St Clair v Wright
[2017] NZHC 494
•17 March 2017
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2015-485-616540 [2017] NZHC 494
UNDER the Trustee Act 1956 and the
Administration Act 1969
IN THE MATTER OF
the estate of John Vernon Wright
BETWEEN
CHELSEY ELLEN ST CLAIR Plaintiff
AND
IAIN WRIGHT Defendant
Hearing: 23 August 2016 Counsel:
I R Millard QC for Plaintiff
No appearance for Defendant
P R W Chisnall for Official AssigneeJudgment:
17 March 2017
JUDGMENT OF CLARK J
Background
[1] The plaintiff is one of two residuary beneficiaries in the estate of John Vernon Wright (the testator) who died on 25 November 2014. The sole executor of the will is the defendant, Iain Wright, the testator’s only son.
[2] Probate was obtained on 24 March 2015. The estate has not been distributed but held in its entirety by the defendant as far as is known to the plaintiff.
[3] In these proceedings the plaintiff seeks orders removing the defendant as the executor and trustee of the trusts created by the will. Other orders are sought. I
come to these in due course.
ST CLAIR v WRIGHT [2017] NZHC 494 [17 March 2017]
Only the plaintiff appeared
[4] The defendant was represented during the early stages of the litigation. But since April 2015 attempts to contact him have been numerous and unsuccessful. The plaintiff’s solicitors and the defendant’s own solicitors have attempted to obtain from the defendant proper financial disclosure in respect of the estate including details of income and expenditure.
[5] On 25 February 2015 Mr Wright swore in an affidavit in support of his application for probate that when called upon he would provide an accurate account of the deceased’s estate, including receipts and disbursements and that he would faithfully execute the will dated 20 September 2014. He remains in default.
[6] In his written submissions Mr Manktelow, then counsel for the plaintiff, submitted these failures were compounded by subsequent events which were noted in a Court minute dated 2 June 2016:
Mr Grimwood [the defendant’s solicitor] has filed a memorandum for Mr Wright in which he advises that he has been having difficulty contacting his client. Mr Wright has apparently been working on a rig, and contact is difficult. Mr Grimwood says that he received an email on 30 May 2016 stating that: ‘the required information’ had been sent to Mr Grimwood by Mr Wright on 23 May 2016. For whatever reason, it appears that Mr Grimwood has not yet received that information.
…
I record that I have advised Mr Grimwood this morning that it is unsatisfactory that he is apparently having difficulty obtaining instruction from Mr Wright. Mr Wright will be aware that accepting the office of executor and trustee in an estate carries with it responsibilities, and it is simply not acceptable for him to put himself out of communication with his solicitors and counsel on a matter as important as the issue of whether he should be removed as executor and trustee.
[7] A further minute of this Court dated 30 June 2016 records:
Mr Manktelow [the plaintiff’s current solicitor] advised that no further information has been provided by Mr Wright. Specifically Mr Wright has not provided the statement of income and expenditure which Ms St Clair seeks. Mr Manktelow does not seek any order relating to the statement of income and expenditure; he prefers to press on with the claim, and asked me to allocate a one day fixture.
Mr Grimwood advised that he has received no further instruction from Mr Wright. He was unable to assist on the question of the statement of income and expenditure. He advises that his firm will be seeking leave to withdraw as solicitors for Mr Wright.
[8] A timetable was set in the Court minute of 30 June 2016. Pursuant to the timetable Mr Wright was to file and serve any further affidavit by 14 July 2016 and submissions by 16 August 2016. The matter was set down for hearing on 23 August
2016. On 9 August 2016 Mr Grimwood filed a memorandum notifying the plaintiff that the defendant now acted in person. Nothing was filed by Mr Wright. Instead an email from Mr Wright dated 17 August 2016 to the registry advised the case manager that he was overseas and not in a position to get back to New Zealand for the hearing. Mr Wright asked for the proceeding to be adjourned until he returned to New Zealand.
[9] I issued a minute on 18 August 2016 indicating that the Court would consider whether postponement was in the interests of justice but before the countervailing interests could be assessed Mr Wright needed to make a proper application setting out proper grounds. Other parties to the litigation needed to have notice of any such application. As Mr Wright’s informal communication to the registry provided no grounds for his request beyond that he was overseas and unavailable Mr Wright was invited to make an application and serve it on the plaintiff. In recognition of Mr Wright’s geographical distance I indicated that in lieu of a formal document I was prepared in the circumstances to accept an email to the registry copied to counsel for the plaintiff. The minute stated:
It is not sufficient for a party to litigation to simply advise the Court that they are unavailable because they are overseas. Once fixtures are obtained the obligation is on litigants to organise their personal affairs around the commitment to the hearing.
[10] Mr Wright was to file or email an application for an adjournment within
24 hours of receipt of my minute. As at 23 August 2016, the day of the hearing, there had been no communication from Mr Wright. Nor did he appear.
[11] Mr Millard QC appeared for the plaintiff at relatively short notice due to
Mr Mankletow becoming unavailable. To assist, Mr Chisnall who appeared for the
Official Assignee, remained for the duration of the hearing. I record my appreciation
of Mr Chisnall’s assistance.
[12] I discussed with counsel at the outset the onus on the plaintiff to formally prove her case. In his statement of defence Mr Wright admits the factual background and denies only the pleading in the fourth and final paragraph of the statement of claim to the effect that continuance of the defendant as trustee and executor of the will would be detrimental to, and prevent, the proper execution of the trusts and it is expedient and equitable that he be discharged and removed as executor and trustee.
[13] The only issue for determination is whether there is a basis for removal of
Mr Wright as executor and trustee.
Jurisdiction
[14] Where it is expedient to do so the Court may appoint a new trustee in addition to, or in substitution for, any existing trustee. Section 51 of the Trustee Act
1956 provides:
51 Power of court to appoint new trustees
(1) The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
[15] The jurisdiction of the Court to remove a trustee is ancillary to its principal duty to see that the trusts are properly executed.1 It is not necessary to establish that the trustees have committed breaches of trust. The main concern must be the welfare of beneficiaries.2 A macroscopic rather than a microscopic view of the evidence is required and it is sufficient if the evidence shows:3
(i) that there is a conflict between interest and duty; (ii) that the trustees have failed to recognise this conflict and to take steps to ensure that their interest should not prevail as against their duty, and have
1 Hunter v Hunter [1938] NZLR 520 at 529.
2 Letterstedt v Broers (1884) 9 App Cas 731 cited in Hunter v Hunter at 529.
3 Hunter v Hunter, above n 1 at 530.
disregarded the interests of the infant cestui que trust; and (iii) that a state of hostility exists between the trustees and the immediate possessor of the trust estate which is calculated to work against the true interests of the estate.
[16] The Court may discharge or remove an administrator in circumstances provided by s 21 of the Administration Act 1969:
21 Discharge or removal of administrator
(1) Where an administrator is absent from New Zealand for 12 months without leaving a lawful attorney, or desires to be discharged from the office of administrator, or becomes incapable of acting as administrator or unfit to so act, or where it becomes expedient to discharge or remove an administrator, the court may discharge or remove that administrator, and may if it thinks fit appoint any person to be administrator in his or her place, on such terms and conditions in all respects as the court thinks fit.
[17] As can be seen there is a common theme of “expediency” in the “parallel provisions for removal”4 under the Administration Act and Trustee Act.
[18] The Court will be guided in the exercise of its jurisdiction by the following principles:5
(a) The starting point is the Court’s duty to see estates properly
administered and trusts properly executed.
(b)The wishes of the testator/settlor (evidenced by the appointment of a particular executor or trustee) are to be given considerable weight.
(c) The welfare of the beneficiaries is the “litmus” test.
(d)Hostility between administrators/trustees and beneficiaries is not by and of itself a reason for removal. Such hostility assumes relevance if
and when it risks prejudicing the interests of the beneficiaries.
4 To adopt Osborne AJ’s description in Crick v McIlraith [2012] NZHC 1290 at [13].
5 Operative principles have been conveniently summarised in, for example, Crick v McIllraith at
[16] cited in Harsant v Menzies [2012] NZHC 3390, (2012) 3 NZTR 22-033 at [57].
(e) The Court will consider the circumstances of the case in a macroscopic not microscopic fashion.
Grounds for application
[19] The broadly stated grounds for discharge and removal in the statement of claim were elaborated by Mr Millard QC in light of the affidavit evidence before the Court.
(a) The defendant has failed to provide proper financial disclosure in respect of the estate including details of income and expenditure. The only bank statements provided by the defendant date back to 2014 and it is suggested that the defendant has intermingled estate funds with his own.
(b)The defendant held a power of attorney for the testator which ceased at the date of the testator’s death on 25 November 2014. But it is apparent from the testator’s bank statement of 24 December 2014 that the defendant has drawn down from that account for his own personal benefit. This bank statement was provided by the defendant’s previous solicitor and the plaintiff has no statements before or since. This statement was put in evidence by the plaintiff.
(c) An asset of the estate was a residential property. The property was a unit attracting body corporate levies. The defendant failed to pay the levies as they accrued causing penalties to be charged. He had a duty to protect the assets as both trustee and executor.
(d)The affidavits disclose a controversy about chattels. The defendant suggested in his affidavit that the plaintiff’s mother had taken valuable chattels without accounting for them (which she denies). The defendant intends to deduct $13,500.00 from the plaintiff’s share of the estate for chattels alleged to be missing.
(e) The defendant has been using estate funds for his own private
expenses from at least the date of the testator’s death and, the plaintiff
assumes, has continued to do so after 24 December 2014, the end date covered by the statement.
Assessment
[20] All of the grounds are made-out by the evidence. The plaintiff has established to my satisfaction that the defendant must be removed as trustee and executor.
[21] Although I do not need to enter into a meticulous examination of the evidence6 I am conscious of the fact that the defendant did not appear. His non- appearance requires of me a greater engagement with the evidence than might otherwise have been the case. While the burden of proof is not altered I must ensure that the matters which the defendant might have raised in his defence, had he appeared, are addressed.
[22] The case advanced on behalf of the plaintiff is essentially that the evidence demonstrates plain misconduct on the part of the defendant. There has not been proper accounting, there have been delays and the defendant has stalled in providing even elementary accounts or details. When threatened with proceedings he has threatened his own. It is convenient to address the alleged defaults in, more or less, a chronological sequence.
[23] The testator died on 25 November 2014. Probate was obtained on 24 March
2015 and on 10 April 2015 the testator’s residential property was transferred to the
defendant as sole executor.
[24] Ms St Clair, the testator’s granddaughter and one of the two beneficiaries, engaged Carter Chung, a firm of solicitors. On 16 April 2015 Carter Chung wrote to the defendant requesting to know the law firm acting on behalf of the estate, whether an application for probate had been filed, and what assets formed part of the estate.
No reply was received. The letter was sent to the defendant’s email address.
6 Hunter v Hunter, above n 1 , at 529.
[25] In his affidavit sworn 17 February 2016 the defendant referred to Carter Chung’s letter of 16 April 2015 and deposed that he had “no knowledge of receiving this letter”. It is difficult to understand why the defendant has no knowledge of this document in light of email communications between the defendant and Ms St Clair’s mother, copies of which were exhibited to the defendant’s affidavit. The particular email string commences 17 February 2015 and continues through March 2015 with the defendant using the same email address Carter Chung used in April to send the letter of which the defendant pleads ignorance. The defendant continued to use this same email address throughout 2015 and, indeed,
2016.
[26] In May 2015 Carter Chung established that Malcolm Lake, solicitor of Rotorua, acted for the defendant in the transfer of title of the testator’s residential property. On 8 May 2015 Carter Chung wrote to Malcolm Lake requesting information in particular, confirmation that probate had been obtained and information as to the assets forming part of the estate. Throughout May, June and July 2015 there were written communications between the solicitors. On 14 May
2015 Malcolm Lake advised that the substance of Carter Chung’s correspondence could not be answered without instructions; the defendant was “out of the country and not returning for some months”. On 20 May 2015 a copy of the grant of probate was provided to Carter Chung by Malcolm Lake.
[27] On 22 May 2015, Malcolm Lake wrote to Carter Chung advising that the defendant “has now informed me that”:
… the deceased had approximately $117,000.00 in his bank account as at the date of death. From that amount funeral costs, on-going Unit costs and legal fees have been paid. At present there is approximately $100,000.00 remaining. The deceased also owned a motor scooter, a bed, table and sundry items of furniture. I am further instructed that my client’s sister and your client have uplifted property and paintings together with Mr Wright’s mother’s jewellery and antiques. Those items will need to be appraised and a suitable adjustment made at the appropriate time.
Until Mr Wright returns to New Zealand in late August I will not be in a position to provide you with accurate figures because I simply do not have those on my file.
[28] In his affidavit opposing removal, sworn on 17 February 2016, the defendant refers to the communications between Malcolm Lake and Carter Chung in May 2015 and says he was unaware of them as he was overseas. Once again, it is difficult to reconcile this testimony with Malcolm Lake’s communication on 22 May 2015 to the effect that “Mr Wright has now informed me…”.
[29] I accept Mr Millard’s submission that the inference the defendant was in fact aware of the communications is irresistible. The information Malcolm Lake passed on in the letter of 22 May 20157 was expressly sourced to the defendant having “now informed me”. As Mr Millard submitted the defendant’s evidence that he was unaware of the communications because he was overseas during May and June 2015 alongside the provision of details from the defendant himself in May 2015 “just does not add up”.
[30] The last communication from Malcolm Lake was on 8 July 2015. The letter consisted of the following two sentences:
Further to previous correspondence I write to advise that I have not been favoured with additional instructions in relation to this Estate. You will need to deal with Mr I Wright direct.
[31] On 1 July 2015 the defendant wrote to Carter Chung from his customary email address. He sought from Carter Chung positive identification of Chelsey St Clair in the form of a drivers licence or passport and he alluded to the possibility of legal issues regarding probate.
[32] Carter Chung replied to the defendant on 16 July 2015. The passport identifying Ms St Clair was provided and the letter reminded the defendant of his executor’s obligations to the beneficiaries. Carter Chung repeated previous requests for the following information:
(a) all bank account statements of the deceased since his death;
(b) confirmation or otherwise that the bank accounts had been closed;
7 Set out at [27] above.
(c) if the bank accounts had been closed, confirmation of where those funds were currently held and the current balance;
(d) copies of all invoices paid to date and/or outstanding; and
(e) a complete list of chattels.
[33] The defendant deposes that “by the time I was furnished with this proof and returned from Australia I received a letter from the Official Assignee”. The Official Assignee’s letter is dated 13 November 2015. The defendant had been in possession of the passport identification he sought for almost four months by the time of the Official Assignee’s letter. The trigger for the Official Assignee’s letter of
13 November 2015 appears to have been a letter from Mr Manktelow to the defendant dated 12 November 2015 to the following effect:
(a) It was apparent that the defendant was unwilling to provide a schedule of assets and liabilities with supporting documentation in respect of the estate and the defendant was preferring his own private interests as against his niece’s interests in its distribution.
(b)When applying for probate the defendant undertook to faithfully carry out his duties as administrator but had not done so.
(c) It was appropriate in light of that failure that the defendant resign and consent to the appointment of a neutral person to carry out that task.
(d) The defendant was asked to consent to this course.
(e) As the matter had been dragging on since the testator’s death
12 months earlier a response was sought within three days from the date of the letter failing which court proceedings would be issued.
[34] The Official Assignee’s letter of 13 November 2015 refers to a conversation with the defendant “today” that is, the day following Mr Manktelow’s threat of legal proceedings.
[35] On 14 November 2015 the defendant emailed Ms St Clair’s mother in a most threatening manner. As Mr Millard submitted it exhibited extraordinary behaviour for an executor who, inexplicably, seemed motivated to remain executor when he had control of the entire estate, had not accounted, had given no details and had ignored all requests for details.
[36] Beyond the impoverished communications (for an executor in discharge of his duties as executor) there are serious concerns about assets being used for personal expenses. A Westpac Bank statement as at 24 December 2014 shows, for example, purchases from Dunkin’ Donuts, BurgerFuel, Bunnings and cash withdrawals all following the testator’s death. As well superannuation payments were continuing to be made the last on this statement being 15 December 2015 when the fact of the testator’s death should have been notified to the New Zealand Superannuation Fund.
[37] Mr Millard provided to the Court an email to Mr Manktelow from Mr Chisnall, for the Official Assignee dated 7 July 2016. Attached to it is an email from the defendant to Mr Chisnall with “a cost breakdown with copies of bank records”.
[38] The documentation itself gives rise to further issues. Payments of some
$7,400.00 from the estate for lawyer’s fees are not permissible because there was no charging clause in the will. More particularly the defendant has deducted that amount from the estate which the defendant has purported to halve.
[39] There are disputed facts around distribution. If indeed, as the defendant contends, a third party removed assets from the testator the value of those assets is not to be deducted from the beneficiary, Ms St Clair. The real point is that if there are issues around the chattels they need to be investigated by a newly appointed executor.
[40] Beyond the concerns and defaults (not all enumerated in this judgment) there have been real difficulties in holding the defendant to account. A Court minute of
2 June 2016 records advice to the Court from counsel for the defendant to the effect
the defendant was aware of his obligations and was complying. Through counsel the defendant undertook to provide the required information to Ms St Clair and the Official Assignee. Because it appeared to the Associate Judge that all matters were likely to be settled he made no orders. Yet by the end of that month no information had been provided and counsel for the defendant sought leave to withdraw.
Decision
[41] Manifestly the defendant has preferred to balance the respective interests of the two beneficiaries in his favour and in so doing he has failed to look after the interests of the plaintiff. I have no doubt that the defendant must be removed as executor and trustee.
[42] Mr Millard submitted that this is a straight-forward estate. There is no need for the assets to be held on trust. The proper administration of the estate requires that it be distributed by a new executor. I am reluctant to simply bring the trust to an end. The Court’s concern is the welfare of the beneficiaries. I am confident that the appointment of a substitute executor and trustee will achieve a proper administration of the estate and execution of the trust while also recognising the wishes of the testator.
[43] As to costs, the plaintiff should not have had to bring this application. She made a simple request for information the month following the testator’s death and that information was never provided. Not only was the failure to provide the information in breach of the defendant’s duties but his failure to communicate and the manner of his communications were contrary to the proper discharge of his duties as administrator and trustee. Where a trustee defends proceedings brought to secure his or her removal and fails in defence of that proceeding the trustee may be
ordered to pay the plaintiff’s costs.8 I propose to make an order accordingly.
Result
[44] The following orders are made:
8 Hunter v Hunter, above n 1, at 538.
(a) The defendant is removed as trustee and executor of the testator’s
will.
(b)Michael Basil-Jones, solicitor of Lower Hutt, is appointed executor and trustee of the will of the late John Vernon Wright.
(c) The reasonable costs incurred by the executor and trustee in administering the estate are to be met from the estate.
[45] I award the plaintiff costs on a 2B basis and disbursements reasonably incurred for the purpose of this proceeding to be paid by the defendant personally. The plaintiff’s costs are not to be paid from the estate.
[46] The defendant has acted unreasonably and he is not entitled to be indemnified from the estate for his legal costs in defending the proceeding.
Karen Clark J
Solicitors:
Guy Manktelow, Lower Hutt, for Plaintiff
Lance Lawson, Rotorua for Defendant
P R W Chisnall, Wellington for Official Assignee
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