Rushton v Guthrie
[2023] NZHC 2983
•26 October 2023
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2022-412-066
[2023] NZHC 2983
UNDER the Trusts Act 2019 and Property Law Act 2007 IN THE MATTER
of the Estate of Beverley Ann Rushton
BETWEEN
KERRY MARIA RUSHTON
Plaintiff/First Counterclaim Defendant
AND
JENNIFER ANNE GUTHRIE and CHRISTOPHER WILLIAM RUSHTON
Defendants/Counterclaimants
JONATHAN ANDREW BROWN
Second Counterclaim Defendant
Hearing: 20 September 2023 Appearances:
G A Paine for Plaintiff/First Counterclaim Defendant R M Reeve for Defendants/Counterclaimants
Judgment:
26 October 2023
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 26 October 2023 at 2.15 pm pursuant to rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
RUSHTON v GUTHRIE [2023] NZHC 2983 [26 October 2023]
Introduction
[1] Beverley Ann Rushton (Beverley) died on 9 January 2018 leaving six children and also grandchildren.
[2] The plaintiff/first counterclaim defendant, Kerry Maria Rushton (Kerry), is one of Beverley’s children.
[3] The defendants/counterclaim plaintiffs, Christopher William Rushton (Christopher) and Jennifer Anne Guthrie (Jennifer), are the executors and trustees of Beverley’s last will.1 Christopher is Beverley’s grandson and Kerry’s son.
[4]Kerry has another son named Shawn Richard Driscoll (Shawn).
[5] The second counterclaim defendant, Jonathan Andrew Brown (Jonathan), is Beverley’s brother.
[6] The relations between some family members are dysfunctional and the administration of Beverley’s estate has been plagued by litigation. The administration is now almost complete, but two matters remain outstanding.
[7] First, in this proceeding Kerry applies to remove the executors and to replace them with a corporate trustee. She also claims reimbursement for expenses she says she has incurred on behalf of the estate.
[8] Second, Kerry and Jonathan are co-owners with the executors of a property at Forbury Road, Dunedin. They have an option to purchase the executors’ interest in the property, but have not exercised it. The executors are seeking an order for the sale of the property, so that the estate can be wound up and a final distribution made to the residuary beneficiaries.
[9] This judgment concerns an application by the executors seeking summary judgment and/or strike out of Kerry’s claims, and summary judgment on their
1 I will refer to Christopher and Jennifer together as “the executors”.
counterclaim for an order for sale of the Forbury Road property under s 339 of the Property Law Act 2007.2
[10] Kerry has opposed the executors’ applications. Jonathan has not taken any part in this proceeding.
[11]The issues that arise are broadly stated as:
(a)whether Beverley’s statement of claim should be struck out in whole or in part as disclosing no reasonable cause of action;3 and
(b)whether the executors have satisfied their onus that Beverley and Jonathan have no arguable defence to the application for an order for sale of the Forbury Road property.4
Background
[12] The executors were granted probate of Beverley’s last will and codicil on 27 June 2018.
[13] At the time of her death Beverley was living in a rest home, but for many years previously she lived at 18 Forbury Road, Dunedin. Kerry has also lived at the Forbury Road property continuously since around 2000.
[14] Beverley’s two major assets were her interests in the Forbury Road property and 18 Seaforth Street, Karitane. She and Jonathan were equal co-owners of the properties, having inherited them from their mother.
[15]Under her will, Beverley:
(a)appointed Christopher and Jennifer (who is a lawyer and not a family member) as her executors and trustees;
2 There is an additional counterclaim which I understand Mr Reeve accepts is unsuitable for summary judgment. I say no more about that particular counterclaim.
3 High Court Rules 2016 (the Rules), r 15.1.
4 Rule 12.2.
(b)directed that her interest in the Seaforth Street property should be put into a trust for the purpose of retaining the property as a holiday home for the family, and of which trust Christopher and Shawn were to be the final beneficiaries;
(c)gave no specific directions in respect to the Forbury Road property; and
(d)left the residue of her estate to be divided into three equal parts, with two parts to Kerry and one part to be held on trust for another daughter, Jacquine Rushton (Jackie).
[16] In June 2019, Kerry challenged Beverley’s will in the Family Court and sought further provision for herself under the Family Protection Act 1955 and the Law Reform (Testamentary Promises) Act 1949. In August 2020, two other of Beverley’s daughters also filed claims against the estate, which were consolidated with Kerry’s proceeding.
[17] On 21 September 2020, there was a judicial settlement conference conducted by Judge Flatley in respect to those claims. A settlement was reached. Following the conference a deed of family arrangement was prepared and signed by all affected parties except for Jonathan. Although Jonathan did not sign the deed his agreement to its terms was confirmed by his solicitors and, on 7 October 2020, the Family Court made consent orders at the parties’ request.
[18] The consent orders included that the Seaforth Street property would not be put into trust but would be sold, with the net proceeds to be distributed in equal shares to Jonathan and to Beverley’s estate. Kerry was to get a one-quarter share of the Forbury Road property and the first option to purchase the estate’s remaining one-quarter share in that property for $143,500 in full and final settlement of her court proceedings and entitlements under Beverley’s will. Kerry was to forgo her share in the residue of the estate in favour of Christopher and Shawn.
[19]The relevant terms of the consent orders were as follows:
iii.Kerry Marie Rushton (“Kerry”) will receive a quarter-share of the property known as 18 Forbury Road, Dunedin (“Forbury Road”) (i.e. half the half share presently owned by the Deceased’s estate) in full and final settlement of both her proceedings and her interest under the Will.
iv.Either Jonathan or Kerry will purchase one quarter-share of Forbury Road from the Deceased’s estate at a value of $143,500, with Kerry being granted first option to purchase same from the Deceased’s estate;
v.Kerry and Jonathan will enter into a property-sharing agreement or lease on terms suitable to themselves in respect of Forbury Road, with consent of either party to same not being unreasonably withheld;
…
ix.Kerry will forgo her 2/3rd share of the Deceased’s residuary estate in favour of Shawn Driscoll and Christopher William Rushton, who will receive that share as tenants in common in equal shares;
x.Jacquine Frances Rushton will continue to receive a 1/3rd share of the Deceased’s residuary estate, as per the Will;
…
xii.All parties to this settlement will do all things reasonably necessary to ensure these Orders, where applicable, prevail over the terms of the Will;
xiii.All costs associated with Kerry’s, Donna’s and Debbie’s proceedings will lie where they fall, with no party being required to answer to any other party in respect of any claims, actions, suits or further obligations, damages or other liabilities arising any way from the Deceased’s estate;
…
[20] As far as the deed of family arrangement is concerned, it is sufficient to note that the deed set out the terms of the agreed settlement which were later incorporated into the consent orders. For the purposes of this proceeding the executors rely on two clauses in the deed, cls 1.5 and 3.
[21] Clause 1.5 related to the terms upon which Kerry and Jonathan would share the Forbury Road property following the exercise of the option to purchase and provides:
Kerry and Jonathan will enter into a property-sharing agreement or lease on terms suitable to themselves, with consent by either party to same not being unreasonably withheld to frustrate the terms of this settlement.
[22]Clause 3 was a release from further claims and provides:
The parties hereby indemnify and release each other from all claims, actions, suits or further obligations, and from any demands for costs, damages or other liabilities arising in any way from this deed, and acknowledge that this deed may be pleaded as a complete defence to any future action brought in connection with the matters the subject of this deed.
[23] In November 2020, Kerry filed an appeal from the making of the consent orders. That appeal was abandoned in February 2021.
[24] The sale of the Seaforth Street property did not run smoothly. Kerry had, without authority, granted a long lease of the property to third parties and the executors were involved in litigation before the Tenancy Tribunal to secure the tenants’ removal.5
[25] The executors were also forced to take proceedings in this court against Jonathan, who would not co-operate in the sale of the Seaforth Street property.6 The property was subsequently sold.
[26] The executors have attempted to engage with Kerry and Jonathan about giving effect to the terms of the consent orders, particularly in relation to:
(a)transferring legal title of Kerry’s one-quarter interest in the Forbury Road property to her; and
(b)whether they wish to exercise their options to purchase the estate’s remaining one-quarter interest in the Forbury Road property.
[27] Specifically, from October 2020 the executors have sought a decision from Kerry and Jonathan as to whether they will exercise the options and, if so, when. On 15 October 2020, counsel for the executors, Mr Reeve, wrote to Kerry’s counsel, Mr Paine, stating:
Clause 1.4 [of] the deed grants your client first option to purchase one quarter- share of Forbury Road from the estate. We are instructed that the executors wish to grant until 29 January 2021 to exercise that option, after which they will make enquires with [Jonathan’s] solicitors. As such, your client has just
5 Estate B Rushton v Meiklejohn [2020] NZTT Dunedin 4283890.
6 Guthrie v Brown [2022] NZHC 748.
under four months to exercise her options. That time frame is more than reasonable.
[28]On 17 June 2022, Jennifer wrote to Kerry and Jonathan as follows:
We refer you to the Court Order dated 7 October 2020 and in particular clause
(iv) pursuant to which one of you will purchase the one quarter share of Forbury Road at a value of $143,500. While there has subsequently been some correspondence about the purchase of this remaining one-quarter share, we are now at the stage where the sale of this share must be actioned.
As a matter of urgency, we would appreciate your discussing this between yourselves. If neither of you is in a position to or wishes to buy this quarter share, the Executors, subject to the approval of the other residuary beneficiaries Jacky and Shawn would agree to another family member to buy it.
…
Kerry, while your ownership of a one-quarter share has not been registered, you are the equitable owner of this share. As we discussed on the phone when you called, we would like to attend to the paperwork to have this share transferred to you as soon as possible. For that, we require your IRD number and also need to complete the AML identification requirements. It would be appreciated if you would provide us with your IRD number and also contact me about the other requirements and to make a time to complete the transfer paperwork with one of our conveyancers.
[29] Although Kerry says she believes she replied to this correspondence, I am satisfied she did not. What she did do was file this proceeding on 7 July 2022.
[30] Notwithstanding the issue of proceedings, the executors sought to advance matters in relation to the exercise of the options to purchase. I accept it is their wish that Kerry and/or Jonathan would exercise their options rather than forcing a sale of the property.
[31] On 11 August 2022, Mr Win from Wilkinson Rodgers wrote to both Kerry and Jonathan on behalf of the executors, noting that the executors were “in the dark” and seeking an urgent indication from them as to whether they wished to exercise their options to purchase. In a summary of the executors’ position, Mr Win wrote:
To that end, as a matter of urgency, can we please have your position in writing as to whether or not either of you wish to exercise the option by not later than 19 August 2022. I note that there has been previous legal correspondence to you on this matter, with no substantive position yet taken by either party as a result of that correspondence.
While our client executors appreciate that flexibility in this matter may be congenial to family accord, they also have a legal duty to realise the assets of the Estate for final distribution. I refer you to section 26 of the Trusts Act 2019 in this regard, which makes the executors’ duty to act for the benefit of the residuary beneficiaries explicit at a statutory level.
If we do not hear from you shortly with some constructive proposal for resolving the issue of this final quarter-share, the executors will be instructing counsel to seek sale of the property on the open market pursuant to the Property Law Act 2007 …
[32]There was no response from Kerry or Jonathan to this letter.
[33] An additional issue between Kerry and the executors has been that Kerry has made demands for reimbursement of sums she says she expended on the Seaforth Street and Forbury Road properties on behalf of the executors. The executors have not accepted all her claims, but have reimbursed Kerry sums they accept were properly payable from the estate in three tranches totalling $17,032.43. The executors have set out in correspondence what claims they accept and those they do not accept, and why. Kerry does not accept that she has been paid her entitlement.
The defendants’ application to strike out the statement of claim
[34] Although the executors have applied for summary judgment in respect to the claims made by Kerry in her statement of claim, I do not consider summary judgment is available to them. This is because of the requirement in r 12.2 of the High Court Rules that to obtain summary judgment they must satisfy the Court that none of the causes of action in Kerry’s statement of claim can succeed. For reasons I shall come to, I cannot exclude the possibility that Kerry has an arguable cause of action for reimbursement of expenses from the estate, and that while her present pleading is deficient it could be saved by repleading.
[35] I turn now to consider the executors’ application for an order striking out Kerry’s statement of claim.
Strike out principles
[36]Rule 15 of the High Court Rules relevantly provides:
15.1Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it
---(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
…
(2)If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3)Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.
(4)This rule does not affect the court’s inherent jurisdiction.
[37] The court will exercise its power to strike out a pleading sparingly and only in clear cases. Before striking out a claim under r 15.1(a), the court must be satisfied that the claim is clearly untenable and cannot succeed.7 Further, the court has traditionally been wary of the potential inefficiency of applications to strike out part of a pleading, but that may be justified if it could substantially reduce the burden of trial or preparing for trial.8
[38] I accept the general approach in Attorney-General v McVeagh, where the Court of Appeal said:9
The Court is entitled to receive affidavit evidence on a striking out application, and will do so in a proper case. It will not attempt to resolve genuinely disputed issues of fact and therefore will generally limit evidence to that which is undisputed. Normally it will not consider evidence inconsistent with the pleading, for a striking out application is dealt with on the footing that the pleaded facts can be proved; see Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641, 645-646, Southern Ocean Trawlers Ltd v
Director-General of Agriculture and Fisheries [1993] 2 NZLR 53 at pp 62- 63, per Cooke P. But there may be a case where an essential factual allegation is so demonstrably contrary to indisputable fact that the matter ought not to be allowed to proceed further.
The statement of claim
[39] Kerry’s statement of claim is an unsatisfactory pleading in several important respects as it:
7 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267; and Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
8 ANZ Bank New Zealand Ltd v Frost and Sutcliffe [2014] NZHC 245 at [24].
9 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.
(a)appears to advance more than one cause of action, but they are not differentiated and are merged into a discursive series of allegations;
(b)does not indicate the nature of each cause of action;10
(c)fails to provide sufficient particulars of the claims;11
(d)does not specify separately the relief or remedy sought on each cause of action; and12
(e)makes a claim for interest without specifying the rate or basis for such a claim.13
[40] In short, the statement of claim is wholly deficient in that it fails to satisfy both the requirements of the Rules and its basic purpose of informing the executors and the Court of the essential basis of the claims and their necessary ingredients.14
[41]The principal relief sought in the statement of claim is:
(a)the removal of the executors as trustees of the estate and their replacement with a corporate trustee; and
(b)that Kerry be paid for work for the estate.
The claim for reimbursement for work
[42] Insofar as Kerry seeks payment for her work, the statement of claim does not disclose an adequate legal basis for such a claim, the work done or the amounts claimed.
[43] The executors served, on 7 October 2022, a notice for further particulars of the claim. The response to the notice is as inscrutable as the statement of claim itself.
10 Rule 5.26(a).
11 Rule 5.26(b).
12 Rule 5.27.
13 Rule 5.26(c).
14 Robert Osborne and others McGechan on Procedure (online, Thomson Reuters) at [HR5.26.03].
However, in respect to the amounts being claimed by Kerry for her work, her response stated, “The quantum of the payment being sought is per the Schedules filed and served”.
[44] Kerry had attached one such schedule to her affidavit of 28 June 2022, which claimed as “Costs paid by Kerry for B. A Rushton estate…” itemised amounts totalling
$59,722.49 and went on to itemise further amounts not yet incurred. However, she has also submitted to the executors another schedule, making additional claims where the amount of costs paid totalled $75,892.39.
The claim for removal of the executors
[45] There are allegations in the statement of claim that appear to be directed to the removal and replacement of the executors, which are:
(a)the executors have refused to reimburse Kerry for work and outgoings on behalf of the estate (but no particulars are provided of the work or outgoings);15
(b)the executors intend to pay residuary beneficiaries before making payment of the debts of the estate;
(c)the executors have failed to pay rates and insurance on the estate’s properties (but no particulars are provided);
(d)the executors have refused to pay for any works to maintain the Forbury Road property;
(e)the executors have failed to account to Kerry “as a beneficiary and co-owner” for income received from the Forbury Road property (but no particulars are provided);
15 It should be noted that while the body of the statement of claim refers to reimbursement of outgoings, the prayer for relief refers only to payment for work done for the estate.
(f)that Christopher is using his position to put pressure on Jonathan to force a sale to him of an unidentified property in Christchurch, and has failed “to recognise the conflict between interest and duty and has taken no steps to address it”; and
(g)that there is a state of hostility between Kerry and the executors which is impacting the estate’s best interests.
The submissions
[46] The executors’ primary submission is that they have a complete defence to Kerry’s claim for reimbursement of costs/expenses under cl 3 of the deed of family arrangement. Mr Reeve argued that the settlement recorded in the deed was intended to not only settle the proceedings then before the Family Court and vary Beverley’s will, but also to permit the estate to exit its co-ownership of the Forbury Road and Seaforth Street properties so that they became the sole responsibility of Jonathan and Kerry.
[47] Mr Reeve submitted the executors remain willing and able to reimburse Kerry for further undisclosed and legitimate estate expenses, but these can only be paid once the executors are in a position to wind up the estate. Further, he submitted the amounts claimed by Kerry are, on their face, almost entirely unrelated to the administration of the estate or have not been incurred at all and, insofar as that is not the case, any amounts owing would fall within the jurisdiction of the Disputes Tribunal and should not be pursued in this court.
[48] Mr Reeve provided helpful submissions on the law as it applies to the removal of executors and trustees and addressed s 21 of the Administration Act 1969, s 112 of the Trusts Act 2019, and the inherent jurisdiction of the court. He submitted Kerry has no interest in the estate to bring such a claim apart from her interest in a one-quarter share in the Forbury Road property, which would have been transferred to her by the executors but for her own inaction. He submitted that on the indisputable facts of this case, the removal of the executors is not a suitable, practical or efficient means of advancing the administration of the estate, nor is it in the interests of the residuary beneficiaries (being the only beneficiaries awaiting their entitlements).
[49] Mr Paine submitted there are contested issues of fact which make the case unsuitable for resolution on the executors’ applications.
[50] He justified the decision to bring Kerry’s claim for reimbursement of costs/expenses in this court on the basis that it accompanies the application to remove and replace the executors, which can only be dealt with in the High Court.
[51] He argued that while the executors continue to hold a one-quarter share of the Forbury Road property on trust for Kerry she has standing to bring an action for their removal.
[52] Mr Paine referred to Hunter v Hunter, which he said is authority that the court may remove a trustee where the trustee has failed to recognise a conflict between interest and duty, and where hostility exists between the trustee and a beneficiary.16
[53] Mr Paine said the evidence clearly shows there is antagonism between the executors and Kerry. When I pressed him to identify the executors’ conflict of interest, I understood him to say this relates to the executors’ decision to sell the Forbury Road property and thereby dispossess Kerry of her home. This is not how the claim is pleaded.
My analysis
Reimbursement of expenses
[54] I do not accept the executors’ submission that cl 3 of the deed of family arrangement is a total answer to this claim. Kerry’s claim for reimbursement is not a claim that is “arising in any way from this deed”.
[55] That said, for the reasons I have given above, the statement of claim is defective and fails to identify Kerry’s cause of action, or the amounts being claimed and why. While the executors sought, by their notice requiring further particulars of the claim, details of the nature of the claim and amounts being sought, the responses provided were obtuse.
16 Hunter v Hunter [1938] NZLR 520 (CA).
[56] Mr Paine submitted that Kerry has a quantum meruit claim. He did not address the elements of such a claim and their application to the facts of this case. However, if Kerry has a quantum meruit claim that could only be in respect to few of the amounts she is seeking which, in the main, do not relate to the provision of services.
[57] After taking account of amounts the executors have already paid to Kerry and excluding from her claim amounts which plainly are not the responsibility of the executors or have not in fact been incurred by her, if there is any amount owing to Kerry it will be a modest sum. Mr Reeve may well be correct that her claim would be within the Disputes Tribunal’s jurisdiction. However, in the circumstances I cannot rule out the possibility that Kerry can adequately replead her claim to advance an arguable cause of action for reimbursement of some expenses, and I will give her the opportunity to do so.
The application to remove the executors
[58] The claim to remove the executors is in a different category. I am satisfied it discloses no arguable cause of action and should be struck out, without reserving leave for Kerry to amend her pleading.
[59] In the executors’ notice requiring further particulars of the statement of claim they asked, “What is the legal basis for the Defendants being removed from the trusteeship of the estate?”. The response to that was unhelpfully “… the Trusts Act 2019 and the inherent jurisdiction of this Honourable Court”.
[60] I agree with Mr Reeve that the relevant statutory jurisdiction for the removal of the executors is s 21 of the Administration Act. It relevantly provides:
Where an administrator … becomes incapable of acting as administrator or is 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.
[61] The Trusts Act 2019 contains a new provision providing for the removal of trustees by the court. It is s 112, which provides:
Whenever it is necessary or desirable to remove a trustee and it is difficult or impracticable to do so without the assistance of the court, the court may make an order removing a trustee.
[62] The High Court also has an inherent jurisdiction to remove a trustee which exists alongside, but independent of, the statutory powers and will be exercised when the court, guided primarily by the beneficiaries’ welfare, considers that allowing the trustee to continue in office would prevent the proper execution of the trust.17
[63] Recently in K v K, Gwyn J was of the view that the “necessary or desirable” test for the exercise of the court’s power to remove a trustee under s 112 did not import a lower threshold than had previously applied under s 51 of the Trustee Act 1956.18 Section 51 provided for a power of replacement whenever it was “inexpedient, difficult or impracticable to do so without the assistance of the Court”.19 Gwyn J adopted Westlaw commentary that the court would continue to assess an application for removal on the basis of whether it would be to the advantage, advisable, prudent or expedient for the proper execution of the trust and the beneficiaries as a whole to remove a trustee.
[64]Gwyn J also applied Miller v Cameron, where Dixon J said:20
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised.
[65] Regardless of whether one applies the court’s statutory or inherent jurisdiction, there is no prospect that Kerry could obtain an order removing the executors and replacing them with an independent corporate trustee for several reasons.
17 C Kelly and others Garrow and Kelly Law of Trusts and Trustees (8th ed, LexisNexis, Wellington, 2022) at [17.75].
18 K v K [2022] NZHC 3123, [2022] NZFLR 624 at [99].
19 Trustee Act 1956, s 51(1).
20 Miller v Cameron (1936) 54 CLR 572 at 580-581, cited with approval by Randerson J in
Attorney-General v Ngāti Karewa and Ngāti Tahinga Trust (2001) 1 NZTR 11-012 (HC) at [65].
[66] First, the administration of the estate is almost completed. All the specific bequests have been distributed. While it is the case the executors hold a one-quarter share of the Forbury Road property on trust for Kerry, that is only because she has not co-operated (for reasons she does not explain) to effect the transfer. Importantly, she has no interest in the residue of the estate.
[67] Second, several of the reasons Kerry advances in support of her application to remove the executors relate to the alleged failure by the executors to reimburse her for costs/expenses. In fact, the executors have reimbursed her for legitimate expenses on three occasions and acknowledged they will continue to do so should any further legitimate expenses be incurred. The executors do not accept Kerry’s claim and, in my assessment, are correct to defend it for the reasons set out above.
[68] It is alleged the executors have failed to account to Kerry “as a beneficiary and co-owner” for income received from the Forbury Road property. There is no evidence to support this allegation.
[69] It is then said that Christopher has a conflict of interest. In the statement of claim the conflict alleged is that Christopher intends to pay the residuary beneficiaries, of which he is one, before the “just debts of the estate” and is attempting “to use the way the will is drafted” to put pressure on Jonathan to force a sale of a property in Christchurch to him. Insofar as the first allegation is concerned, I am satisfied the executors have no such intention. There is no evidence to support the allegation except for Kerry’s bald assertion. As to the second allegation, there is also no evidence of any “pressure” brought to bear on Jonathan to sell any property. How such pressure could be applied by the terms of Beverley’s will is not explained and is fanciful.
[70] Perhaps recognising the weakness of the pleaded allegations of conflict, at the hearing Mr Paine took a different tack. He argued Christopher’s conflict related to steps being taken to sell the Forbury Road property. The steps taken by the executors to obtain a court order for the sale of the property are, to my mind, consistent with their obligations to administer the estate in accordance with the trusts contained in the will as varied by the consent orders. There is nothing in this point.
[71] The next matter is that there is said to be a state of hostility between Kerry and the executors. It is fair to say the relations between Kerry and the executors are not good, but there can be no suggestion this has prevented them from acting in the interests of the beneficiaries. The correspondence between the executors and Kerry demonstrates they have at all times acted professionally and with restraint towards her in the interests of the beneficiaries.
[72] There are three other relevant factors which contribute to my conclusion that there is no arguable case to remove the executors. First, I can readily infer from the timing of Kerry’s removal application, which follows the receipt of correspondence from the executors indicating their intention to obtain a sale order of the Forbury Road property and the rejection of her reimbursement claims, that it has been made for tactical reasons.
[73] Second, the removal of the executors and appointment of a corporate trustee would cause delay and come at considerable cost to the estate which is unnecessary and would be borne entirely by the residuary beneficiaries. It is relevant that only Kerry is seeking the removal of the executors and the appointment of an independent corporate trustee, yet she will be bear none of the costs of doing so.
[74] Third, while Kerry makes allegations that Christopher is conflicted (which I do not accept), Jennifer is an experienced solicitor and not a family member against whom no such criticism can be levelled. I have every confidence the estate has been, and will continue to be, responsibly managed.
[75] The application to remove the executors is hopeless in my view, and it is struck out.
The application for summary judgment for an order for sale of Forbury Road
[76] I now turn to consider the executors’ application for summary judgment for an order for the sale of Forbury Road.
Property Law Act
[77] A court may order the sale or division of a property under s 339 of the Property Law Act 2007. Section 339 provides:
339 Court may order division of property
(1)A court may make, in respect of property owned by co-owners, an order—
(a)for the sale of the property and the division of the proceeds among the co-owners; or
(b)for the division of the property in kind among the co-owners; or
(c)requiring 1 or more co-owners to purchase the share in the property of 1 or more other co-owners at a fair and reasonable price.
(2)An order under subsection (1) (and any related order under subsection (4)) may be made—
(a)despite anything to the contrary in the Land Transfer Act 2017; but
(b)only if it does not contravene section 340(1); and
(c)only on an application made and served in the manner required by or under section 341; and
(d)only after having regard to the matters specified in section 342.
(3)Before determining whether to make an order under this section, the court may order the property to be valued and may direct how the cost of the valuation is to be borne.
(4)A court making an order under subsection (1) may, in addition, make a further order specified in section 343.
(5)Unless the court orders otherwise, every co-owner of the property (whether a party to the proceeding or not) is bound by an order under subsection (1) (and by any related order under subsection (4)).
(6)An order under subsection (1)(b) (and any related order under subsection (4)) may be registered as an instrument under—
(a)the Land Transfer Act 2017; or
(b)the Deeds Registration Act 1908; or
(c)the Crown Minerals Act 1991.
[78] The executors have standing to make this application as co-owners of the Forbury Road property.
[79] Section 342 sets out mandatory relevant considerations in any assessment of an application for an order under s 339, which are as follows:
342Relevant considerations
A court considering whether to make an order under section 339(1) (and any related order under section 339(4)) must have regard to the following:
(a)the extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made:
(b)the nature and location of the property:
(c)the number of other co-owners and the extent of their shares:
(d)the hardship that would be caused to the applicant by the refusal of the order, in comparison with the hardship that would be caused to any other person by the making of the order:
(e)the value of any contribution made by any co-owner to the cost of improvements to, or the maintenance of, the property:
(f)any other matters the court considers relevant.
[80]Further powers of the court are provided in s 343 as follows:
343Further powers of court
A further order referred to in section 339(4) is an order that is made in addition to an order under section 339(1) and that does all or any of the following:
(a)requires the payment of compensation by 1 or more co-owners of the property to 1 or more other co-owners:
(b)fixes a reserve price on any sale of the property:
(c)directs how the expenses of any sale or division of the property are to be borne:
(d)directs how the proceeds of any sale of the property, and any interest on the purchase amount, are to be divided or applied:
(e)allows a co-owner, on a sale of the property, to make an offer for it, on any terms the court considers reasonable concerning—
(i) the non-payment of a deposit; or
(ii) the setting-off or accounting for all or part of the purchase price instead of paying it in cash:
(f)requires the payment by any person of a fair occupation rent for all or any part of the property:
(g)provides for, or requires, any other matters or steps the court considers necessary or desirable as a consequence of the making of the order under section 339(1).
[81] In Bayly v Hicks, the Court of Appeal held that s 339 confers a broad discretion to make orders.21 The discretion is limited by s 339(1), but otherwise turns on whatever factors appear to be relevant. The legislation is remedial, with no intention to unduly cramp its scope and efficient operation. The Court said a Judge should consider what is “the most just and practical way through the impasse before the court”, which may mean giving directions different from those sought by the parties.22
Summary judgment principles
[82] The executors bring this application as counterclaim plaintiffs, and the relevant rule is r 12.2(1) of the High Court Rules which reads as follows:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
…
[83] The principles that apply to a plaintiff’s summary judgment application are well-known and are summarised by Associate Judge Osborne in Mount Grey Downs Ltd v Pinot Properties Ltd as follows:23
(a)Commonsense, flexibility and a sense of justice are required.
21 Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401, referred to in Robertson v Robertson [2020] NZHC 2272, (2020) 21 NZCPR 875 at [23]; and Hayes v McAuley [2022] NZHC 1386 at [39].
22 At [32]-[33].
23 Mount Grey Downs Ltd v Pinot Properties Ltd [2018] NZHC 3094 at [12].
(b)The onus is on the plaintiff seeking summary judgment to show that there is no arguable defence. The Court must be left without any real doubt or uncertainty on the matter.
(c)The Court will not hesitate to decide questions of law where appropriate.
(d)The Court will not attempt to resolve genuine conflicts of evidence or to assess the credibility of statements in affidavits.
(e)In determining whether there is a genuine and relevant conflict of facts, the Court is entitled to examine and reject spurious defences or plainly contrived factual conflicts. It is not required to accept uncritically every statement put before it, however equivocal, imprecise, inconsistent with undisputed contemporary documents or other statements, or inherently improbable.
(f)In assessing a defence the Court will look for appropriate particulars and a reasonable level of detailed substantiation – the defendant is under an obligation to lay a proper foundation for the defence in the affidavits filed in support of the Notice of Opposition.
(g)In weighing these matters, the Court will take a robust approach and enter judgment even where there may be differences on certain factual matters if the lack of a tenable defence is plain on the material before the Court.
(h)The need for judicial caution in summary judgment applications has to be balanced with the appropriateness of a robust and realistic judicial attitude when that is called for by the particular facts of the case. Where a last-minute, unsubstantiated defence is raised and an adjournment would be required, a robust approach may be required for the protection of the integrity of the summary judgment process.
(i)Once the Court is satisfied that there is no defence, the Court retains a discretion to refuse summary judgment but does so in the context of the general purpose of the High Court Rules which provide for the just, speedy and inexpensive determination of proceedings.
(footnotes omitted)
[84] Under r 12.4(2), an application for summary judgment by a plaintiff may be made at the time the statement of claim is served upon the defendant, or later with the leave of the Court. Here, on 19 January 2023, by consent Osborne J granted the executors leave to make their applications for strike out or summary judgment by 31 March 2023 and that direction was complied with.24
24 I note that in light of Osborne J’s direction, the leave sought in para [1(i)] of the executors’ application of 17 March 2023 for leave to apply for summary judgment was unnecessary.
[85] There is a view that the summary judgment procedure is not well-suited to applications under s 339 of the Property Law Act because on such applications the court must exercise a broad discretion, taking into account a variety of factors and possible outcomes.25
[86] In Anderson v Anderson, Associate Judge Bell said in relation to a proceeding seeking orders under s 339 by way of summary judgment that:26
Because the court’s powers to grant relief under s 339 require a range of matters to be considered, as there is a range of potential outcomes, to grant summary judgment the court has to be satisfied on the information provided on the summary judgment application that there can be only one possible outcome. If other possible outcomes remain arguable, the Court cannot grant summary judgment. The plaintiff must therefore negate all outcomes except that sought in the statement of claim.
(footnote omitted)
[87] However, in Coffey v Coffey, Associate Judge Osborne considered that summary judgment would be appropriate when there were clear concessions or indisputable facts such that “clarity of appropriate outcome occurs”.27 He said this called for a careful consideration of the facts relating to the parties’ co-ownership of the property. Associate Judge Osborne considered such clarity existed in the case before him and granted an order for the sale of the subject property. I agree with the Judge’s approach and, for the reasons that follow, I see the only possible outcome of this application is to make an order for the sale of the property.
Submissions
[88] The executors’ concern is that, with Kerry and Jonathan’s failure to exercise the option to purchase the Forbury Road property, a deadlock exists which is preventing them from completing the estate administration and making a final distribution to the residuary beneficiaries.
25 Bayly v Hicks, above n 21 at [31]; Anderson v Anderson [2020] NZHC 788; (2020) 21 NZCPR 22 at [9] citing Carey-Venable v Carey [2016] NZHC 2646, (2016) 18 NZCPR 289 at [6].
26 At [9].
27 Coffey v Coffey [2012] NZHC 1765 at [45].
[89] They say it was never contemplated that Kerry and Jonathan would have over three years to exercise their options and as a result the executors have incurred, and will continue to incur, costs relating to maintenance and outgoings on the property contrary to the interests of the residuary beneficiaries.
[90] They say the sale of the property is the only realistic means of ending the deadlock, and the failure by Jonathan and Kerry to exercise the options demonstrates that no purpose would be served by making an order for them to acquire the estate’s interest. However, they remain willing to sell the estate’s interest to Kerry or Jonathan if they wish to exercise the options.
[91] Mr Paine accepted that the Court may make an order for the sale of the property, notwithstanding that it is subject to options to purchase in favour of Kerry and Jonathan. However, he raised several issues in opposition to the executors’ application.
[92] First, he again made the broad submission that there are factual disputes making this case unsuitable for summary judgment.
[93] Second, he argued the making of a sale order will impose hardship upon Kerry, who has lived in the property for many years, has a strong attachment to it and has, according to Kerry, maintained it without the assistance of the executors since Beverley’s death.
[94] Third, and somewhat contrary to the previous submission, Mr Paine said the Forbury Road property now suffers from maintenance issues and that Beverley was a hoarder, so there is a lot of work to be done to prepare the property for sale for which the executors have not agreed to pay.
[95] Finally, and most significantly, he submitted there is an alternative to making a sale order. While Kerry has to date been unable to raise finance to exercise her option to purchase, Shawn (who is one of the three residuary beneficiaries) is now willing to “leave his money in” which Kerry believes will allow her to raise sufficient money to exercise the option and acquire the property. Kerry argues this has not
occurred because the executors have not disclosed details of the amounts presently held by them in trust so she can determine how much she would need to borrow to acquire the estates interest in the property.
Analysis
[96] It is for the executors to establish that Kerry and Jonathan have no arguable defence to the making of the order for the sale of the Forbury Road property. I deal with the mandatory s 342 considerations seriatim.
The extent of the share in the property of any co-owner by whom, or in respect of whose estate or interest, the application for the order is made
[97] The legal owners of the property are Jonathan and the executors as to a one-half share each. The executors hold a one-quarter share of the property on trust for Kerry. Kerry says that, between her and Jonathan, the owners of three-quarters of the property do not want to sell. This is not correct. Jonathan has not taken any steps in the proceeding to oppose the executors’ application. It is Kerry alone who does so.
Nature and location of the property
[98] The property is a five bedroom, two-storey residential property on 782 square metres of land in South Dunedin. It appears it is in average condition and, according to Kerry, there is substantial work to be done to maintain it and get it ready for sale. It has a rateable value of $720,000. There is no mortgage or encumbrances on the title. It is not realistically subdivisible in a manner that would allow for division of the property in kind among the co-owners.
The number of other co-owners and the extent of the shares
[99] As noted above, Jonathan is the legal and beneficial owner of a one-half share of the property. The executors and Kerry are the beneficial owners of a one-quarter share each. Importantly, Kerry alone resides in the property. Jonathan lives overseas and has done so for many years. There is no evidence indicating Jonathan contributes to the maintenance and upkeep of the Forbury Road property in any way whatsoever, or that he is prepared to do so in the future.
Hardship that would be caused to the applicant by the refusal of the order in comparison to the hardship to any other person by the making of the order
[100] The issue of hardship has been considered in several cases. In Holster v Grafton, Fogarty J considered the concept in the context of s 342 and said:28
[50] “Hardship” is a value laden criterion. It suggests an adverse effect which is of significant impact to the applicant. It has to be read consistent with the policy of the statute which respects property rights of tenants in common, but seeks to resolve conflicts fairly.
[101]After discussing the authorities and dictionary definitions, in Coffey v Coffey
Associate Judge Osborne said:29
[155] While, mindful of the observations of the Court of Appeal in Morrison, not to limit the concept of hardship in s 342 of the Act to severe suffering or privation, I would not view the term as embracing mere inconvenience or disappointment. Such lesser impacts might fall for consideration under “other matters relevant” under s 342(f) of the Act but do not semantically fall within the concept of hardship.
[102] In Bayly v Hicks in the High Court, Wylie J considered that hardship needed to be considered both in the round and by reference to the partition proposals advanced by the parties.30
[103] Kerry alleges that Christopher wishes to throw her out on the street leaving her homeless. I do not accept Christopher has any wish to do so, or that the sale of the property will leave Kerry homeless. She will obtain her share of the sale proceeds which she may use to rent or acquire an alternative property.
[104] The position in which Kerry finds herself is not one the executors have created. The terms of Beverley’s will did not envisage the Forbury Road property would be retained for her benefit or that Kerry would have the right to live there indefinitely (or at all). Further, Kerry settled her claims against the estate in return for a share of the Forbury Road property and the option to purchase a further share. It was entirely foreseeable that, if she did not exercise the option, the property would need to be sold to satisfy the entitlements of other beneficiaries.
28 Holster v Grafton (2008) 9 NZCPR 314 (HC).
29 Coffey v Coffey, above n 27.
30 Bayly v Hicks [2011] NZHC 920, (2011) 13 NZCPR 568 at [61].
[105] Any hardship experienced by Kerry from a sale of the property is outweighed by the hardship experienced by the residuary beneficiaries if the property is not sold. They are being deprived of their inheritance whilst Kerry lives in the property without paying anything to the estate for her occupation. Further, neither Kerry nor the estate can maintain the property and Jonathan has shown no willingness to do so either. In those circumstances the property will deteriorate in condition and fall in value, further prejudicing the residuary beneficiaries.
Contributions made by co-owners
[106] The extent to which Kerry has made contributions to the property is disputed, but she has been reimbursed for such contributions as the executors accept she has made, as well as for outgoings that she has paid.
[107] The claims Kerry has made for reimbursements relate in large part to amounts she has not in fact paid and include a long “wish list” the executors could never reasonably agree to. While it appears the property would now benefit from some maintenance work, it would never have been contemplated that because Kerry and Jonathan did not exercise their options to purchase the property the estate would be required to contribute to such costs. Kerry also does not recognise the benefit she has received from her sole occupation of the property.
[108] On the evidence, I do not accept that Kerry has made significant contributions to the maintenance and improvement of the Forbury Road property for which she has not been, or will not be, reimbursed by the executors.
[109] Mr Paine said a lot of work must be done to get the property ready for sale and the executors have not offered to pay for that. It is almost always the case that work will be done before a property is put to market. Such costs should not be borne by the executors alone, they should rightly be shared by the three owners of the property and can be paid, if necessary, from the proceeds of sale.
Any other matters the Court considers relevant
[110] The executors are understandably concerned that they must wind up the estate. They cannot continue indefinitely as property co-owners incurring liabilities in respect of the property. This was conveyed by Jennifer to Kerry in her letter of 19 October 2022, when she said:
It seems to us that your understanding of what the estate should and should not pay for is misconceived. The estate has no liability to pay invoices that have no real connection with …. her estate. Thus, the estate is not required to pay for utility services that neither Bev nor the estate ever used. Nor is the estate required to pay for improvements that have no bearing on the interests of the estate’s residuary beneficiaries and which neither they nor the executors endorsed. As neither Chris nor I contracted you to be a paid property manager you are not entitled to payment from the estate for the services you allege you have provided in relation to the property.
[111] While Kerry argues that the Forbury Road property is the ancestral home for the extended Rushton family, there is no evidence anyone other than Kerry wishes to retain the property or views it in that way.
[112] Further, it is clear from the terms of Beverley’s will that she did not contemplate that the property would be retained as a family home, rather it was the Seaforth Street property that was to be put into trust and kept for the family.
[113] The matter upon which Mr Paine put most significance was that there is a resolution and settlement just around the corner, and that it would be precipitous to order a sale of the property at this time because Shawn will make his interest in the residuary estate available to Kerry and she will borrow what further sum is required to exercise the option to purchase.
[114] This matter was raised at a late stage shortly prior to the hearing. There is no evidence any such proposal has ever been put by Kerry to the executors.
[115] While Mr Paine said that arrangements have been made for Kerry to borrow sufficient funds to exercise the option, there is no evidence of her ability to borrow any amount or of the steps taken by her to do so.
[116] Mr Paine said the executors have not disclosed details of the amounts held in trust for the beneficiaries to allow Kerry to obtain a loan, but there is no evidence before me that such requests have been made and Mr Reeve was not aware of them.
[117] Mr Paine’s submissions highlighted why Kerry’s position is unrealistic. She has expectations about the amount she will need to borrow based on her assessment of what the executors should hold in trust following the sale of the Seaforth Street property. It is clear from my exchanges with counsel that her expectations are unrealistic, including because she does not accept legal costs incurred by the executors in relation to legal proceedings taken against them by her. The executors should be rightly concerned about any proposal which would lead to yet further disputes, and potentially litigation, with Kerry.
[118] Further, I accept Mr Reeve’s submission that the executors will face difficulty providing an estimate of the amount to be received by Shawn as a residuary beneficiary when they continue to be faced with litigation by Kerry.
[119] In those circumstances, I did not consider there is any realistic prospect of Kerry exercising the option to purchase.
[120] In summary, I am satisfied that Kerry and Jonathan have no defence to the executors’ application for an order for a sale of the property Division of the Forbury Road property in kind is not realistic and requiring Kerry or Jonathan to purchase the share of the estate is also not appropriate in circumstances where they have already had ample opportunity to do so. The Court cannot be satisfied that either of them has both the means and inclination to purchase the estate’s interest in the property.
Result
[121] Kerry’s statement of claim is struck out. I reserve leave for her to file an amended statement of claim within 28 days of the date of this judgment in respect to her claim for reimbursement of costs/expenses.
[122] Pursuant to s 339(1) Property Law Act 2007, the Forbury Road property is to be sold. I make an order under ss 339(1)(a) and (to the extent necessary) 343 of the Property Law Act for the sale of the property.
[123] In relation to the method of sale and division of the proceeds of sale, I reserve these matters for further consideration. I will be distributing to counsel proposed orders of sale for their consideration.
[124] I direct the Registrar to set this case down for a further hearing at 10 am on 14 November 2023, with half a day reserved, at which I will hear from counsel before issuing the further orders.
[125] Counsel for the executors shall file and serve any submissions on the terms of the proposed orders by 7 November 2023. Any submissions on behalf of Kerry shall be filed and served no later than 10 November 2023.
[126] The executors are entitled to costs, but I shall formally reserve fixing the quantum of such costs pending the making of final orders.
O G Paulsen Associate Judge
Solicitors:
McMillan & Co Lawyers (S A Milne), Dunedin Downie Stewart Lawyers (G DeCourcy), Dunedin
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