Smith v Velekof

[2022] NZHC 386

IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE

CIV-2021-454-41

[2022] NZHC 386

UNDER

Section 21 of the Administration Act 1969 and section 112 of the Trusts Act 2019

IN THE MATTER

of an application to remove and replace the executor and trustee of the Estate of Robert Earl Smith of Palmerston North (deceased)

BETWEEN

ANTON CRAIG SMITH AND MELANIE MARIE SMITH

Plaintiffs

AND

CHRISTINE VELEKOF

Defendant

Hearing:	18 February 2022
Appearances:	M Freeman and N Donaldson for the Plaintiffs D M Abricossow for the Defendant
Judgment:	8 March 2022

JUDGMENT OF COOKE J

Introduction

[1]    The plaintiffs in this proceeding are two of the four children of Mr Robert Smith who died in January 2020. The defendant, Ms Velekof, was Mr Smith’s de facto partner, and the person appointed as the administrator of his estate under his will.

[2]    In this proceeding the plaintiffs seek orders removing the defendant as administrator and appointing an independent person in her place under s 21 of the Administration Act 1969. The ultimate purpose of having an independent administrator appointed in place of Ms Velekof is so that the administrator can then

SMITH v CHRISTINE VELEKOF [2022] NZHC 386 [8 March 2022]

commence proceedings against Ms Velekof to recover some of the property she obtained or kept following the administration of Mr Smith’s estate, with other proceedings then commenced as contemplated by the plaintiffs, including under the Family Protection Act 1955. It is said that some of that property should have been brought back within the estate under the Property (Relationships) Act 1976, and that the plaintiffs and their siblings should benefit from that property by proceedings subsequently brought.

[3]    Ms Velekof opposes the orders. Affidavits have been filed by each of the plaintiffs, and an affidavit from the defendant has been provided in opposition.

The plaintiffs’ contentions

[4]    Mr Smith and Ms Velekof had a de facto relationship lasting some 32 years. The plaintiffs and their two brothers were Mr Smith’s children of a former relationship.

[5]    Mr Smith died on 3 January 2020. Under his will Ms Velekof was his sole executor, and under the will  she inherited his estate.   Probate  was obtained on     11 February 2020. The reported assets of the estate were $97,262.58. This was distributed within a month of probate being granted.

[6]    The plaintiffs say that the majority of Mr Smith and Ms Velekof’s assets acquired during their relationship were held in Ms Velekof’s name or their joint names, and that they accordingly did not fall into Mr Smith’s estate. They say there were substantial term deposits, and also identify three properties which they say have a combined value of $1.5 million, together with two other properties which they believe Mr Smith and Ms Velekof had an interest in.

[7]    The plaintiffs say that this property was more properly treated as relationship property, and that they have been disinherited. They say they cannot bring a claim under the Family Protection Act unless there is a mechanism to bring relationship property assets back into the estate. This requires a claim by the administrator under ss 25 and 88 of the Property (Relationships) Act. Only the personal representative of the deceased can bring that claim. They say that Ms Velekof is the administrator and

that she cannot be expected to bring proceedings against herself. They accordingly bring these proceedings to have Ms Velekof removed as administrator, and replaced by an independent person so that such proceedings may be advanced.

[8]    There is no dispute in relation to the approach applied by the Court to applications under s 21 of the Administration Act. It was set out by Heath J in Farquhar v Nunns, adopted by the Court of Appeal in Tod v Tod and Frickleton v Frickleton.1

[9]    Mr Freeman referred to a line of authorities where the Court had exercised such powers when an administrator had a conflict of interest, and could not be expected to be able to properly address whether proceedings should be brought against themselves in their personal capacity.2 He contended that such principles applied here as the majority of Mr Smith’s wealth fell outside the estate, Ms Velekof had been advantaged at the expense of the plaintiffs and their siblings, and that an independent person should now be appointed to allow the claims to be advanced.

Assessment

[10]   I can explain my decision on the application in concise terms. Notwithstanding the arguments advanced by Mr Freeman, I accept Mr Abricossow’s submission that the claims the plaintiffs contemplate cannot succeed, and that for this reason it would not be appropriate to make orders under s 21 of the Administration Act.

[11]   There is no dispute that proceedings brought for orders under s 25 of the Property (Relationships) Act would be necessary so that property held personally by Ms Velekof  is  re-classified  as  relationship   property,   and   then   divided.   As Mr Abricossow submitted, any such proceedings by any new administrator seeking to recover assets for the benefit of the estate are now time-barred, however. Section 90 of the Property (Relationships) Act provides:

1      Farquhar v Nunns [2013] NZHC 1670; Tod v Tod [2015] NZCA 5012 at [22]; Frickleton v Frickleton [2016] NZCA 408 at [29].

2      Niewisielski v Niewisielski [2014] NZHC 1547; Teariki v O’Reilly (1992) 2 FRNZ 51; Re Williams HC Hamilton CIV-2003-419-205 27 June 2003; Farnsworth v Farnsworth HC Auckland M1767/97 12 January 1999.

90       Time limits for commencing proceedings

(1)Proceedings must be commenced within the following time limits:

(a)if the estate of the deceased spouse or partner is a small estate (as defined in section 2), the proceedings must be commenced—

(i)no later than 12 months after the date of the death of the deceased spouse or partner; or

(ii)if administration of the estate is granted in New Zealand within that period, no later than 12 months after the grant of administration,—

whichever is the later:

(b)in any other case, the proceedings must be commenced no later than 12 months after administration of the estate of the deceased spouse or partner is granted in New Zealand.

(2)Regardless of subsection (1), but subject to subsection (3), the court may extend the time for commencing proceedings after hearing—

(a)the applicant; and

(b)any other persons who have an interest in the property that would be affected by the order sought and who the court considers should be heard.

(3)The court’s power under this section extends to cases where the time for commencing proceedings has already expired, including cases where it expired before the commencement, on 1 February 2002, of the Property (Relationships) Amendment Act 2001.

(4)The court may not grant an extension of time under subsection (2) unless the application for the extension is made before the final distribution of the estate of the deceased spouse or partner.

[12]   Mr Smith died in January 2020 and any proceedings brought by the administrator are well outside the 12-month period. For that reason, an application for an extension of time under s 90(2) would be required. But s 90(4) makes it clear that any such application needs to be made before the final distribution of the estate. It is not disputed that the modest estate involved in this case was finally distributed on  10 March 2020. So no such application can now be brought.

[13]   Mr Freeman responded to this point by arguing that s 90 did not apply to the prospective claim at issue at all. He argued that s 90 was in Part 8 of the Act, and that this Part was concerned only with the rights of the surviving partner to divide

relationship property, and that s 90 only applied to a surviving partner seeking to divide relationship property. It did not apply to proceedings taken by an administrator on behalf of the deceased partner against the surviving partner.

[14]   I see no substance to this argument. As Mr Abricossow submitted, Parliament expressly contemplated actions brought by a personal representative of the deceased partner seeking an order under s 25 of the Act. Section 88 provides:

88       Who can apply

(1)The following persons may apply for an order under section 25(1)(a) or (b) or an order or declaration under section 25(3):

(a)the surviving spouse or partner:

(b)any person on whom conflicting claims in respect of property are made by the surviving spouse or partner and the personal representative of the deceased spouse or partner.

(2)The    personal    representative    of    the     deceased     spouse or partner may, with the leave of the court, apply for an order under section 25(1)(a). The court may grant leave only if it is satisfied that refusing leave would cause serious injustice.

(3)The following persons may apply for an order under section  25(1)(b) or an order or declaration under section 25(3):

(a)the  personal  representative  of  the   deceased   spouse or partner:

(b)the Official Assignee in bankruptcy of the property of either spouse or partner:

(c)an appointee (within the meaning of section 378(1) of the Insolvency Act 2006) in whom the estate of a deceased spouse or partner vests on an order being made under section 379 of that Act.

(4)Subsection (2) is subject to section 12 of the Succession (Homicide) Act 2007.

(emphasis added)

[15]   Sections 88(2) and 88(3) contemplate proceedings brought by an administrator against the surviving partner. Proceedings under s 88(2) may not be brought as of right, however. Leave is required, and is only able to be granted if there would be serious injustice if it were not granted. As Mr Abricossow submitted this requirement to obtain leave reflected a concern that proceedings not be brought under the Act

against surviving partners without compelling reasons. A Department of Justice working group had recommended that such proceedings not be allowed at all.3 In the end Parliament addressed such concerns by permitting such proceedings, but any proceeding seeking a division of matrimonial property under s 25(1)(a) would first need to meet the stringent leave requirement.

[16]   It is not entirely clear to me whether proceedings against Ms Velekof to determine that property was relationship property not separate property would be within, or entirely within s 25(1)(a) or whether they would involve s 25(1)(b) or       s 25(3).4 But in any event what is clear is that proceedings under Part 8 contemplate claims advanced by the personal representative of the deceased partner against the surviving partner of the kind the plaintiffs suggest here.

[17]   The plaintiffs’ argument also comes up against the plain terms of s 90. The section applies to “proceedings”. That word is not defined, but clearly refers to the proceedings contemplated by the Act, including proceedings for orders under s 25. Section 88 specifies who can bring such proceedings (including the representative of a deceased partner), s 89 specifies certain pre-requisites for such proceedings depending on the state of the relationship at the time of death, and s 90 then specifies a time period within which such proceedings must be brought. This 12-month time period is consistent with other time periods prescribed under other legislation.5   So   s 90 clearly regulates proceedings brought by an administrator, including when they involve a requirement for leave under s 88(2). It is not possible to interpret the provisions in any other way.

[18]   This conclusion is consistent with the analysis of the Court in Hislop v Public Trust.6 Mr Freeman contended that the points that he was advancing had not been argued in that case. But it is nevertheless authority that stands against his contentions.

3      See Nicola Peart and ors Family Law – Family Property (online looseleaf ed, Thomson Reuters) at [PR88.03]; Department of Justice Report of the Working Group on Matrimonial Property and Family Protection (October 1988).

4      See Public Trust v Whyman [2005] 2 NZLR 696 (CA) at [20]-[21].

5      See Family Protection Act 1955, s 9.

6      Hislop v Public Trust [2015] NZHC 1101 [2015] NZFLR 716 at [16].

[19]   There is accordingly no point in removing Ms Velekof as administrator and replacing her with someone else. There are no steps a replacement administrator could take. This conclusion means that I do not need to address Mr Abricossow’s alternative argument that jurisdiction under s 21 to remove and replace an administrator no longer exists once the administration is complete. That may well be the case. Neither does  it seem that the power to remove a trustee under the Trusts Act 2019 could be applied as Ms Velekof would not be holding the assets as a trustee. But given the above conclusions I do not need to finally determine those points.

Conclusion

[20]   The application to remove and replace the defendant as the administrator is dismissed.

[21]   The defendant will be entitled to costs. If costs cannot be agreed, I will receive a memorandum from the defendant (no more than five pages plus a schedule) which is to be responded to by the plaintiffs within five working days (no more than five pages plus a schedule).

Cooke J

Solicitors:

Thomas Dewar Sziranyi Letts, Lower Hutt for the Plaintiffs Morrison Kent, Wellington for the Defendant