plaintiff
AND
GREGORY KENNETH MULHOLLAND
Defendant
Hearing: 9 May 2022 Appearances:
JS Gurnick for the Plaintiff UA Kuddus for the Defendant
PA Depledge for Stephen Mulholland
Judgment:
12 May 2022
JUDGMENT OF GORDON J
This judgment is delivered by me on 12 May 2022 at 11 am pursuant to r 11.5 of the High Court Rules.
.....................................................
Registrar / Deputy Registrar
Solicitors: V Woodhams, Vosper Law, Cambridge
U Kuddus, Patel Nand Legal, Penrose
Counsel: JS Gurnick, Barrister, Hamilton
PA Depledge, Barrister, Hamilton
RIDLEY v MULHOLLAND [2022] NZHC 1007 [12 May 2022]
[1]Jocelyn Mulholland died on 1 October 2020.
[2] Mrs Mulholland’s daughter, Catherine Ridley, and son, Gregory Mulholland,1 are the administrators of their mother’s estate. They are also, respectively, the plaintiff and defendant in this proceeding.
[3] The main asset of the estate is Mrs Mulholland’s residential home in Manurewa, Auckland (the property). Gregory lived in the property with his mother prior to her death. He has continued to occupy the property since 1 October 2020 on a rent-free basis.
[4] Catherine applies to remove Gregory as an administrator of Mrs Mulholland’s estate.2 She also seeks an order for vacant possession of the property. Catherine says Gregory has refused to co-operate in the sale of the property.
[5]Gregory opposes the application.
Factual background
[6] Catherine and Gregory are two of Mrs Mulholland’s three adult children. The third is a brother, Stephen.3
[7] Mrs Mulholland died on 1 October 2020, leaving a will dated 31 May 2004 (the Will). In the Will, Mrs Mulholland appointed Catherine and Gregory as executors and trustees of her estate. The Will provided that after the trustees had paid debts, funeral expenses and any duties the residue was to be divided equally between Catherine, Gregory and Stephen. Probate of the Will was granted on 4 December 2020 and Catherine and Gregory were appointed administrators of their mother’s estate.
[8] Gregory was living with his mother in the property at the time of her death. He had been living there since approximately 2014. He did not pay rent while he was living with his mother. He says she did not expect that. Gregory acknowledges that
1 There is another sibling who is referred to below. To avoid any confusion I will refer to the three siblings by their first names. No disrespect is intended by the use of first names.
2 Pursuant to the Administration Act 1969, s 21.
3 Stephen filed an appearance reserving rights. He supports Catherine’s application.
he has continued to live in the property and has not paid rent to the estate since his mother’s death.
[9] At some stage prior to her death (it is not clear when) Mrs Mulholland took out a reverse mortgage with Heartland over the property. A letter from Heartland to Catherine dated 4 January 2021 says:
The current balance owing on the Heartland Home Equity Loan as at today is
$73,883.11. The loan term requires repayment within 12 months of the last nominated resident ceasing to reside in the property. Please note there is no provision for anyone else to reside in the property while the loan is still in place.
[10]The parties agree that Mrs Mulholland was the “last nominated resident”.
[11]The letter continues:
The current variable interest rate on this loan is 5.95% compounding monthly and is reviewed at least quarterly.
…
It is important that the beneficiaries of the estate are aware that interest on the Home Equity Loan continues to be calculated and compounded on to the loan monthly until such time as the loan is fully repaid. It is therefore in the interests of everyone concerned for someone to arrange for the loan to be fully repaid as soon as is practicable.
Please confirm the dwelling remains vacant, house insurance remains in place and valid for a vacant property and that the rates are paid up to date. Please also advise when the property is listed, with which real estate agent and at what price.
[12] There is no evidence of any reply to the Heartland letter but Catherine deposes in her affidavit that the loan to Heartland is still outstanding.
The parties’ respective positions
Catherine
[13] Catherine says that Gregory refuses to administer their mother’s estate in accordance with the Will and is living in the property without authorisation and to the detriment of all beneficiaries.
[14] She refers to the reverse mortgage agreement which is overdue for repayment and which explicitly precludes anyone else living at the property while the balance remains unpaid. She says the reverse mortgage is accruing interest which is compounding monthly as a debt against the estate. Catherine says the repayment of the reverse mortgage can only realistically be facilitated through the sale of the property and, while unpaid and accruing interest, diminishes the value of the estate for all beneficiaries.
[15] Catherine says that Gregory’s rent-free occupancy gives him little incentive to engage in the administration of the estate and to sell the property. His continuing unwillingness to do so is self-serving and not in the interests of the estate and its beneficiaries.
Gregory
[16] Gregory denies refusing to engage in the administration of the estate. He says he wishes to purchase the property and he made this known in front of his sister and brother to the solicitor who was acting on the application for probate. Gregory says that the lawyer advised them to obtain an independent valuation with the valuer to be nominated by his sister and brother. He says that his sister and brother nominated Property Valuations Ltd on 14 January 2021. That company conducted a valuation on 30 April 2021 and produced its report on 6 May 2021. The valuation report values the property at $830,000. Gregory says he paid for the report.
[17] He says the reason the sale of the property has been delayed is that Catherine has not responded to his request to produce the list of chattels she removed from the property and provide a valuation for them. He estimates that chattels of the estate are worth approximately $90,000 and the value of the items removed is approximately
$80,000. He says the estate should be administered in one go.
Catherine in reply
[18] Catherine says that the relevant chattels were removed by agreement with Gregory. She says he helped pack their mother’s personal china and belongings for later distribution, to be stored at her house until he and Stephen each had their own
home. She annexes to her affidavit photographs of boxes with handwriting on the boxes identifying the contents as crystal, silver and china. She says further that she and her two brothers verbally agreed to take things that meant something to each of them. She says she has the gifts she gave her mother including Lladro china and Royal Doulton china. Stephen has her father’s desk and the silver tea set. She says Gregory took her aunt’s chair and 3D pictures of England.
[19] Catherine disputes the value Gregory attributes to the items stored at her place saying they are worth around $2,000 and that having them valued would be disproportionately expensive compared to their value.
[20] She says she was unaware of Gregory’s wish to purchase the property until 24 December 2020. She says she had not seen the valuation completed by Property Valuations Ltd until service of Gregory’s affidavit on her on 26 April 2022. She notes in her reply affidavit that while the valuation provides an assessment of value at
$830,000, the online valuation of the property, as of 1 May 2022, is $935,000.4
[21] Catherine further says she does not believe that the value of the chattels has anything to do with the value of the property. They are of largely sentimental value only. She asserts that Gregory’s position in relation to the chattels is a tactical response to justify his lack of engagement in the sale of the property.
Stephen
[22] Stephen has not filed evidence but Mr Depledge on his behalf advises the Court that Stephen supports Catherine’s application.
Removal of Administrator – Legal Principles
[23] An administrator may be removed from that role pursuant to s 21 of the Administration Act 1969 (the Act). Section 21(1) provides as follows:
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
4 According to 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.
[24] In Frickleton v Frickleton the Court of Appeal confirmed the principles that should guide a Court in dealing with an application under s 21 of the Act to remove an administrator:5
(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.
(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.
[25]The Court of Appeal also referred to Crick v McIlraith where the Judge said:6
In relation to any application for any removal the Court must retain due respect for the wishes and indeed the autonomy of a testatrix.
The testator’s selection of executor should not lightly be set aside.
[26] The Court went on to say however that the interests of beneficiaries must always be the focus, citing the Privy Council in Letterstedt v Broers:7
If [the Court is] satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee might be removed. It must always be borne in mind, that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate.
5 Frickleton v Frickleton [2016] NZCA 408, [2017] 2 NZLR 154 at [29]; citing Tod v Tod [2015] NZCA 501 at [22] and Farquhar v Nunns [2013] NZHC 1670 at [13] (footnotes omitted).
6 Crick v McIlraith [2012] NZHC 1290 at [19]–[20].
7 Frickleton v Frickleton, above n 5, at [33] citing Letterstedt v Broers (1884) 9 App Cas 371 (PC) at 386 per Lord Blackburn.
[27]The Court next referred to its earlier decision in Kain v Hutton as follows:8
… mere incompatibility between trustees and beneficiaries is not enough … Any incompatibility must be at such a level that the proper administration of the trust is seriously adversely affected and it has become difficult for a trustee to act in the interests of the beneficiary.
[28] Finally, I note the comment by Health J in Farquhar v Nunns that the issues raised must be considered in a macroscopic and not microscopic fashion.9
Discussion
[29] Gregory has been living in the property rent-free since his mother’s death on 1 October 2020. As an administrator of the estate, living there rent-free is a breach of his obligation to the beneficiaries. The fact that he did not pay rent to his mother before she died is irrelevant.
[30] While Gregory continues to live in the property and it remains unsold, the interest on the reverse mortgage continues and is compounding. That is also a breach of his obligations as an administrator of the estate. Further, he continues to live in the property in breach of the terms of the mortgage as referred to in [9] above.
[31] Mr Kuddus submits there is no prejudice to the beneficiaries by Gregory continuing to live in the property because it is appreciating in value (referring to the difference between the 2021 valuation obtained by Gregory annexed to his affidavit and the desktop valuation referred to by Catherine). I do not accept that submission. The beneficiaries are entitled to the benefit of both the increase in capital value and rental income pending the sale of the property. The lack of any rental payments and the increasing amount of interest under the mortgage cannot be netted off against any increase in capital value.
[32] While Gregory says he wants to buy the property, the parties have not been able to agree on a fair value. The valuation report he puts before the Court values the
8 Frickleton v Frickleton, above n 5, at [35]; citing Kain v Hutton [2007] NZCA 199, [2007] 3 NZLR 349 at [267].
9 Farquhar v Nunns, above n 5, at [31]; citing Hunter v Hunter [1938] NZLR 520 (CA) at 528, adopting Great Western Railway Co v Owners of SS “Mostyn” [1928] AC 57 (HL) at 62.
property at $830,000. In light of the desktop valuation of $935,000 referred to by Catherine in her evidence, it would be a breach of Catherine’s duty to all the beneficiaries to agree that $830,000 is a fair value for the property.
[33] It seems to me that the only option in all the circumstances is for the market to determine the fair value. In other words the property needs to be sold on the open market. There is nothing to stop Gregory either bidding at auction or making an offer to compete with any other offers – depending on the method of sale adopted.
[34] The very highest that Gregory can put his defence is that Catherine has not responded to his request for a list of chattels stored in boxes in her home and for her to provide a valuation for them. He says this issue needs to be addressed in conjunction with the sale of the property. That position, however, needs to be seen in the context of the evidence from Catherine that Gregory assisted in packing up the chattels and accordingly Gregory knows what is in the boxes. Gregory concedes that he helped with packing up some of the chattels now in Catherine’s possession awaiting, she says, distribution amongst the three beneficiaries once her two brothers have their own properties. With that background, I do not accept that Gregory’s “defence” is one that should be accorded any weight in opposition to Catherine’s application.
[35] The further context is that while any sale is delayed the interest on the mortgage is increasing and no rental is being paid.
[36] Mr Kuddus accepts that there is hostility between the executors but submits that hostility cannot be relied on as the sole ground for the removal of an executor. That submission is correct as far as it goes but the point is that the hostility and inability of the parties to agree on a fair value for Gregory to purchase the property has not been possible.
[37] Gregory appears to be acting in his own interest in wanting to purchase the property and not in the interests of all beneficiaries in obtaining a fair value for the property. Once it was apparent that no agreement was possible on that issue between the parties there should have been no delay in listing the property for sale on the open
market. I further note that there is no evidence from Gregory as to his financial means to in fact purchase the property.
[38] As things stand and if Catherine’s application is not granted, in effect Gregory is holding the other beneficiaries to ransom. He says he wishes to purchase the property for a price he considers is the fair market value. But as I have already said if Catherine were to accede to that proposal she would be in breach of her duty to all beneficiaries. In the meantime there is nothing that compels Gregory to pay rent.
[39] Mr Kuddus says some of the delay can be sheeted home to Auckland operating under restrictions in the latter part of last year because of COVID-19 circulating in the community. However, there was no evidence as to any particular difficulties that would have prevented the property being sold. The Court can take notice that properties were sold during periods when there were restrictions on movement in the community. Even if the Court were to accept there were such difficulties in the latter part of 2021, it is now May 2022. I give this submission made by Mr Kuddus little weight.
[40] Gregory’s position is that if Catherine’s application is granted it will in fact result in more cost to the estate: first, Mr Kuddus submits there will be a two-step process in relation to the title for the property. Gregory’s name will need to be removed as a registered proprietor and then there will be a transfer to the new owner. For my part I would have thought that the conveyancing attendances in relation to the first step would be relatively limited. As a second point Mr Kuddus submits that there will be fees payable to a real estate agent if the property is sold on the open market. That is true, but sale on the open market is the only way in which a fair value for the property can be achieved.
[41] I raised with Mr Gurnick, counsel for Catherine, whether an independent administrator might be appointed. Mr Gurnick resisted that suggestion having regard to the relatively small size of the estate and the cost associated with an independent administrator.
[42] Mr Kuddus suggested that a way forward might be for both Gregory and Catherine to be removed and for an independent administrator to be appointed in place of the two of them. I suspect that submission was made somewhat “on the fly” as it is somewhat inconsistent with Gregory’s position that he wants to buy the property.
[43] I accept Mr Gurnick’s submission. I do not consider it is necessary to appoint an additional administrator in Gregory’s place. I am satisfied on Catherine’s evidence that she will take all reasonable steps to wind up the affairs of the estate in an orderly way. She says in her affidavit that she simply wishes to administer her mother’s estate in the way that her mother intended as set out in the Will. Catherine notes it has been 20 months since her mother passed away and she wants her mother’s wishes to be followed, all her debts paid and her house sold.
[44] In the circumstances, considerations of suitability, practicality and efficiency lead me to the conclusion that Catherine’s application to remove Gregory as a trustee is one that should be granted. That will enable the property to be sold and the proceeds distributed to the beneficiaries.
Should an order for vacant possession be made?
[45] Catherine seeks an order for vacant possession of the property. Mr Gurnick says that it is clear from Gregory’s affidavit that he has a strong desire to remain living in the property. Without an order for vacant possession, a sale on the open market could be jeopardised.
[46] Mr Gurnick refers to the judgment of Fitzgerald J in Jensen v Jensen10 where such an order was sought in somewhat similar circumstances. The Judge commented in that case that with one brother having been removed as an executor, the property would vest in the other brother as the sole continuing executor.11 As the Judge said, the brother who was the continuing executor, on behalf of the estate, would have the right to exclude all other persons from possession.12
10 Jensen v Jensen [2019] NZHC 329.
11 At [26].
12 See Hinde, McMorland and Sim Land Law in New Zealand (online looseleaf ed, LexisNexis) at [3.008]: “A tenant in fee simple in possession is entitled to exclude all other persons from the land
[47] Fitzgerald J noted that an order for vacant possession could be made unless the brother who was removed as an executor could demonstrate legal entitlement to continue to occupy the property13 – which he endeavoured to do. In this case Gregory does not argue that he has a legal entitlement to continue to occupy the property. His right to live in the property ceased on his mother’s death. Catherine, on behalf of the estate will have the right to exclude all other persons from possession.
[48] As Fitzgerald J noted, vacant possession orders have been made in similar cases where the Court’s assistance was required to bring that about.14 Given the strongly expressed desire by Gregory to continue living in the property I consider it appropriate to make an order for vacant possession.
[49] Mr Gurnick properly accepted that Gregory would need time to arrange alternative accommodation. To give Gregory time to make suitable arrangements but so as not to delay the sale of the property any longer than necessary, the vacant possession order will take effect two months from the date of this judgment. Unless there is agreement by Catherine on behalf of the estate to any extension, Gregory must vacate the property on or before 12 July 2022.
Result
[50]I make orders:
(a)Removing the defendant Gregory Kenneth Mulholland as an administrator of the estate of his mother, Jocelyn Hendra Mulholland; and
(b)That the defendant must vacate the property at 1/35 Rathmar Drive, Manurewa, Auckland no later than 12 July 2022 (unless Catherine, on behalf of the estate, agrees to an extension of that date).
and, if wrongfully dispossessed, can recover possession by peaceable re-entry or by taking proceedings for recovery of possession”.
13 Jensen v Jensen, above n 10, at [26].
14 At [37], citing Aronui Ko Huarau Trust Board v Harris [2015] NZHC 2911; Moore v Harry [2017] NZHC 1587; Macfarlane v Perpetual Trust Ltd [2018] NZHC 1055; Public Trust v Turner [2017] NZHC 2979.
Costs
[51] Catherine, as the successful party, is prima facie entitled to costs. If the parties are able to agree costs then a joint memorandum should be filed no later than 20 working days from the date of this judgment.
[52] In the event costs cannot be agreed Catherine is to file and serve an application for costs within five days of the date for the joint memorandum. Gregory is to respond by filing and serving a memorandum within five days of the date of service of Catherine’s memorandum.
[53] Memoranda should not exceed four pages (excluding any attachments). I will determine costs on the papers.
Gordon J
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