Smith v Hills
[2020] NZHC 2293
•4 September 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2020-419-000020
[2020] NZHC 2293
IN THE MATTER OF The estate of DAVID BRUCE SMITH BETWEEN
WARREN PETER SMITH
Plaintiff
AND
BARBARA JOY HILLS and BRADLEY
JOSEPH HILLS, as executors in the estate of DAVID BRUCE SMITH
Defendants
Hearing: 25 August 2020 Appearances:
Plaintiff in Person
M Brady and C R Lunt for Defendants
Judgment:
4 September 2020
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by Associate Judge Andrew on 4 September 2020 at 11.00 am
pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar
Date………………………
SMITH v HILLS [2020] NZHC 2293 [4 September 2020]
Introduction
[1] This is the third set of High Court proceedings relating to the estate of the deceased, Mr David Bruce Smith (Mr Bruce Smith).
[2] The plaintiff, Mr Warren Smith, is the son of Mr Bruce Smith. The defendant, Ms Barbara Joy Hills, is Mr Bruce Smith’s daughter and the defendant, Mr Bradley Hills, is Mr Bruce Smith’s grandson. The defendants are the executors appointed under the Will for Mr Bruce Smith’s estate.
[3] In the present interlocutory application, the defendants seek to strike out the whole of the plaintiff’s statement of claim dated 6 December 2019. The defendants claim that the proceedings are an abuse of process, the causes of action are not reasonably arguable and are unintelligible, and that the deficiencies will not be remedied by amending the statement of claim.
Background facts
[4] The deceased’s wife, namely the mother of the plaintiff and Ms Barbara Hills, and the grandmother of the defendant, Mr Bradley Hills, died in November 2000. She left a life interest in her half-share of 1 Thompson Street, Hamilton, to her husband, Mr Bruce Smith.
[5] The plaintiff, Mr Warren Smith, subsequently challenged his mother’s Will under the Family Protection Act 1955. There was a settlement of those proceedings and the property at 1 Thomson Street was transferred into various ownership interests. Mr Warren Smith was awarded 1/14th share under the settlement and Ms Barbara Hills a 1/7th share. The Deed of Settlement is dated 7 June 2002.
[6] In accordance with his life interest, Mr Bruce Smith continued living in 1 Thomson Street until 26 June 2016, when he moved into a rest home.
[7] In May 2005, Mr Bruce Smith entered into a mortgage with his daughter, Ms Anne Roach, secured against the Thomson Street property, and for the principal sum of $32,000, together with interest at the rate of eight per cent per annum. Whether
there was an entitlement to impose an additional three per cent per annum as penalty interest is at issue.
[8] On 3 November 2016, a residential tenancy agreement was entered into between Mr Bruce Smith and his grandson, the defendant, Mr Bradley Hills, and Bradley’s then partner, Lynda, now his wife.
[9] The final Will of Mr Bruce Smith is dated 19 May 2017. It replaced two earlier Wills, namely that of 23 February 2001 and 26 June 2002. Under the 2017 Will, the residue of Mr Bruce Smith’s estate is to be divided equally between his seven children.
[10] On 13 February 2018, the Thomson Street property was sold for $420,000. The balance of the proceeds of the sale are currently held in the trust account of Harkness Henry, solicitors.
[11] Mr Bruce Smith passed away on 20 March 2018. Probate was granted for his 2017 Will on 9 May 2018.
[12] On 15 March 2019, Mr Warren Smith made an application to the Registrar seeking from the defendant executors a full inventory of the assets and liability of the estate (Wellington Registry CIV-2018-485-604398).
[13] On 27 March 2019, the Registrar made an order that the defendants provide an accurate inventory and an account of the estate.
[14] On 29 April 2019, the defendant executors filed an affidavit in response to the Registrar’s direction.
[15] On 12 June 2019, the plaintiff, Mr Warren Smith, filed a further application with the Registrar, together with an affidavit in support, seeking a full inventory of the estate. A further order from the Registrar was made on 28 June 2019.
[16] On 18 July 2019, the defendants swore further affidavits in response to the Registrar’s orders. In addition, an affidavit of Mark Thompson, sworn 19 July 2019, was also provided to Mr Warren Smith. Mr Thompson was the solicitor responsible
for administering Mr Bruce Smith’s estate. He had previously been responsible as the solicitor for administering the estate of Mr Bruce Smith’s wife, Mrs Smith (the grandmother of Mr Bradley Hills and the mother of Mr Warren Smith and Ms Barbara Hills).
Relevant legal principles
[17] Rule 15.1 of the High Court Rules 2016 provides that 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
(b)Is likely to cause prejudice or delay; or
(c)Is frivolous or vexatious; or
(d)Is otherwise an abuse of the process of the Court.
[18] The general principles relating to striking out pleadings were established by the Court of Appeal in Attorney-General v Prince.1 Those principles were endorsed by the Supreme Court in Couch v Attorney-General.2 The principles are as follows:
(a)The facts pleaded in the statement of claim are assumed to be true;
(b)The causes of action must be so clearly untenable that they cannot possibly succeed;
(c)The jurisdiction is to be exercised sparingly and only in clear cases; and
(d)The jurisdiction is not excluded by difficult questions of law requiring extensive argument.
1 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.
2 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
[19]In Attorney-General v McVeagh, the Court held that:3
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. 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.
(citations omitted)
The pleadings
[20]In his statement of claim of 6 December 2019, Mr Warren Smith seeks orders:
(a)That the executor defendants have not provided a proper inventory of the estate; and
(b)That the defendant executors should meet the short-fall from the estate.
[21] In the alternative, Mr Warren Smith seeks an order from the Court as to the correct form and content of the accounts and inventory that are appropriate to the case.
[22] It seems clear from the pleading that Mr Warren Smith considers that some assets of the estate have been wrongfully omitted from the inventory of the estate. Mr Warren Smith’s concerns can be summarised as follows:
(a)That Mr Bruce Smith wrongfully paid penalty interest to Anne (Mr Bruce Smith’s daughter and a beneficiary) under the mortgage that she provided to Mr Bruce Smith and that this should be recovered;
(b)Prior to Mr Bruce Smith’s death, Ms Barbara Hills, the defendant, breached her duties as Mr Bruce Smith’s power of attorney by agreeing to rent the Thomson Street property to Mr Bradley Hills, her son, the other defendant, and his wife, for an unreasonably low rental; and
3 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.
(c)He should be reimbursed for a motor vehicle which he says he gifted to Mr Bruce Smith, his father, on the proviso that the vehicle would be returned to him when Mr Bruce Smith was no longer able to drive it.
[23]There was also a claim regarding an electric razor but that is no longer pursued.
Analysis and decision
[24] I reject the submission of Mr Warren Smith that the Court cannot strike out these proceedings because he, as the applicant/plaintiff, has sought to invoke the Court’s inherent jurisdiction. There is no jurisdictional bar to the Court striking out a proceeding simply because what is at issue is the exercise of the Court’s inherent jurisdiction. The purpose of r 15.1(4), which Mr Warren Smith relied upon, is intended to preserve the Court’s inherent jurisdiction to strike out proceedings (aside from r 15.1) and not to restrict it in any way.
[25] I reject the submission of Ms Brady, for the defendants, that Mr Warren Smith’s pleadings are unintelligible. It is sufficiently clear, from the various documents that he has filed, what his fundamental concerns are and the basis of his challenge.
[26] I acknowledge that Mr Warren Smith has a genuine sense of grievance at the way he has been treated in the financial affairs of both his parents. However, and in the context of a relatively modest estate (approximately $130,000) and where this is in substance a third set of proceedings relating to Mr Bruce Smith’s estate, the critical issue I must determine is a legal one – namely whether, assuming the factual allegations pleaded by Mr Warren Smith are true, they are legally capable of success.
[27] The fundamental problem for the claims that Mr Warren Smith makes is that the actions and decisions of which he complains were decisions relating to his father’s estate that pre-date the appointment of the defendants as executors and, to the extent that such decisions relate to the defendants, they are decisions made by the defendants not in their capacity as executors but as members of the Smith family. These complaints do not provide a legitimate basis for his challenging of decisions of the defendants as executors. In my view, it is not reasonably arguable that these decisions are live issues for the executors to resolve.
[28] I accept that the earlier two proceedings brought in this Court against the defendants (both successful) were properly directed at the defendants in their capacity as executors of Mr Bruce Smith’s estate. However, the key decisions at issue in this proceeding, namely the decision to pay penalty interest to Anne, the decision to rent the Thomson Street property to Mr Bradley Hills (said to be an unreasonably low rental) and the disposal by Mr Bruce Smith of the car (which Mr Warren Smith says he gifted to his father) all pre-date the appointment of the defendants as executors.
Issue (a): Penalty interest under the mortgage
[29] Mr Bruce Smith borrowed the principal sum of $32,000 from Anne, which was secured by a mortgage over the Thomson Street property.
[30]The mortgage provided that:
(a)Interest was to be paid on the loan at the rate of eight per cent per annum ($213.33) with an additional three per cent per annum payable as penalty interest. Interest was to be paid on the 27th of each month.
(b)The principal sum was to be repaid within six months of the date of Mr Bruce Smith’s death or upon the sale of the Thomson Street property (whichever occurred first).
(c)The provisions of Memorandum No. 1995/4003 were incorporated.
[31] Clause 2(b) of the Memorandum provided that the mortgagor shall pay interest on each interest date. Clause 2(c)(i) provided that if the mortgagor failed to comply with the specified term (as defined in sub cl (e)) on or before 14 days from when compliance was due, then the interest payable on the principal sum would be increased to the penalty sum. Clause 2(e) confirmed that cl 2(b) was a specified term.
[32] It is not in dispute that no interest at all was paid by Mr Bruce Smith to Anne throughout the term of the loan. Mr Warren Smith submitted that the mortgage to Anne was intended to be the same as a $25,000 loan that had originally been borrowed from Ms Barbara Hills. It was agreed amongst the family that Anne’s loan, as with
Ms Barbara Hills’ loan, was to be an interest-free loan. There was never any contemplation that penalty interest would be applied.
[33] However, whatever the particular family agreement or arrangements there might have been, there is, in my view, a clear contractual entitlement by Anne to penalty interest under the mortgage. That is apparent from the provisions I have set out above. It is also important to note that there was, in effect, a negotiated settlement of Anne’s claim to penalty interest entered into while Mr Bruce Smith was alive and involving Mr Warren Smith. To Mr Warren Smith’s credit, he was concerned about the extent of the penalty interest claimed by Anne and appears to have been successful in reducing the amount of that penalty interest.
[34] Both Mr Bruce Smith and Anne were legally represented at the time the penalty interest rate issue was settled. Mr Bruce Smith initially clamed that there was no legal basis for charging penalty interest. Ultimately, the parties, namely Mr Bruce Smith and Ms Anne Roach (née Smith), settled for the sum of $75,962.54. Originally, she had claimed some $129,000.
[35] In these circumstances and where there was a clear contractual entitlement to penalty interest, I find that Mr Warren Smith’s claims about the mortgage have no reasonable prospect of success. In my view, the issue has been resolved by the settlement and there is simply no legal basis for claiming that the current defendant executors (namely Ms Barbara Hills and Mr Bradley Hills) can have any responsibility for what appears to be an entirely legitimate and negotiated settlement of the penalty interest issue.
[36] I find therefore that the claim in relation to penalty interest under the mortgage should be struck out.
Issue (b): Rent for the Thomson Street property
[37] In June 2016, Mr Bruce Smith moved from his home at Thomson Street and became a resident in a rest home. At that time, Mr Bruce Smith owned a half-share in the Thomson Street property and a life interest in the other half pursuant to his wife’s Will. The other half of the property was owned by the Smith children, including both
Mr Warren Smith and Ms Barbara Hills, such ownership being subject to Mr Bruce Smith’s rights as a life tenant.
[38] Mr Warren Smith claims that there is a debt due by the defendant executors for unpaid rent for Mr Bradley Hills’ occupation of the Thomson Street property. In his written submission of 25 August 2020, Mr Warren Smith claims that the under-value of rent by some $13,000 to $14,000 by the two executors was “fraudulent”.
[39] The Residential Tenancy Agreement was entered into in November 2016 by Mr Bruce Smith on the one hand and Mr Bradley Hills and his then partner (now his wife) on the other hand. That is well before Mr Bruce Smith passed away. The agreement refers to a “Mr R Yates”, who held a power of attorney for Mr Bruce Smith. The Tenancy Agreement expressly notes that Mr Bruce Smith’s bedroom “to be left as is. Access for Mr Smith at any time”. On the face of the document itself, therefore, there would appear to be a good reason for a reduction in rent.
[40] Fraud or dishonesty is a serious allegation and must be alleged with care and particularity. A pleading may not contain an allegation of fraud in the absence of reasonably credible material that, as it stands, establishes a prima facie case of fraud
– that is, material of such a character which would lead to the conclusion that serious allegations could properly be based upon it. Fraud cannot be left to be inferred from the facts; fraudulent conduct must be distinctly alleged and distinctly proved.4
[41] The materials that Mr Warren Smith has placed before the Court fall well short of the requirement that allegations of fraud be based on reasonably credible material. The rental agreement was clearly part of some relatively informal arrangements between a grandfather and his grandson, and full disclosure has been made by the grandson (Mr Bradley Hills) as to the amount of rent he and his wife paid – the relevant bank statements have been provided. It is also important to note that at the time that Mr Bruce Smith entered into the arrangements, a power of attorney was held for his financial affairs by a Mr R Yates. The physical address for service in the Residential Tenancy Agreement is expressly stated as being c/o Mr Yates. Even if there is some
4 McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR5.26.08(b)(1)], citing
Schmidt v Pepper New Zealand (Custodians) Ltd [2012] NZCA 565 at [15].
legitimate basis for questioning the legality of the rental agreement (because of the complexity arising from the 50 per cent life interest held by Mr Bruce Smith), I do not see, on the undisputed evidence here, that Mr Warren Smith’s claims of fraud and/or substantial underpayment have any prospect of success. There is no legal basis, in my view, for claiming that the defendants, as executors, have some liability or responsibility in relation to the rental arrangement. To the extent that there may be some legal liability or fault (and I express no concluded view on that), the more appropriate challenge may be one directed at Mr R Yates, who held the power of attorney.
[42] In his affidavit, Mr Warren Smith deposes that Ms Barbara Hills had power of attorney over Mr Bruce Smith and that due to nepotism towards her son, Mr Bradley Hills, she allowed him to rent the property at a reduced rate. However, it is abundantly clear that that claim cannot succeed. Ms Barbara Hills did not have a power of attorney over Mr Bruce Smith’s property. As noted above, it was Mr R Yates who had the power of attorney.
[43] Mr Warren Smith has referred to s 5(1)(n) of the Residential Tenancies Act 1986 which provides that that Act is excluded in the following cases:
Where the premises, not being a boarding house, continue to be used, during the tenancy, principally as a place of residence by the landlord or the owner of the premises or by any member of the landlord’s or owner’s family.
[44] I accept that the exclusion of the Residential Tenancies Act may well have applied to Mr Bradley Hills’ tenancy at the Thomson Street property (it is clearly arguable), but that does not assist Mr Warren Smith at all. That section simply means that the protections in the Residential Tenancies Act will not apply. It provides no support for Mr Warren Smith’s claims of fraud and/or under-payment of rent. On the contrary, the exclusion of family type arrangements recognises that, in a family context, the parties may well come to arrangements that are different from those entered into by landlords and tenants negotiating at arms’ length.
[45] I therefore find that the claims by Mr Warren Smith in relation to the rental agreement have no reasonable prospect of success.
Issue (c): The motor vehicle
[46] Mr Warren Smith alleges that he loaned the motor vehicle to Mr Bruce Smith, his father, on the basis that it would be returned to him when Mr Bruce Smith was no longer able to drive and/or maintain it. He claims that this was recorded in an earlier version of Mr Bruce Smith’s will and seeks reimbursement of $2,500 to account for this vehicle being sold to another person without his knowledge.
[47] Clause 3 of Mr Bruce Smith’s 20 February 2001 Will did provide that Mr Warren Smith was to be gifted any motor vehicle owned by Mr Bruce Smith at the date of his death. However, that provision was removed from Mr Bruce Smith’s 26 June 2002 Will and replaced with a provision gifting any motor vehicle to Ms Barbara Hills. There is no equivalent provision in the 2017 Will, which is the operative Will for which probate was granted.
[48] It is undisputed that Mr Bruce Smith did not own a car at the time of his death and that the vehicle in question was disposed of some time prior to that. There is no suggestion that it was gifted or transferred to Ms Barbara Hills.
[49] Mr Warren Smith says that he purchased the car in 1998 for about $9,000. That is now more than 20 years ago.
[50] Mr Warren Smith contends that he has a claim under the Law Reform (Testamentary Promises) Act 1949 in relation to his motor vehicle. However, this is a clear case, in my view, where the Court should apply the principles laid down by the Court of Appeal in Attorney-General v McVeagh.5 In that case, the Court held that there may be a case where an essential factual foundation is so demonstrably contrary to indisputable facts that the matter would not be allowed to proceed further.
[51] Here, the undisputed evidence is that as long ago as 2002 the promise made to Mr Warren Smith that the motor vehicle would be returned to him was expressly removed from Mr Bruce Smith’s will. Mr Bruce Smith moved into residential care in June 2016, and none of the parties have any clear idea or recollection as to when it
5 Attorney-General v McVeagh, above n 3.
was disposed of by Mr Bruce Smith. It seems highly likely that the disposal of the motor vehicle preceded the making of the final will in 2017. Even if the motor vehicle had been retained up until 2016 or 2017, it would seem most likely that it would be of relatively minimal value given that it was purchased in 1998 for $9,000. Mr Warren Smith has clearly been in contact with his father over the past few years and it is difficult to accept that he was not aware of the disposal of the motor vehicle at the time that his father was alive and certainly well before the grant of probate.
[52] In the circumstances, I do not see how the Court could reasonably conclude that there was a valid testamentary promise in relation to the motor vehicle which could be upheld. Given the very modest amount that the motor vehicle would have been worth at the time it allegedly should have been returned to Mr Warren Smith, it would of course be grossly disproportionate, in the context of this modest estate, to incur any significant legal cost in determining the dispute.
Issue (d): Disclosure of assets and liabilities
[53] It appears that Mr Warren Smith continues to seek further disclosure of the assets and liabilities of the estate from the defendants.
[54] However, I agree with the submission of Ms Brady that the defendants, together with the estate’s former solicitor, Mr Mark Thompson, have already filed comprehensive affidavits setting out the assets and liabilities of the estate.
[55] Mr Warren Smith has provided no basis for any claim that there may be other assets and liabilities which have not, to date, been disclosed by the defendant executors. Considerable expense has obviously been incurred by the estate in the provision of the information sought by Mr Warren Smith and, in my view, it would be wrong to allow matters now to continue.
[56] I find that there is no reasonably arguable claim that the defendants should be required to provide further disclosure in relation to the assets and liabilities of the estate.
[57] As to the claim (so it appears) by Mr Warren Smith that he is seeking in this proceeding an order for costs incurred in proceedings CIV-2018-485-604398, namely the proceedings in which the Registrar made two separate orders requiring the defendant executors to file an accurate inventory of the estate, that is a matter I can address in short order.
[58] In those earlier proceedings, Mr Warren Smith was self-represented. He is not entitled to costs in any event. There is a primary rule, required to be applied unless legislatively altered, that a lay litigant in New Zealand is not entitled to recover costs.6 It is therefore not necessary for me to determine whether, as Ms Brady submits, the principles set out in Club Marine (NZ) Ltd v Quadrant Yachts Ltd should be applied in this case (that is, the general principle that costs cannot be claimed as damages).7
Result
[59] I grant the application by the defendants striking out the proceedings pursuant to r 15.1 of the High Court Rules 2016. The claims of Mr Warren Smith are not reasonably capable of success and the pleadings are incapable of being amended to disclose tenable causes of action.
[60] I reserve costs. I note Ms Brady’s submission that the defendant executors wish to file written submissions on costs.
[61] The written submissions of the defendant executors on costs are to be filed and served within 14 days. Mr Warren Smith will then have the opportunity of filing submissions in reply within a further 14 days. The Court will then make a decision on the papers.
Associate Judge P J Andrew
6 McGuire v Secretary for Justice [2018] NZSC 116, [2019] 1 NZLR 335 at [88].
7 Club Marine (NZ) Ltd v Quadrant Yachts Ltd [2019] NZHC 48 at [37].
Associate Judge P J Andrew
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