Tata v Abrams

[2023] NZHC 3372

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-1850

[2023] NZHC 3372

UNDER

Part 18 of the High Court Rules 2016 and the Trusts Act 2019

IN THE MATTER

of the Estate of VIOLET AOTEAROA TE WAIPOUNAMU TATA

BETWEEN

REGINALD RAURETI TATA

First Plaintiff

REGINALD RAUREI TATA and CHRISTINA AKATA AOTEROA TE WAITOA TAI

Second Plaintiffs

AND

DONNA DOREEN MATEKINO ABRAMS

First Defendant

JOSEPH CHRISTOPHER LEE GEORGE
Second Defendant

MICHAEL AUSTIN LUCAS

Third Defendant

Hearing:	20 November 2023
Appearances:	S E Wroe, R Evans for the Plaintiffs No appearances for the Defendants
Judgment:	27 November 2023

JUDGMENT OF WHATA J

Formal proof hearing

Solicitors:

Turner Hopkins, Takapuna

S Wroe, Eldon Chambers, Auckland

TATA v ABRAMS [2023] NZHC 3372 [27 November 2023]

[1]                 Ms Donna Abrams (Donna), an executor, sold estate property at undervalue to her son Joseph George (Joseph). She and Joseph are sued by Reginald Tata (Reginald) and Christina Tata (Christina), for the consequential loss in estate value. The claim is not defended. This is an application for formal proof.

Background

[2]                 The key facts can be stated succinctly. Donna and Reginald’s mother, Violet Tata (Violet), passed away on 19 March 2008. Donna was one of two executors appointed under Violet’s Will. The other executor, Ms Judy Kaka, passed away in 2016. Donna assumed responsibility for administering the estate. The primary asset of the estate was her mother’s home. The home was occupied by a relation, Tony Tata, until he passed away in August 2019. At this point the whānau began discussions in earnest about what to do with the property. I will return to those discussions below. In any event, two property valuations were obtained from real estate agents, putting the property at between $1 million and $1.05 million. Donna then arranged for the home to be sold to Joseph for $760,000 in December 2020. The sum of in and around

$240,500 was also gifted by the estate to Joseph.  This was subsequently increased to

$300,000. The settlement date was 26 February 2021.

[3]                 Shortly prior to settlement, Donna’s lawyers, Mike Lucas Law, sent a letter to Joseph’s lawyers suggesting that a Deed of Family Arrangement (Deed) be concluded because the property was sold at under value. A subsequent email from Joseph’s email address, signed by Donna, said there was no need for such a Deed because the family had already approved the deal.

[4]                 In order to be able to buy the property, Joseph obtained a mortgage from RESIMAC Home Loans. Regrettably he defaulted on the repayments. When whānau members discovered this, they tried to buy back the property, but were not successful. The property was sold at a mortgagee sale for $1.04 million. The surplus funds after repayment of the mortgage and costs was $164,000.

Process

[5]                 Reginald in his personal capacity commenced proceedings against Donna. Donna filed a defence to those proceedings, claiming in short that there was a family agreement to the sale of the property to someone within the whānau because it was papakāinga. On 1 July 2022, Duffy J declined an order to remove Donna as an administrator but Reginald and his half-sister, Christina Tai, were appointed as administrators and trustees alongside Donna. Amended pleadings, including their names as administrators, were filed and served in March 2023. Donna died in September 2023. It is not known whether she had a will or if administrators have been appointed.

The claim and defence

[6]                 Reginald and Christina claim that Donna breached her fiduciary duty of fairness to the beneficiaries of the estate by selling estate property at under value to Joseph. They also claim Joseph received the property, knowing that Donna was breaching her duties to the estate. They seek a variety of orders to restore as far as possible the estate to the position it should have been in but for the breach. Orders as to costs are also claimed, including costs incurred by Reginald in his personal capacity in bringing this matter to Court.

[7]                 Reginal filed an affidavit in support of his claims. He refers to a family meeting on or around 14 or 15 August 2019. He says that they discussed the fact that the home would have to be sold and the children would get equal portions of the proceeds of sale; there was some discussion about the house was to be sold; his brother Fred wanted it to be gifted to the grandchildren; there was a suggestion that it could be sold at less than market value to a family member; there was no agreement as to how the sale would be managed, but everyone except Fred agreed it had to be sold. He also says that he then obtained an appraisal report showing an estimate sale price of between $1 million and $1.05 million. He refers to trying to make contact unsuccessfully with Donna about the property, and then discovering in March 2021 that the property had been sold to Joseph.

[8]                 While no defence has been filed to the amended statement of claim, Donna filed a statement of defence to the initial claim. She alleged the following:

(a)that the agreement reached by the family at a meeting on or around  14 or 15 August 2019, meant that it was inappropriate to follow any advice proffered by real estate agents in relation to the sale strategy to obtain the best price for the property;

(b)that the agreement reached by the family at that meeting meant that it was inappropriate to market the property on the open market; and

(c)that the offer of $760,000 was the highest offer received by a family member to purchase the property with and the only offer the defendant was able to accept.

[9]                 These allegations are supported by an affidavit filed by Donna and in that affidavit she says that nearly all her living siblings were present at the meeting including Fred, Richard Tata, Christine, Reginald, and Tāne Tata. She notes that many other family members were also present, including Christina her niece, Joseph and her daughter Kerry Greaves. She says that the meeting was recorded. She refers to among other things Reginald saying you that you would not be expected to pay market rates if sold to a family member. She then says that all the family agreed that the property was to be kept among the family, it would not be sold at market value and the highest offer put forward would be accepted. She says Joseph’s was the highest offer.

Assessment

[10]              An executor must act fairly toward beneficiaries and must not act in self- interest.1 Transfer of property out of an estate for the benefit only of a child of the executor, who is not a beneficiary of the estate, at significant undervalue, is prima facie, a breach of these basic duties. That executor is liable for consequential loss to

1      Re Stewart [2003] 1 NZLR 809 (HC) at [25]; See also Irvine v Public Trustee [1989] 1 NZLR 67 (CA) at 70.

the estate arising from that breach.2 Furthermore, a recipient of estate property, knowing that the executor is acting in self-interest and unfairly to the beneficiaries of the estate, must also account to the estate for that consequential loss.3

[11]              In the present case, there is a dispute on the evidence as to whether Donna acted on the authority of the whānau when she sold the property to her son Joseph.   It is difficult in the absence of cross-examination to make a definitive finding about this issue. Her claim that she wanted to retain the property in the hands of whānau as it was papakāinga is plausible. Given the importance of maintaining connection to place in tikanga Māori,4 it is conceivable that she felt obliged to prefer an outcome that kept the property in whānau hands. That obligation might, in the appropriate case, colour whether there was a breach of fiduciary duty.5

[12]              But, even so, it remained incumbent on Donna as executor to be sure she had the approval of the whānau when taking steps that benefited her son Joseph at the obvious expense of the beneficiaries of the estate. She did not do this. In fact, she turned down the opportunity to obtain a Deed when advised that this was the proper course. The advice to her and Joseph bears repeating in this regard, recorded in an email sent a by a legal executive to Donna as well as to the email address of Joseph in which she recommended that all parties should sign a Deed. In particular that email records:

We would wish to make it clear that we are acting for you as executor in the Estate of Violet Tata relating to the transmission of the property to you as surviving executor and then the sale of the estate’s property. We are not acting for any of the beneficiaries.

There is a possibility that potential beneficiaries of the estate could make a claim due to the fact that the property is to be sold below market valuation. In this situation, we would recommend that the siblings and grandchildren enter into a Deed of Family Arrangement confirming that they are aware and agree

2      Lindsay Breach (ed) Nevill’s Law of Trusts, Wills and Administration (14th ed, LexisNexis, Wellington, 2023) at [22.8.2]; See also Greenwood v Simpson [2018] NZHC 845, [2018] NZAR 728 at [59].

3      Eden Refuge Trust v Hohepa [2011] 1 NZLR 197 at [212], [213] and [221] – [223] citing Westpac Banking Corporation v Savin [1985] 2 NZLR 41 (CA) at 53.

4      Te Aka Matua o te Ture | Law Commission He Poutama (NZLC SP24, 2023 at 3.48). While the whānau home does not appear to be traditional tribal lands, the underlying value of maintaining connection to place, including to a family home, may nevertheless still be relevant to the assessment in a contemporary setting. As the matter was not argued or the evidence tested, it is a theoretical proposition only for present purposes.

5      Kusabs v Staite [2019] NZCA 420, [2023] 2 NZLR 144.

to receiving the lesser amount for the property and therefore their share in the estate. This will of course take some time to circulate to all the potential beneficiaries to sign.

[13]                Given this, I am satisfied on balance that Donna acted in self-interest and unfairly to the beneficiaries of the estate when she sold estate property to her son at substantial undervalue, as well as gifting the sum of $300,000 to him. In so doing, she breached her fiduciary duty to the beneficiaries of the estate. She must account for the consequential losses to the estate. I am also in no doubt that Joseph was aware of what was happening and therefore knowingly received the property in breach of fiduciary duty. He too must compensate the estate for the losses incurred by the estate because of it.

[14]              For completeness, while not addressed in submissions, I have considered whether I should relieve Donna of personal liability pursuant to s 73 of the Trustee Act 1956. The essential requirements are that the trustees must have acted honestly and reasonably and ought fairly to be excused for both breaching the trust and omitting to obtain directions from the Court.6 Donna’s claim to acting to keep the land in whanau hands may, if proven, gone to the issues of honesty, reasonableness and fairness. But on the present state of the evidence, for reasons already stated, I consider that she acted in self-interest and unreasonably so.

Costs

[15]              Reginald and Christina, when acting as administrators, are entitled to their reasonable costs associated with these proceedings.

[16]              Reginald is entitled to be reimbursed by Donna for cost on the proceedings incurred by him in his personal capacity on a scale 2B basis together with disbursements to be fixed by the registrar. For reasons already stated, I did not consider her claimed defence was vexatious or totally lacking merit. Reginald has sought total legal costs excluding disbursements of $70,031.06 only against Donna, including costs prior to the proceedings. No authority was cited in support of this, though reference was made to s 140 of the Trusts Act 2019 which states:

6      Greenwood at [46] ff

Court may charge costs on trust property

The court may order that the costs of an application to the court under this Act—

(a)be paid or raised out of—

(i)the trust property to which the application relates; or

(ii)the income of the trust property to which the application relates; or

(b)be borne and paid in the way and by the persons that the court considers just.

[17]              While it may be available to make an order for litigation (in excess of scale 2B) under this section against Donna’s share of the estate given Reginald was simply responding to her breach of fiduciary duty and was acting for the benefit of all beneficiaries, the sum sought represents a significant portion of the remaining estate. Moreover, I consider that it is preferable for Reginald and Christina to seek the mandate of the other beneficiaries for a pay-out in excess of what Reginald is entitled under the cost rules. In this regard, if the remaining beneficiaries (not including Donna or the beneficiaries of her estate, if any) approve the payment out of Donna’s share then there could be no reasonable objection to it.

Result

[18]              In the result, I am satisfied that the judgment should be entered in favour of the plaintiffs. I make the following orders accordingly:

(a)The first defendant is liable to the beneficiaries of Violet’s estate for breach of trust.

(b)The second defendant is liable for knowingly assisting the breach of trust by the first defendant.

(c)The first and second defendants are jointly and severally liable to pay the second plaintiffs:

(i)damages of $300,000;

(ii)interest   from   the   date   of    sale    to    Joseph,    namely  26 February 2021 ($22,630.45 as at 20 November 2023 and continuing at the daily rate of $22.70 per day); and

(iii)costs incurred by the estate in relation to the proceeding (to be assessed).

(d)Any surplus from the mortgagee sale held by the mortgagee’s solicitors is subject to a remedial constructive trust in favour of the second plaintiffs as administrators of Violet’s estate and is to be paid to the second plaintiffs.

(e)Any judgment sum owing by the first defendant to the first and second plaintiffs, may be deducted from amounts otherwise payable to her under the will.

(f)The first defendant must pay the first plaintiff’s 2B scale costs and disbursements.

[19] I also reserve leave for Reginald and Christina to come back to this Court for further orders relating to Reginald’s costs if the remaining beneficiaries approve a further payment in respect of those costs; see discussion at [17].

Whata J