Swanhick v Bostock

[2023] NZHC 1600

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE

CIV-2022-441-53

[2023] NZHC 1600

UNDER

the Law Reform (Testamentary Promises) Act 1948

IN THE MATTER

of a Testamentary Promises claim in the estates of Kenneth Earl Swanwick and Betty Reid Swanwick

BETWEEN

TIMOTHY EARL SWANWICK

Plaintiff

AND

EDWARD ANTHONY BOSTOCK as

sole executor and trustee of the estate of Kenneth Earl Swanwick (deceased)

First Defendant

EDWARD ANTHONY BOSTOCK as

sole executor and trustee of the estate of Betty Reid Swanwick (deceased)

Hearing:

2 December 2022 (part heard only);

final submissions received on 14 April 2023

Appearances:

S J Webster for Plaintiff

M C De Jong for First and Second Defendants N T Gray for Interested Parties

Judgment:

27 June 2023

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    In this proceeding, the plaintiff, Timothy Swanwick (“Tim”),1 is advancing claims pursuant to the Law Reform (Testamentary) Promises Act 1948 against the

1      I am proposing to use first names for certain parties. No disrespect is intended. It is merely an attempt to avoid confusion. I am using the diminutive version of the plaintiff’s first name as that is the version that counsel have used.

SWANWICK v BOSTOCK [2023] NZHC 1600 [27 June 2023]

estates of his late father, Mr Kenneth  Swanwick (“Mr Swanwick”), and mother,  Mrs Betty Swanwick (“Mrs Swanwick”).

[2]    Before the Court for determination is Tim’s interlocutory application for an order pursuant to s 6 of the Testamentary Promises Act extending the time for the commencement of his claim against Mr Swanwick’s estate pursuant to that Act. The defendant of course adopts a neutral position. Tim’s application is opposed by his three siblings: Caryl Swanwick (“Caryl”), Angela  Swanwick  (“Angela”)  and  Judith Miratana (“Judith”), (collectively, “the interested parties”).

[3]    Mr Swanwick died on 28 August 2008. Probate in relation to his will was granted on 26 September 2008. Mrs Swanwick died on 30 June 2021. Probate in relation to her will was granted on 15 September 2021. The details of the estates and the terms of Mr and Mrs Swanwick’s wills are unimportant. It is sufficient to say that the combined value of the estates was reasonably substantial; over $5 m. Their assets consisted primarily of four properties, including a family farm which is at the centre of this case.

[4]    The defendant, Mr Edward Bostock, is the sole personal representative in relation to both estates. In his will Mr Swanwick named Mrs Swanwick and his solicitor, Mr Malcolm Walker, as his executors and trustees. In her will Mrs Swanwick named Tim, Judith and Mr Bostock as her executors and trustees. Tim and Judith renounced their executorships and trusteeships, leaving Mr Bostock as the sole personal representative  in  relation  to  Mrs  Swanwick’s  will.  On  1  June  2021  Mr Walker retired as the personal representative in relation to Mr Swanwick’s will, and Mr Bostock was appointed in his stead.

[5]    Tim’s case is that his parents made a promise, or series of promises, to him that if he worked on the family farm and other properties owned by them, they would each leave their half interest in the farm to him in their wills. He says that, on the strength of that promise or those promises, over a period of approximately 30 years, he worked full time on the farm and performed a range of work on the other family properties, foregoing other opportunities in life such as an opportunity that he and his wife, Glenda Fay Swanwick (“Glenda”), had to acquire a farm for themselves. On that

basis, he says that he has enforceable claims against both estates under the Testamentary Promises Act. He also says that he has parallel claims in constructive trust.

Background

[6]    In their wills, Mr and Mrs Swanwick left their half interests in the farm to be divided amongst all four of their children.

[7]    For whatever reason, Tim took no steps in relation to Mr Swanwick’s estate prior to commencing this proceeding in August 2022.

[8]    In support of this application Tim swore a brief affidavit. Mr Bostock swore an affidavit providing the Court with relevant information at his disposal. The interested parties swore affidavits in response. Tim swore an affidavit in reply.

[9]    Tim’s application is made pursuant to s 6 of the Testamentary Promises Act which is headed “Limitation of actions”.

[10]   The section provides that any proceeding pursuant to the Act must be commenced within 12 months of a grant of probate.   Accordingly, Tim  had until   26 September 2009 to commence this proceeding as of right. After that, he needed leave to do so.

[11]The section contains a proviso in these terms:

… provided that the time for commencing an action may be extended for a further period by the court or a Judge, after hearing such of the parties affected as the court or Judge thinks necessary, and this power shall extend to cases where the time for commencing an action has already expired, including cases where it expired before the commencement of this proviso; but in all such cases the application for extension shall be made before the final distribution of the estate of the deceased, and no distribution of any part of the estate made before the administrator receives notice that the application for extension has been made to the court, and after every notice (if any) of an intention to make an application under this Act has lapsed in accordance with subsection (6) of section 30A of the Administration Act 1952, as inserted by section 2 of the Administration Amendment Act 1960, shall be disturbed by reason of the application for extension, or of an order made on that application, or of any action or order that is consequential thereon.

[12]   Essentially, then, Tim must establish — and the burden rests on him in this regard — that there had not been a final distribution of Mr Swanwick’s estate prior to him commencing this proceeding. Only if he can establish that does the Court have jurisdiction to embark upon the exercise of the discretion described in the proviso to s 6.

[13]   Tim’s application was heard on 2 December 2022. As the argument developed it became increasingly clear that whilst counsel were alert to the existence of the threshold issue, insufficient attention had been paid to it. I concluded that it would be unjust to proceed to deal with the application without giving the parties an opportunity to offer additional evidence on the issue of distribution and make submissions directed to it. In a minute dated 5 December 2022, I made directions to facilitate this. The matter was called in the chambers list on 14 February 2023 and I issued a further minute following that call.  Counsel subsequently filed a joint memorandum dated  15 March 2023 seeking amendments to my directions, effectively providing them with further time, and that joint application was acceded to by Cull J in a minute the same day.

[14]   I therefore have an additional affidavit from Mr Bostock addressing the question of a distribution of Mr Swanwick’s estate and submissions from counsel for Tim and the interested parties in relation to the point.

[15]   Both Mr Webster for the plaintiff and Mr Gray for the interested parties accept that s 6 of the Testamentary Promises Act operates as an absolute bar to any claim commenced after the elapse of 12 months from a grant of probate and the final distribution of the estate. Accordingly, the issues coalesce around three points; what it means to say that there has been a final distribution of an estate, whether, on the application of the proper test, that had or had not occurred prior to this proceeding being commenced; and, if not, whether the Court should exercise its discretion under s 6.

[16]   As it happens, I was required to address the first issue in Takarangi v McConkey.2 I will not repeat the analysis of the law in that case here.

2      Takarangi v McConkey [2021] NZHC 1813 at [39]-[42].

[17]   The authorities are clear that there is a final distribution when the executors have completed their functions as such. That idea is beguilingly simple. Certainly, in the case of an estate where there is no will trust, there is probably no final distribution until such time as the executors have transferred the entire estate to the beneficiaries. The position is more complicated where the testator settles a will trust and some or all of the estate is to be disposed of to the trustees to hold for beneficiaries. If the executors and trustees are different individuals, the final distribution of the estate may well occur at the point of transfer of the assets from the executors to the trustees. However, in the far more common — almost invariable — situation where the executors and trustees are the same individuals, at what point does the law treat the estate as having been finally distributed? The cases say that it is at the point where the executors and trustees have discharged their responsibilities as executors and are holding the assets as trustees under the will trust.3 At a theoretical level it is easy to see that at that point the executorship has come to a conclusion; the estate has been finally distributed (albeit to trustees), and all that remains is the relationship of trusteeship between those individuals in their capacities as trustees and the beneficiaries. At a practical level, it is often tricky to determine when that has occurred.

[18]   No doubt that is why, in the case of the Family Protection Act 1955, which contains a similar limitation provision to s 6 (see s 9 of the Family Protection Act), the Legislature has clarified the position by modifying the common law so as to provide that distribution to trustees to hold estate assets for beneficiaries of an estate under a will trust does not constitute a final distribution.

[19]   That, in my view, is a clear acknowledgement on the part of the Legislature that, in the absence of reform, the common law position that I have outlined prevails.

[20]   Having described the legal position, it is necessary to apply that to the facts in this case.

3      See, for example, Lilley v Public Trustee [1981] 1 NZLR 41 (PC); Re Magson [1983] NZLR 592 (CA); IER v GJD [Relationship Property] [2009] NZFLR 607 (FC); and Lai v Huang [2017] NZCA 499.

Has Mr Swanwick’s estate been distributed?

[21]Counsel were on common ground as to the test involved.

[22]   Both identified the leading case as Sullivan v Brett.4 In that case, the Court of Appeal’s judgment was delivered by Somers J who said this:5

The whole of the estate of [this] deceased is available to an executor for the payment of debts and testamentary expenses and his other functions in the administration of the estate. The testator’s property reaches the executor as such “in full ownership, without distinction between legal and equitable interests”. Those interested in residue under the will have no true beneficial interest in the assets in the hands of the executor during the course of administration — their right is to require and to enforce the due administration of the estate. The reason, at least in part, is that until it can be seen what exists as residue after administration there are no specific assets to which a trust can attach …

Whether the executor’s functions have been completed so that the actual assets which comprise that residue to which the trusts of the will may attach have been ascertained depends upon the course of administration and is normally only within the executor’s knowledge …

An assent may be express or it may arise by implication. … It is a question of fact …

…The issue is not what the executor believes or intends to be the case. It is what the facts demonstrate. Where a formal assent is given there is no further argument — it is treated as irrevocable …

Where, as is usually the case there is no formal assent, the circumstances are considered to see whether an inference of assent can be drawn. In the case of residue that will usually depend upon whether all claims against the estate for debts legacies, testamentary and administration expenses have been paid. For it is not until that stage has been reached that the existence and nature of the residue can be ascertained. … Actual assent may be viewed as evidence against the executor that such a state of affairs has been reached. But if in fact reached assent will be inferred. Assent is evidence; the actual fact of ascertainment of residue will import assent.

[23]   As Mr Webster submitted, the same principles were applied by Cartwright J in this Court in Re Eagle (dec’d)6 where her Honour said:

The term distribution is not defined in the Act. It is clearly the case that an asset distributed when it has been paid, transferred or apportioned to a beneficiary … the situation is, however, not so clear cut when physically payment or transfer to the residuary beneficiary has not occurred. In Lilley v

4      Sullivan v Brett [1981] 2 NZLR 202 (CA)..

5      At 206-207.

6      Re Eagle (dec’d) HC Auckland M721/97, 21 November 1997.

Public Trustee … the Privy Council held that final distribution of the estate occurs when the executor of the deceased has completed the administration of the estate and begins holding the assets as trustee. Whether the executors’ duties have been completed is a question of fact. In Sullivan v Brett … Somers J adopted the following approach in determining whether there had in fact been a distribution:

(a)had the executor completed all the activities which it was his or her duty to perform and had the residue of the estate been ascertained

(b)if so, then assent can be inferred if there was no formal assent

(c)if there was assent, then had the estate been distributed when the applicant filed for leave.

[24]I gratefully adopt Mr Webster’s summary of the position:

… if the extension application is to succeed at all the Court must be convinced that material steps in the administration of [Mr Swanwick’s] estate still remain and that the Executor is not already holding the estate assets in a trusteeship capacity.

[25]   On what basis, then, is it argued on behalf of the plaintiff that Mr Swanwick’s estate has not been finally distributed?

[26]Mr Webster identified five bases.

[27]His first contention is that the residuary estate has not been ascertained.

[28]   The basis for this argument is that the former farming partnership between Mr and Mrs Swanwick has continued to operate,  meet  its  obligations  to  the  Inland Revenue Department, incur the usual obligations to employees, creditors and the like, and generally continued to function as a going concern.

[29]   Mr Webster also submits that there are a series of legal issues associated with the operation of the business. There is an issue, he says, as to whether the partnership was dissolved on the death of Mr or Mrs Swanwick, and other issues arising from the operation of the Partnership Act 1908 (repealed) and the Partnership Law Act 2019, and the common law principles relating to partnerships. However, as Mr Gray submits in response, the fundamental issue remains whether the executors had effectively transferred their interests in the half shares of the business to the trustees. The short point is that whilst all of the issues identified by Mr Webster may arise, and various

steps may yet need to be taken in relation to them, there is no reason why they are necessarily the obligations of Mr Swanwick’s personal representatives qua executors as opposed to his personal representatives qua trustees. Having regard to the passage of time between Mr Swanwick’s death in August 2008 and the commencement of this proceeding in August 2022, and having regard to Mrs Swanwick’s death in June 2021, my assessment is that Mr Swanwick’s personal representatives had concluded their role as executors and have for some time been treating his half share in the farming business as forming part of the capital of the will trust.

[30]   To put the matter in another way, I am not persuaded by Mr Webster’s submission to the effect that the residuary estate has not been ascertained.

[31]   Mr Webster’s second contention is that the residuary estate has been held for unascertained beneficiaries.

[32]   This argument derives from the fact that cl 5(b)(i) of Mr Swanwick’s will provides that the distribution of the farm property is contingent upon the beneficiaries forming a GST registered entity and that this has not yet occurred.

[33]   In my judgment, there is nothing in this point. The beneficiaries are ascertained. They are the children of Mr and Mrs Swanwick. That is a closed group. It is true that if they wish their interests in the farm property to be transferred they may need to form a corporate entity or corporate entities that is or are registered for GST purposes, but I cannot see that that is relevant to the capacity in which Mr Bostock holds their interests in the farm property for them.

[34]   Mr Webster’s third contention is that the executorship cannot have concluded because various properties in respect of which Mr and Mrs Swanwick were both owners are currently registered in the names of Mr Swanwick’s original personal representatives, and have not been transferred to Mr Bostock.

[35]   Again, this does not appear to me to mean that there has not been a final distribution as between Mr Swanwick’s personal representatives qua executors and those individuals qua trustees. There can be no question that, as between

Mr Swanwick’s original personal representatives and Mr Bostock that, notwithstanding the registration of the ownership of these properties not having been transferred, Mr Bostock has been the equitable owner of the legal interest since his appointment.

[36]   In short, the registration position seems to me to be irrelevant to the question of whether the estate has been distributed.

[37]   The fourth contention advanced on Tim’s behalf by Mr Webster is that there is no evidence of the annuity provided for in cl 7 of Mr Swanwick’s will having been wound up.

[38]Clause 7 of the will provided:

I AUTHORISE my Trustees to provide for the payment of the annuity to my said wife by setting apart and appropriating such part or parts in any residuary estate as shall be sufficient by the income to pay such annuity AND I DECLARE that when such appropriation shall have been made such annuity shall be wholly charged on the investments so appropriated (hereinafter referred to as the “the annuity fund”) in exoneration of the rest of my estate but that the capital of the annuity fund may be resorted to in case at any time the income thereof is insufficient to pay such annuities AND I FURTHER DECLARE that on the cessor in whole or in part of the said annuity the annuity fund or such part thereof as shall not in the opinion of my Trustees be required shall resort to and form part of my residuary estate and any surplus income arising from the annuity fund shall be applied as income of my residuary estate.

[39]   The difficulty with this contention is that the evidence is that no annuity fund was created and therefore that there is no such fund to wind up. As I understand it, Tim is not pursuing this point.

[40]   The final argument advanced on Tim’s behalf is that the shares which formed part of Mr Swanwick’s estate have not been dealt with.

[41]Here is how Mr Webster put the point in his written submissions:

Shares Not Dealt With

10. Shares in Ravensdown and Farmland [sic] were  listed  in  the  Executor’s affidavit but not mentioned again and apparently not dealt with because there is no Statement of Assets and Liabilities. If the

shares were held in [Mr Swanwick’s] name alone then they could not pass to [Mrs Swanwick] by survivorship. The assumption is that the shares remain to be dealt with.

[42]   The answer in the case of the shares seems to be this. The Ravensdown shares were included in the assets of the partnership and so will be dealt with as described earlier. The Farmlands shares were jointly owned by Mr Swanwick and Tim so that they have already passed to the latter by survivorship.

[43]   There is no reason to think that any executorship functions remain in relation to the shares.

[44]   For those reasons, the conclusion that I have reached, which appears to me to be consistent with authorities cited by counsel, is that Mr Swanwick’s estate has been distributed even though much of it remains held by Mr Bostock in his capacity as the trustee of Mr Swanwick’s will trust.

Discretion

[45]   It follows that in my judgement the Court has no jurisdiction to exercise the discretion provided for in the proviso to s 6 of the Testamentary Promises Act.

[46]   Against the possibility that that conclusion is wrong, I propose to give brief reasons why, in any event, I would not have exercised the discretion in Tim’s favour.

[47]   Again, counsel were on common ground in terms of the law relating to the exercise of the discretion.

[48]   Again, the leading case is Sullivan v Brett where the Court of Appeal said that, aside from the distribution issue, when it comes to the exercise of the discretion under s 6, the key questions are whether the plaintiff’s delay in commencing the proceeding can be satisfactorily explained so that it does not count against him, and second, the prima facie merits of the claim and whether it has a reasonable prospect of success.7

7      Sullivan v Brett, above n 4, at 209-210.

[49]   As to the first of those issues Tim’s evidence is that he did not receive a copy of Mr Swanwick’s will, and therefore had no knowledge of its contents, until his mother’s death. That is not contradicted elsewhere in the evidence and, for present purposes, I accept that that is the position.

[50]   For their parts, the interested parties say that it is far from a complete explanation.

[51]   On their behalves, Mr Gray began his submissions with the point that the delay here is not a matter of days, weeks or months, as is often the case, but of years: thirteen years. As he submits, it seems to be accepted on Tim’s part that such a delay would be inexcusable, but for his not having been aware of the contents of Mr Swanwick’s will until after Mrs Swanwick’s death in 2021.

[52]   On its face, it is surprising, to say the very least, that if Tim was expecting his father to leave him his half interest in the farm he did not make enquiries as to whether those were, in fact, the terms of his father’s will. In his evidence, Tim explains that the continued management of the farm was the important issue in the wake of his father’s death, and that he was told by his mother, and his father’s solicitor, Mr Walker, that nothing had changed. He says that he had no reason to question his belief that the farm would pass to him on Mrs Swanwick’s death, consistent with the promise or promises he says his parents made to him.

[53]   On behalf of the interested parties, Mr Gray questions whether Tim’s evidence is plausible. However, that is not a matter that the Court is in a position to determine, and I am prepared to accept that that was the inference that Tim took from what he says he was told.

[54]   The real question is whether it was a reasonably available inference. Bearing in mind the significance of the matter — after all, it is Tim’s case that he was promised the farm by both of his parents, that he and Glenda had invested their working lives in the farm and other properties on the strength of that promise, and bearing in mind his own evidence that Mr Swanwick had a pattern of behaviour which involved making and then breaking promises, I have serious reservations as to the reasonableness of

Tim not having insisted — which, as a beneficiary, he was entitled to do, on being provided with a copy of his father’s will or at least those aspects of it which related to him which would of course have meant that he became aware of cl  5(b) in which  Mr Swanwick left the farm to all four children.

[55]   Against that background, I am not satisfied that Tim is able to provide a reasonable explanation for his failure to take any steps in the years between the expiry of the one-year period from his father’s death to the date of his mother’s death and the commencement of this proceeding.

[56]   As to the prima facie merits of the case, in a situation such as this, all the Court can do is, on the strength of the affidavit evidence, obtain an impression as to the merits. In doing so I have had regard to Tim’s evidence which focusses on an alleged express promise in December 1992 and series of reinforcing, less formal promises, and ongoing encouragement. I have also had regard to the evidence of his siblings which, very broadly speaking, is to the effect that no such promise was made which is based on their evidence that neither Mr nor Mrs Swanwick mentioned the alleged promise to them. On the contrary, Tim’s siblings say that they were told by Mr and Mrs Swanwick that the farm would be left to all four children in equal shares.

[57]   I have considered also such extraneous evidence as is available including the evidence Tim and his wife Glenda gave that they were encouraged to forego an opportunity to buy another farm property and that Tim carried out a great deal of work not only on the farm property  but  also  on  other  properties  owned  by  Mr and  Mrs Swanwick over the years, which I do not doubt.

[58]   It needs to be borne in mind that, throughout, Mr and Mrs Swanwick employed Tim and paid him wages and that he received other benefits including housing. On balance, the impression I have is that whilst Tim’s claim is not hopeless, having regard to the available evidence, but that it is certainly not strong, particularly as if successful it would partially disinherit all three of his siblings in a situation where Mr and     Mrs Swanwick appear to have worked hard to deal with their children even-handedly.

[59]   For those reasons, even if I had concluded that Mr Swanwick’s estate had not been distributed, I would not have exercised the Court’s discretion in favour of permitting Tim to proceed with his claim out of time.

[60]   Of course the above conclusion does not preclude Tim from proceeding with a claim.   He  is  able  to  pursue  his  Testamentary  Promises  Act  claim  against   Mrs Swanwick’s estate, and his alternative claim in constructive trust against both estates.

Outcome

[61]The application before the Court is dismissed.

[62]   I reserve costs, not having heard from counsel as to these. My preliminary view is that as the unsuccessful party Tim should pay one amount of scale costs on a 2B basis to the interested parties collectively, and that the defendant’s actual and reasonable costs should be paid from the trust fund.

Associate Judge Johnston

Solicitors:

Lunn & Associates Ltd, Napier for Plaintiff

Bramwell Bate Lawyers, Hastings for First and Second Defendants Sainsbury Logan & Williams, Napier for Interested Parties