Strange v Dunn

[2022] NZHC 2648

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2022-485-145

[2022] NZHC 2648

BETWEEN

ANNETTE STRANGE

Plaintiff/Respondent

AND

JASON DUNN

Defendant/Applicant as executor and trustee of the Estate of Pauline Strange

Hearing:	23 September 2022
Appearances:	N J Newbery and C D Batt for Plaintiff/Respondent S Barker for Defendant/Applicant
Judgment:	13 October 2022

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

Introduction

[1]    Pauline Strange died on 22 March 2021. As at that date she had six children and 12 grandchildren. She left a will dated 11 September 2009. It is a spare document. Essentially, Mrs Strange appointed one of her children, the defendant, Jason Dunn, as her executor and trustee, and left her entire residuary estate to Jason on the basis that he was to distribute it in accordance with instructions she said she had “passed to him during [her] lifetime”.

[2]    Mrs Strange left no written instructions to Jason. However, a week or so prior to executing her will, on 2 September 2009, Mrs Strange, seemingly with Jason’s assistance, prepared a list of her assets, and, prior to attending an appointment with the solicitors who prepared her will, Kapiti Law, she made a list of beneficiaries which named her children and grandchildren.

STRANGE v DUNN [2022] NZHC 2648 [13 October 2022]

[3]    The estate consists of an unencumbered freehold property in Martinborough, cash, and some other assets. The parties have different views as to the fair market value of the property in Martinborough, and therefore the value of the estate. In the end, it does not appear  to me that a great deal turns on this.   On the evidence,     Mrs Strange’s estate would appear to have a value of between $800,000 and

$1,000,000.

[4]    Jason’s evidence is that Mrs Strange’s instructions to him were clear. He says that she told him that once the net value of the estate was ascertained he was to pay

$150,000 to her six children in equal shares (so $25,000 each) and another $150,000 to her twelve grandchildren in equal shares (so $12,500 each), and that he was to inherit the balance (which, allowing say $50,000 for estate administration costs, might come to something like $550,000). He says that the $300,000 to be distributed to the children and grandchildren bore some relationship to Mrs Strange’s own valuation of her estate prior to the execution of her will. In fairness it should be mentioned that Jason is supported in aspects of this by other family deponents.

[5]    In this proceeding, Annette Strange, another one of Mrs Strange’s children, seeks an order to the effect that Mrs Strange’s will is void for uncertainty, which, because this is the only will that Mrs Strange made, would result in an intestacy and the equal division of the net estate between her children. Annette also seeks an order removing and replacing Jason as the executor and trustee of Mrs Stranger’s will.

[6]    Apparently, this dispute in relation to Mrs Strange’s estate echoes an earlier dispute within the family. When the last of Mrs Strange’s parents died, she became embroiled in a dispute with her siblings. The outcome of the earlier dispute between Mrs Strange and her siblings was that she was left with a block of land in Martinborough and the necessity of subdividing it, selling a proportion of it and building on the section she retained. Jason’s evidence is that he spent a considerable amount of time assisting her to resolve the dispute and with the subdivision and the build. As I understand it that evidence is directed at explaining why his mother may have felt it appropriate to treat him more favourably than his five siblings in her will.

[7]    Annette moved to Australia approximately 30 years ago. She has not been in New Zealand for approximately 20 years. It is also some years since she has had any contact with her mother.

[8]    I am informed that Mrs Strange was a religious person. It is said that her religious beliefs, whatever they may have been, lead her to mistrust formal secular processes, and that that is why she did not make a will until very late in her life. It seems that when his mother’s health deteriorated Jason was instrumental in persuading her to make a will, and, when she agreed to do so, took her to see his solicitors. As far as I can see there is no basis for criticism of Jason on this account.

[9]    The litigation involving these parties is not confined to this case or this Court. Originally, Annette commenced a claim in the Family Court  pursuant  to  the  Family Protection Act 1955. Those proceedings are being defended by Jason and he has counterclaimed for an order under the Testamentary Promises Act 1939 which mirrors his defence in this proceeding.

[10]   Jason made an application for security for costs in the proceedings in the Family Court. His application was dismissed by Judge O’Dwyer in a judgment dated 29 August 2022.1 This seems primarily to have been on the basis that, come what may, Annette will be entitled to receive $25,000 from the estate and that would be sufficient to cover her likely liability for costs were she to be unsuccessful and were a costs order to be made against her.

[11]Now Jason applies for an order for security for costs in this proceeding.

[12]   On his behalf, Mr Barker calculates that costs on a 2B basis to the conclusion of a trial would likely be over $66,000, and contends that the Court should make an order for a minimum of $50,000 on a staged basis.

1      Re Estate of Pauline Strange (dec’d) [2022] NZFC 8524.

Security for costs

[13]   Security for costs is governed by r 5.45 of the High Court Rules 2016, which provides:

5.45     Order for security of costs

(1)Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—

(a)that a plaintiff—

(i)is resident out of New Zealand; or

(ii)is a corporation incorporated outside New Zealand; or

(iii)is a subsidiary (within the meaning of section 5 of the Companies Act 1993) of a corporation incorporated outside New Zealand; or

(b)that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s proceeding.

(2)A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.

(3)An order under subclause (2)—

(a)requires the plaintiff or plaintiffs against whom the order is made to give security for costs as directed for a sum that the Judge considers sufficient—

(i)by paying that sum into court; or

(ii)by giving, to the satisfaction of the Judge or the Registrar, security for that sum; and

(b)may stay the proceeding until the sum is paid or the security given.

(4)A Judge may treat a plaintiff as being resident out of New Zealand even though the plaintiff is temporarily resident in New Zealand.

(5)A Judge may make an order under subclause (2) even if the defendant has taken a step in the proceeding before applying for security.

(6)References in this rule to a plaintiff and defendant are references to the person (however described on the record) who, because of a document filed in the proceeding (for example, a counterclaim), is in the position of plaintiff or defendant.

[14]   Applications for orders for security for costs are always difficult. They involve the Court balancing a claimant’s right of access to justice against a respondent’s right not to be obliged to incur the costs of defending a claim when there is no real prospect of being able to recover a costs award in the event of the claim being unsuccessful.

[15]As Professor Zuckerman says:2

Requiring a claimant to provide security for costs as a condition to proceeding with the claim is on the face of it an extraordinary jurisdiction. The principle of access to justice demands that citizens should have an untrammelled opportunity to pursue bona fide claims or defences in court …

[16]   That said there are certainly situations where it is in the interests of justice to make an order for security for costs, and where the fundamental principle of unimpeded access to justice must yield to other — often very contextual — considerations.

[17]The issues that arise on any application for security for costs are:

(a)whether the applicant can satisfy the Court that the threshold issue in  r 5.45(1) is met;

(b)if so, whether the Court should exercise its discretion to make an order for security for costs;

(c)if so, what the amount and terms of the order should be; and

(d)in the event that an order is made, whether the Court should also order a stay pending payment of all or any part of the security for costs.3

[18]   There are a large number of cases in which the courts have attempted — with varying degrees of success — to chart the most appropriate approach, and from which some general principles emerge:4

2      Adrian Zuckerman Zuckerman on Civil Procedure Principles of Practice (4th ed, Sweet & Maxwell, London, 2021) at [10.309].

3      Bush v Zion Wildlife Gardens Ltd (in receivership and liquidation) [2012] NZHC 17.

4      See Busch v Zion Wildlife Gardens Ltd (in rec and in liq) [2012] NZHC 17.

(a)it is only if an applicant can establish that the threshold test in r 5.45(1) applies that the application will proceed any further. However, it is important to emphasise this is no more than a threshold test. Even where it is met, it does not follow that an order for security of costs will be made;

(b)where the threshold test is met the Court has a discretion as to whether to make an order and will do so where the Judge concludes that it is just in all the circumstances, and on terms that the Court regards as just;

(c)the Court’s job is to balance the interests of the parties.5 Accordingly, a key consideration in every case is the apparent merits of the parties’ cases.6 However, in the context of an interlocutory application, all the Court is able to do is gain an impression of these.7

[19]   Over and above those principles, the factors that the Court takes into account vary from case to case. However, factors which often play a part include:

(a)whether the claimant has been put up as a party to shield others from costs orders;8

(b)whether there is any evidence that the claimant has deliberately disposed of or hidden assets so as to avoid exposure to a costs award;9

(c)whether the claimant, though personally impecunious, has any other source of funding;10

(d)whether the claimant’s impecuniosity arises from the very action or actions of the respondent that are the subject matter of the proceeding;11

5      Clear White Investments Ltd v Otis Trustee Ltd [2016] NZHC 2837 at [4].

6      A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA); and Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [24](c).

7      Lee v Lee [2019] NZCA 345 at [73]; and McNaughton v Miller [2022] NZCA 273 at [19].

8      Highgate on Broadway Ltd v Devine, above n 6.

9      Highgate on Broadway Ltd v Devine, above n 6.

10     Saunders v Houghton [2009] NZCA 610, [2010] 3 NZLR 331 at [36].

11     Bell-Booth Group Ltd v Attorney-General & BCNZ (1986) 1 PRNZ 457 (HC).

(e)whether making an order for security for costs would prevent the plaintiff from prosecuting the claim;12

(f)whether the cause involved is a public interest one;13 and

(g)the conduct of the parties in relation to the litigation and its subject matter.14

[20]   Ultimately, the overriding objective is to balance the interests of the plaintiff and the defendant and make an order which is just in all the circumstances.

Analysis

[21]   In this case, there is no contest insofar as the threshold test is concerned. Annette lives abroad. In terms of r 5.45(1), that is enough. Although the threshold issue is easily answered here, that does not mean that Annette’s residency abroad and financial position have no further relevance.

[22]   Having said that, it does not appear to me that Annette’s residency in Australia should influence the outcome here.  Primary and subordinate legislation in both  New Zealand and Australia expressly facilitates the reciprocal enforcement of judgments, and of course the two jurisdictions have compatible law in relation to such elementary things as creditors’ remedies. It is not, in my view, going too far to say that the enforcement of a New Zealand judgment in Australia is probably only marginally more complicated and costly than the enforcement of a domestic judgment.

[23]   Of more significance is Annette’s financial position. This was the subject of some controversy. To an extent, this descended into an argument about whether she is “impecunious”. That is a relative term, and not one that lends itself to definition in a vacuum. A more helpful question to ask is whether her financial position would enable her readily to pay a costs award that might follow if she were unsuccessful.

12     Deliu v Chapman [2020] NZHC 2100.

13     McGechan on Procedure (online loose-leaf ed, Thomson Reuters) at [HR5.45.03(5)].

14     Sharda  Holdings  Ltd  v  Gasoline  Alley  Services  Ltd   HC  Auckland  CIV-2008-004-539,    13 November 2009 at [7].

[24]   As already said, Mr Barker has provided an analysis of the likely costs on a 2B basis. Mr Newbery did not challenge that analysis. My assessment is that it is accurate, and I take that as a starting point.

[25]   Annette is apparently the registered owner of two residential properties in Northam, near Perth, Western Australia. They are said to have a value of approximately AUD 270,000 and AUD 130,000, though the evidence for those valuations is not especially compelling as in part at least it was supported by reference to views expressed by a real estate agent looking to secure a listing. My assessment is that the two properties are unlikely to have a  collective  value  of  more  than AUD 400,000. Obviously, that needs to be set against Annette’s outstanding indebtedness secured against them, which would appear to be in the order of $210,000. In addition Annette says that she has a superannuation fund with a value of approximately AUD 89,000. Her evidence is that whilst this is currently inaccessible, she will have access to it when she reaches retirement age in late 2023. Annette is employed and earns an income of AUD 74,000 per annum. This seems just to cover her living costs. On the most positive analysis, then, Annette may have assets with a net value of AUD 279,000, but, as matters stand, these are illiquid and would not immediately be available to meet a costs award.

[26]   Thus, whilst Annette may ultimately be in a position to meet a costs award against her, the enforcement of such an award would involve not insignificant time and cost. However, it seems likely that by the time this matter goes to trial, Annette may have access to her superannuation, which would significantly alter the landscape. In the end, I view this as an evenly balanced consideration.

[27]   It does not appear that Annette is being put up as the plaintiff to shield others from the consequence of costs orders. Whilst there are others who might benefit if she were to be successful in the proceeding, there is no indication that they have any active interest in the matter. There is certainly no evidence that Annette has taken or is likely to take steps to protect herself from a possible costs order. Nor is there evidence that Annette had access to assets or funds beyond those already referred to.

[28]   There may be a sense in which Annette is in a position to say that her financial position is in part due to Jason’s actions, but that can have no real bearing here because she will ultimately be in a position to meet a costs award.

[29]   A costs award requiring Annette to pay anything more than a nominal amount at this stage, coupled with a stay of her proceeding, would on the evidence present significant difficulties for her, and might well preclude her from prosecuting her claim. I view this as a factor which counts against the making of an order.

[30]   This is certainly not a case involving an issue of public interest. It is quintessentially a private matter. This is an irrelevant consideration.

[31]   The conduct of the litigation by the parties is an interesting consideration in this case. Reviewing the correspondence between the parties and their solicitors over the period during which the dispute developed, I doubt whether either party is likely to view the approach they adopted with unmitigated pride. An aggressive approach appears to have crept into the exchanges at a relatively early stage. Early on it may have been more productive to consider a negotiated settlement or possibly a mediation. However, in the end, I do not think that it would be fair to reach an adverse a view as to the conduct of either party, and I regard this too as a neutral factor.

[32]This brings me to two further points raised by Mr Newbery on Annette’s behalf.

[33]   Mr Newbery submitted that the fact that this proceeding concerns an estate and that the parties to the litigation are two beneficiaries (Annette and Jason in his capacity as such) and the executor and trustee (Jason in that capacity) means that an order for security for costs ought not to made as the litigation is likely to be funded by the estate.

[34]   It is true that it is not unusual in litigation involving an estate for the parties’ costs to be paid from estate funds. However, that is by no means a universal rule. Costs in such litigation, as in any litigation, are quintessentially a matter of discretion.15 There can be no assumption that the parties in this case will, as a matter of course, have their costs paid out of the estate.

15     High Court Rules 2016, r 14.1.

[35]   Indeed, if, for example, Jason were to prevail and the Court were to determine that the will was enforceable and the estate was to be distributed on the terms Jason says reflect his mother’s instructions, costs would certainly be in issue because an order that all parties’ costs be paid out of the estate would place the costs burden entirely on Jason. In the end, I do not think this consideration takes the matter any further.

[36]   The second point raised by Mr Newbery concerned the way in which this case has come before the Court. The case involves a testatrix who has made a will that is clear in its terms, but which is silent as to details of how the residue of her estate is to be distributed. On his own evidence, Jason is the executor of the estate and the trustee of the will trust, the only person to whom the full terms of the trust have been imparted and thus the principal source of evidence as to these and the major beneficiary.

[37]   Mr Newbery submitted that, in such circumstances, the proper course for Jason to have taken was to seek confirmation from the Court as to the distribution of the estate. This might have been done in one of at least two ways — by an application for probate in solemn form or perhaps more easily by an application pursuant to s 133 of the Trusts Act for the Court’s approval.

[38]   In my assessment, there is some force in that contention. That point is relevant to the application for security for costs. This is because if Jason had adopted the course suggested by Mr Newbery, the cost of the application would in all probability have been treated as costs in the course of the administration of the estate, even if Jason were entirely successful. Such costs would include Jason’s own costs as the executor and trustee, and the costs of any party who elected reasonably to oppose his application. It does not seem to me to be appropriate for Jason to be able to shift that cost burden merely by electing not to obtain approval from the Court. This is a factor which counts against an order for security for costs.

[39]   That brings me to a brief analysis of the merits as I see them. In doing so, I deal only with the case before  this  Court.  Annette’s  claim  pursuant  to  the  Family Protection Act and Jason’s counterclaim pursuant to the Law Reform (Testamentary Promises) Act are before the Family Court, as they should be.

[40]   Annette’s primary claim is for an order setting aside Mrs Strange’s will for uncertainty. It is a curiosity of the case that, insofar as it goes, the will is quite clear as to the testatrix’ intentions. Neither party suggests otherwise. However, the gift of the entire residual estate to Jason was not an absolute one. It was subject to a fiduciary obligation to discharge her wishes for the disposal of the same, which she indicated she had conveyed to him. The will trust is what the law refers to as a half secret trust.16 The fact of the trust is disclosed but not its terms. And it is in relation to the terms of the will trust that the issue of certainty arises.

[41]   Annette’s case is effectively that because the will is silent as to the beneficiaries and what they are each to receive, it is insufficiently certain.

[42]   The common law — or, rather, equity — has long recognised both fully and half secret trusts, and there is nothing in the Wills Act 2007 or the Trusts Act 2019 that changes that.17 In my assessment, Mr Newbery’s argument in relation to this reflects a misunderstanding of the law. It is true that the law requires there to be certainty as to inter alia the objects or beneficiaries (other than in the case of charitable trusts). However, the notion of certainty in this context does not require there to be certainty on the face of an instrument creating the trust. What it requires is that if and when the terms of the trust are established, those terms identify with sufficient particularity the persons or categories of persons who are beneficiaries.

[43]   Jason’s evidence is that the beneficiaries are the children and grandchildren of Mrs Strange. Insofar as it goes, that is a perfectly clear description. In short, the argument advanced on Annette’s behalf falls into error in that it confuses certainty in the sense already discussed with evidential uncertainty. They are two difficult concepts. One is a core requirement of a trust. The other is a matter of the burden of proof. Subject to one important qualification, assuming as it is necessary to do for this purpose that Jason’s evidence is accepted, there does not appear to me to be an issue of uncertainty as to the beneficiaries.

16     See Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [14.1].

17     See Trusts Act 2019, ss 49–55; and Law Commission Review of the law of trusts: a trusts act for New Zealand (NZLC R130, 2013) at 114.

[44]   The qualification concerns the class of person identified as the testatrix’ grandchildren. Although Mr Newbery did not put the argument in these terms — or at least I did not understand it in these terms — there may be an issue as to the beneficiaries, even on Jason’s evidence. The testatrix’s children are a closed class. However, her grandchildren may not be. In all probability, this issue will be resolved here on the basis of the testatrix’ email of 9 September 2009 to Jason and one of her other children in which she named grandchildren. It is probably a fair inference that it was her intention to benefit those grandchildren.

[45]   However, the Court cannot resolve that issue at this stage in the proceeding, and in my view, is that there is at least an argument available to Annette in relation to this first limb of her claim.

[46]   As already said, the second limb of Annette’s claim is an application for the removal of Jason as the executor and trustee of the estate. Such orders are made pursuant to s 21 of the Administration Act 1969 and s 112 of the Trusts Act 2019 respectively.

[47]   The Court will only make an order for the removal of an executor where the executor has been out of New Zealand for 12 months without a lawful attorney, is incapacitated or unfit to act, or where for other reasons it would be expedient to do so. Where grounds of expediency are alleged, the question is whether it would be in the interests of the beneficiaries to remove the executor.18

[48]   The Court will only make an order for removal of a trustee where it can be established that it is necessary or desirable to overturn the wishes of the settlor and/or will-maker as to the identity of the trustee.19

[49]   In this case, Annette alleges that there are three grounds upon which Jason should be removed:

18     Hinde v Cranwell [2012] NZHC 63.

19     Attorney-General v Ngāti Karewa and Ngāti Tahinga Trust (2001) 1 NZTR 11-012 (HC) at [65]

(a)because he has a conflict of interest by which he is compromised in the role;

(b)that he has acted impartially and therefore acted improperly; and

(c)that he has mismanaged the estate.

[50]   In support of this limb of her claim Annette has made a number of intemperate allegations, including accusing Jason of blackmail, which I put to one side.

[51]   The conflict of interest that Mr Newbery submitted on Annette’s behalf should disentitle Jason from acting as the executor and trustee of the will is the allegation that he is making a claim against the estate or has a competing claim against another beneficiary”. As far as I am able to ascertain from the evidence, the claim against the estate is Jason’s claim to be a beneficiary and the competition that Annette asserts is the different view that she and Jason take as to the validity of the current will. In his submissions, Mr Newbery also levelled some criticism against Jason relating to the circumstances in which his mother made her will in the first place.

[52]   On the basis of the current affidavit evidence, it would be unhelpful for the Court to attempt to unravel the threads of these arguments. The impression that I have is that Annette may be able to advance an argument that Jason is in a position of conflict, but whether or not that would be sufficient in its nature for a Court to take the unusual step of removing him as the executor and trustee is not easy to say.

[53]   Turning to the issue of impartiality, Mr Newbery’s submissions covered a considerable amount of ground. One point that it appears to me may have been lost sight of is that as things stand Jason has two distinct capacities, one as the executor and trustee and the other as a beneficiary. To the extent that Jason is open to the criticisms levelled at him, it is probably fair to observe that as a beneficiary he is entitled to defend his position.

[54]   Jason is accused also of hostility. As I have already said there appears to be evidence of hostility in the conduct of this litigation by both parties and it is by no

means obvious to me that one party is conducting themselves with any more hostility than the other. Once again, this is not the appropriate occasion to go into a detailed analysis of the accusations made, but I accept Mr Newbery’s broad submission that there are issues the Court may ultimately regard it as necessary to enquire into relating to the conduct of the litigation.

[55]   Turning to mismanagement, the submissions advanced on Annette’s behalf by Mr Newbery focussed more on Jason’s past record rather than his administration of his mother’s estate. The evidence is that Jason was involved with companies that have failed. As a result, the Registrar of Companies has determined that he should not act as a company director. There is something in Mr Newbery’s argument that an individual who has that in their immediate background and is currently barred from being a director may not be the most suitable person to act as an executor and trustee of an estate, even a relatively modest one, which involves acting in a fiduciary capacity on behalf of others. Previous conduct of a trustee on an application for their removal is indeed a relevant consideration.20

[56]   The overarching impression I have is that Annette’s claim for an order for removing and replacing Jason with an independent executor and trustee is arguable.

Conclusion

[57]   Doing the best I can to have regard to all of the above considerations, I have concluded that this is not a case in which an order for security for costs should be made.

[58]   The key considerations that have influenced me in reaching that conclusion are as follows:

(a)the arrangements that exist between the New Zealand and Australian jurisdictions render the fact that Annette lives abroad essentially irrelevant to the overall assessment;

20     Skelton v Eriwata [2022] NZHC 1546 at [13]–[14].

(b)Annette’s financial position suggests that she will be able to meet a costs award if one is made against her, even if that required her to liquidate assets. If this matter is ultimately to be resolved in Court, it is unlikely that that will happen prior to late 2023 at which point Annette will have access to her superannuation funds. There is no reason why a further application for security for costs might not be made closer to that time;

(c)I consider that both limbs of Annette’s claim are at least arguable;

(d)the evidence suggests that if an order for security for costs of any magnitude were made at this stage, that might lock Annette out of prosecuting her claim; and

(e)finally, there does seem to be some force in the point that, had Jason sought the Court’s approval at an early stage, matters might have been developed differently.

[59]For those reasons, the application is dismissed.

[60]   Costs are reserved. I expect counsel will be able to resolve these. If not they may file and serve memoranda in the usual way.

Associate Judge Johnston

Solicitors:

Batt Law, Masterton for plaintiff/respondent

Buddle Findlay, Wellington for defendant/applicant