Tod v Tod
[2015] NZHC 528
•23 March 2015
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IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
CIV-2014-470-047 [2015] NZHC 528
IN THE MATTER of the Administration Act 1969 AND
IN THE MATTER
of the estate of the late ALEXANDER MICHAEL TOD
BETWEEN
JULIA ORETIE TOD, ALISTAIR MICHAEL TOD, MARK ALEXANDER TOD AND MATTHEW JOHN TOD Plaintiffs
AND
SHEILA HOLMS TOD sued as executor and trustee of the Will of the late ALEXANDER MICHAEL TOD Defendant
Hearing:
Further written submissions:
31 October 2014
27 January 2015 and
3 February 2015Counsel:
G L Harrison for the Plaintiffs
ACM Fisher QC and Z Matheson for the DefendantJudgment:
23 March 2015
JUDGMENT OF BROWN J
Solicitors: Anthony Frankovich, Auckland
Harmos Horton Lusk, Auckland
Counsel: G Harrison, Auckland
ACM Fisher QC, Auckland
TOD v TOD [2015] NZHC 528 [23 March 2015]
Introduction
[1] Proceedings under the Family Protection Act 1955 have been commenced in the Family Court at Waihi by the children (the plaintiffs in the current proceeding) of Alexander Michael Tod (Alec) who died on 1 August 2013. With a view to the initiation of “retrieval” proceedings so as to enhance the value of the estate, the plaintiffs seek an order under s 21 of the Administration Act 1969 to have the Public Trustee appointed as administrator in place of Sheila Tod, Alec’s widow and the defendant in the current proceeding. It is common ground that in order to pursue such retrieval proceedings the Public Trustee would need to successfully challenge an agreement made under s 21 (the s 21 agreement) of the Property (Relationships) Act 1976 (PRA) between Alec and Sheila.
The statutory jurisdiction
[2] Section 21 of the Administration Act makes provision for the removal of an administrator of an estate. It relevantly provides:
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.
…
[3] The guiding principles in the application of s 21 were helpfully captured by
Panckhurst J in Coote v Warren:1
[11] The term expedient means something less than necessary, rather that removal is a suitable, practical and efficient step to take in order to advance the interests of the estate and its beneficiaries. As to this see the discussion in Crick v McIlraith.
1 Coote v Warren [2013] NZHC 3210.
[12] That said, the authorities in this context stress that the removal of executors, or trustees, is not to be undertaken lightly. Where possible, the wishes of the testator should be honoured. The Courts (sic) jurisdiction to intervene reflects its duty to ensure that estates are properly administered and trusts properly executed. The welfare of the beneficiaries, what will best safeguard their interests, is the yardstick to be applied. As a consequence, the jurisdiction is fact dependant and involves a large element of discretion. The circumstances of individual cases will necessarily be determinative of their outcome.
Factual background
[4] Alec and Sheila were married on 30 September 1995 and remained happily married until Alec’s death. They each had children from previous marriages. Alec had four children – Mark, Alistair, Julia and Matthew (the plaintiffs). Sheila has two daughters, Suzanne and Lisa.
[5] Some ten years prior to his death Alec suggested that he and Sheila should enter an agreement to deal with how their assets should be divided upon their deaths. As Sheila explained in an affidavit dated 12 September 2014:2
13.From about 2003 on, Alec talked to me about his view that we should have a property agreement to deal with how our assets should be divided upon death. This was very much his idea and I agreed; we had worked hard and built up assets together and wanted to ensure that if one of us died the other would have as much financial security as possible. We were also mindful that we each had children from our earlier marriages and we wanted to be fair to them and to each other. We took into account that the children were young and needed to make their own way in life. We agreed to provide for them when both of us had died.
14.We decided to make wills leaving our assets to each other for our use and providing that on the death of the survivor, our assets would be divided equally between our six children. We discussed the fact that the arrangement was in the Tod family’s favour because our assets would be divided equally between all six children rather than my daughters receiving my half, but I agreed with this because I felt that it was important that our children were treated the same. We also agreed that whoever survived would honour our agreement and not change their will.
15.Alec prepared various drafts to give effect to our agreement and from time to time discussed them with our lawyer Mr George Wadsworth, in Auckland. In 2006 we asked Mr Wadsworth to draw up an agreement formally recording what we had decided and to prepare new wills for us.
2 Filed in the Family Protection Act proceeding in the Family Court at Waihi.
16.On 20 March 2006, Alec and I signed an agreement recording that our marriage was happy and successful and that we wanted to ensure that, upon our deaths, we provided for the children of our previous relationships. …
17. We also signed new wills. …
[6] Both wills contained in clause 3 the following direction to their respective trustees:
3 I DIRECT my Trustees to hold my estate on the following Trusts:
(a) TO pay my debts and funeral expenses, my trustees’ administration expenses and any death duty payable on my dutiable estate.
(b) TO give my personal chattels as defined in the Administration Act 1960 to my [husband/wife] if [he/she] is living at my death.
(c) TO hold the residue of my Estate to allow [my husband/wife] the use and enjoyment of it and the net income arising from it during [his/her] lifetime and to use as much of the capital either by outright application or by unsecured interest free on demand loan to [him/her] as my Executors and Trustees think fit to keep [his/her] standard of living at the same level we enjoyed during my lifetime.
(d) From the death of the survivor of me and [my husband/wife] (“distribution date”) to hold the capital or so much of it as then remains equally for both of the children of me and [my husband/wife], namely MARK ALEXANDER TOD, ALISTAIR MICHAEL TOD, MATTHEW JOHN TOD and JULIA ORETI TOD, SUZANNE MICHELLE LOCKHEAD and LISA DEBORAH DARROW as are living at the distribution date but if any of them dies before the distribution date leaving a child or children living at the distribution date then in each case those children shall take and if more than one equally the share which his, her or their parent would otherwise have taken.
[7] In the month prior to his death Alec made a codicil in which he appointed Sheila as his sole executrix and trustee. Probate of his last will and codicil was granted on 22 October 2013. The chief asset of the estate is a property at Athenree which was owned by Alec and Sheila as joint tenants and which passed to Sheila by survivorship.
[8] The plaintiffs’ dissatisfaction with the provision which Alec made for them has prompted their claim under the Family Protection Act in the Family Court at Waihi. They want Alec’s estate to be augmented by his personal representative applying under s 88 of the PRA to seek orders under s 25 of that Act including to set aside the s 21 agreement.
[9] To that end the plaintiffs apply in this proceeding for an order removing Sheila as executrix and appointing the Public Trustee at Auckland as the administrator of Alec’s estate so that application can be made under the PRA. Sheila opposes the order sought.
The pleadings
[10] The key allegation in the succinct statement of claim is in paragraph 4 which reads:
4. To ensure that:
(a) the extent of the deceased’s estate under the PRA is clearly established; and
(b) any PRA proceeding, initiated at the request of the Plaintiffs, is managed responsibly and, in addition, avoids any conflict of interest for the Defendant;
(c) any (sic) the defence of any FPA proceedings is properly and fairly managed;
(d) the Defendant is not compromised in her defence of any FPA
proceeding;
Then it is expedient for the Public Trust at Auckland to be ordered by this Court to administer the deceased’s estate, instead of the Defendant.
Submissions of counsel
Plaintiffs’ submissions
[11] The plaintiffs explained that the proceeding is necessary so that retrieval proceedings can be brought under the PRA. The submission envisaged that the Public Trustee could decide to challenge the s 21 agreement under s 21J of the PRA on the grounds of “serious injustice”. Reliance was placed on the judgment of the
Court of Appeal in Public Trust v Whyman3 which it was said made it clear that that course of action was available in cases like the present where assets, that otherwise would have been available for consideration under a family protection claim, have allegedly been ring-fenced off or access to them has been substantially deferred.
[12] It is fair to say however that in their written submissions considerable emphasis is placed on the need to take steps to prevent the defendant consuming the capital of the estate. That flavour is apparent from the following paragraphs in the submissions:
5.On its face, the provisions in the Will are widely crafted, with one interpretation being the executor – and I note now that there is only one executor, being the Defendant – and this will be referred to later
– having “cart blanche” to do as she wishes with the deceased’s
capital and income from it. However, that was clearly not the deceased’s intention, particularly when clause 3(d) of the Will is considered – and his clear intention or wish was that the capital be managed responsibly by the Defendant on behalf of all the 6 children of the parties’ two earlier marriages – and subject to the Defendant’s standard of living being maintained “[being] her standard of living at the same level we enjoyed during my lifetime”.
6.However, now that family protection proceedings have been issued through the Waihi Family Court, coupled with the fact that the Defendant has made demand for repayment of debts on two of the children owing to their father, there is clearly now a real lack of trust present – and to press that point more candidly, there is every incentive now present, given the situation that now exists, for the Defendant to consume the deceased’s capital – or to put it into a family trust as another example – given that she sole executor – and that, in my submission, cannot be an outcome that the deceased wishes in terms of his capital. Also, and most significantly in my submission, when the parties signed the s21 agreement in 2006 it was clearly on the basis there were going to be two executors administering the estate, and not just one.
Defendant’s submissions
[13] Ms Fisher QC submits that there is little utility in the family protection claim given:
(a) The s 21 agreement takes priority over any award by virtue of s 78 of the PRA;
3 Public Trust v Whyman [2005] 2 NZLR 696, [2005] NZFLR 433 (CA).
(b)There has been no breach of moral duty by Alec as he has made provision for his children, albeit deferred; and
(c) Alec’s priority was to ensure adequate provision was made for his wife including her having access to capital if she needed it. He did not want any fetter on her ability to provide for herself and wanted to appoint her as sole executor.
[14] It is submitted that Sheila is the most suitable person to administer the estate. The evidence filed by the estate demonstrates that Alec and Sheila were an intelligent and thoughtful couple who were of one mind about how their assets should be divided upon their deaths. As the fact of the codicil demonstrates, when Alec knew he was dying his primary consideration was to provide for Sheila knowing that in due course all six children would take under both estates. After
18 years of marriage he clearly trusted her to carry out his wishes and considered that she was perfectly capable of doing so on her own.
[15] It is submitted that in respect of the debts owed to the estate by a number of Alec’s children, Sheila has acted appropriately and in accordance with her obligations as executrix:
(a) She was required to address the issue of loans and was vulnerable to criticism from other beneficiaries if she failed to do so;
(b) The impetus for this came from Alec’s eldest son, Alistair; and
(c) Sheila took steps to ensure that the issue was dealt with as sensitively as possible.
Taking all those matters into account it is contended that the welfare of the beneficiaries does not require the removal of Sheila. The estate is modest and relatively simple to administer. There is no evidence to support the suggestion that the estate will be irresponsibly managed and the wishes of Alec should be honoured and upheld. However Sheila is willing to have an additional administrator appointed
in order to provide some measure of assurance to the plaintiffs. She suggested the appointment of a trusted family friend, John Healy, who is apparently acceptable to the plaintiffs.
[16] So far as any potential challenge to the s 21 agreement is concerned, Ms Fisher argues that realistically there is little prospect of such an application succeeding because there is no evidence to suggest the existence of a serious injustice in terms of s 21J.
Submissions subsequent to the hearing
[17] In a memorandum dated 7 November 2014 counsel advised that the defendant was intending to sell the family home and would transfer back into the estate half the net proceeds of the sale (so that the estate would be increased accordingly) if the plaintiffs agreed to withdraw the family protection claim. She was also prepared to agree to the appointment of an independent co-executor and to provide the plaintiffs with annual financial reports as to the status of the estate.
[18] The plaintiffs’ memorandum in response of 12 November 2014 described the respondent’s memorandum as “diversionary”, being in essence a ‘without prejudice’ type proposal, the objective of which is to divert the Court’s attention away from the key issue of the appointment of an alternative administrator. The plaintiffs emphasised that the issue on the current application is simply whether or not the Court should appoint an alternative administrator under s 21 of the Administration Act (the Public Trust being nominated) who could make decisions on whether or not to initiate retrieval PRA proceedings.
Submissions on issue raised by the Court
[19] In my Minute of 10 December 2014 I advised the parties that their assistance would be appreciated on the question whether a personal representative of a deceased spouse has a right to challenge a s 21 agreement in light of s 87 of the PRA, a provision which neither party had addressed in the course of their submissions. A telephone conference was held on 12 December 2014 and ultimately
a timetable was settled for further submissions on that issue by the end of
January 2015.
[20] The defendant’s submissions dated 27 January 2015 contended:
(a) There is no entitlement for an estate to apply to set aside a s 21 agreement. Section 87 defines exclusively who can challenge an agreement after death, namely only the surviving spouse or partner of the deceased.
(b)The history of the 2001 amendments to the PRA shows that Parliament did not intend to give jurisdiction to challenge an agreement to anyone other than the surviving spouse or partner.
(c) The Court should give effect to the plain meaning and intention of s 87.
(d)The Family Court decision in S v P, which held that a trustee may apply under s 88(2) for leave to set aside a s 21 agreement provided that it is done as part of an application under s 25(1)(a), is not binding and should not be adopted by the High Court.4
[21] The defendant’s submissions reviewed the legislative history relating to the insertion of Part 8 of the PRA following an extensive review of the Matrimonial Property Act 1976, referring in particular to the 1988 Report of the Working Group on Matrimonial Property and Family Protection. She argued that S v P, which is founded on the interpretation that s 87 is a “permissive section” and does not exclude or have primacy over other sections, was inconsistent with the plain meaning of s 87
and Parliament’s intention in enacting it.
4 S v P [2010] NZFLR 230, (2009) 28 FRNZ 394 (FC).
[22] In their submissions in response of 3 February 2015 the plaintiffs reiterated the position that the administrator of a deceased’s estate can request the Court to make any number of orders under the PRA,5 one of which is setting aside an agreement under s 21J if a serious injustice is established. They supported the interpretation that s 87 is a merely “permissive” provision which operates to confirm that a surviving spouse or partner can also challenge a s 21 agreement. They adopted the reasoning in S v P, relying in particular on the following paragraphs:6
[30] It seems that the Bill as originally drafted did not provide for applications by the trustee at all and this was addressed in the latter stages of its passage through Parliament by the introduction of s 88(2). This allowed the trustee to make an application under s 25(1)(a) providing leave was granted by the Court which needed to be satisfied that refusing leave would cause a serious injustice.
[31] I consider the provisions of s 87 affirm the rights of a surviving spouse or partner and a creditor to set aside an agreement. When I consider how s 87 and s 88(2) evolved, I find s 87 to be a permissive section setting out how agreements may be challenged. Section 87 does not exclude nor does it have any primacy over other sections of the Act. To the extent that there are other sections that can provide the necessary jurisdiction to challenge an agreement, then those provisions are able to operate alongside s
87.
Legislative history
[23] As is explained in Relationship Property in New Zealand, because the Matrimonial Property Act 1976 did not extend to widowed spouses, the Matrimonial Property Act 1963 was kept alive so that applications could be made where one or even both of the spouses had died.7 The explanatory note to the Matrimonial Property Amendment Bill noted that the Bill addressed that major anomaly:
… At present the 1976 Act only applies where a marriage breaks down during the joint lives of the spouses. Where one spouse has died and inadequate testamentary provision is made for the survivor, he or she must currently apply for a further share under the Matrimonial Property Act 1963 which remains in force for this limited purpose. The 1963 Act, unlike the
1976 Act, does not provide for equal sharing of matrimonial property but gives the courts a broad discretion to determine the surviving spouse’s share. In consequence, there is potential for a person whose spouse has died to be worse off in property terms than one whose marriage has broken down.
5 Reference was made to both ss 25(1)(a) and (b). I address the s s 25(1)(b) contention at
[54]-[55] below.
6 S v P, above n 4.
7 Bill Atkin and Wendy Parker Relationship Property New Zealand (2nd ed
LexisNexis, Wellington, 2009) at [6.1].
The Bill deals with this disparity by extending the application of the equal sharing regime of the 1976 Act to marriages where one spouse has died. It provides that the surviving spouse’s claim for a share of matrimonial property takes precedence over claims under inheritance law to avoid it being defeated by the actions of the will-maker.
[24] The Bill contained as cl 84 (the antecedent of s 87):
84 Surviving spouse may challenge agreement–
(1) This section applies when–
(a) The spouses make an agreement under section 21 defining the share of the matrimonial property or any part of it that each spouse is entitled to on the dissolution of the marriage by the death of one of the spouses; and
(b) One of the spouses dies.
(2) The surviving spouse may commence proceedings under section 21(8) to have the agreement declared void, and may commence the proceedings either before or after exercising the option in section 58.
(3) In deciding under section 21(10) whether it would be unjust to give effect to an agreement to which this section applies, the Court must have regard, in addition to section 21(10)(a) to (e), to whether the deceased spouse’s estate has been wholly or partly distributed.
(4) This section is subject to section 47.
[25] The antecedent of current s 88 was cl 86 which stated:
86. Who can apply–
(1) The following persons may apply for an order under section 25(1)(a)
or (b) or an order or declaration under section 25(3):
(a) The surviving spouse:
(b) Any person on whom conflicting claims in respect of property are made by the surviving spouse and the deceased spouse’s personal representative.
(2) The following persons may apply for an order under section 25(1)(b)
or an order or declaration under section 25(3):
(a) The deceased spouse’s personal representative:
(b) The Official Assignee in Bankruptcy of the property of either spouse:
(c) An appointee (within the meaning of section 153 of the Insolvency Act 1967) in whom the estate of a deceased spouse vests on an order being made under section 157 of the Act.
[26] With reference to those clauses the Explanatory Note stated:
New section 84 provides that the surviving spouse may seek to have declared void an agreement, made by the spouses while they were both alive, defining the shares the spouses are to have on death.
…
New section 86, in dealing with who can apply under the Act after one spouse dies, makes it clear that the estate of the deceased spouse cannot apply.
[27] In the Bill as reported back from the Government Administration Committee on 15 September 1999, cl 86 was amended to include a new subclause (1A) (which became the current s 88(2)):
(1A) The deceased spouse’s personal representative may, with the leave of the Court, apply for an order under section 25(1)(a). The Court may grant leave only if it is satisfied that refusing leave would cause serious injustice.
[28] With reference to this amendment the Committee’s report stated:8
… Under new section 86, as inserted by clause 52 in the bill, we recommend that the court have a discretion to allow the estate of the deceased to make an application for a division where the inability to do so would cause serious injustice. In view of our recommendation regarding new section 86 concerning the estate bringing a claim, we consider that the court should have a discretion to decide whether the rule contained in the bill, that matrimonial property owned by the spouses as joint tenants is matrimonial property and not the separate property of the survivor by virtue of survivorship, should apply. We recommend that the bill be amended accordingly.
[29] Some legal commentary suggests that s 88(2) was added at a later point in time. Indeed that was the understanding of the Judge in S v P:9
[18] Mr Barkle referred to the process leading to the Act becoming law on 1 February 2002 as it related to claims in respect of deceased estates. He noted that the provisions of s 88(2) were a late amendment to the Bill in response to submissions made to the Justice and Electoral Committee
8 In Whyman above n 3 at para [21] the Court of Appeal commented that the purpose and effect of the restriction in s 88(2) was not clear.
9 S v P, above n 4.
expressing concerns about the rights of children of first marriages or relationships who were not provided for in a will or estate. He said it was for this reason that the provisions of s 88(2) with its leave and serious injustice restrictions was added to the Bill which was then passed into law.
[30] However it is clear, as noted in Relationship Property in New Zealand,10 that it was the first select committee to consider the Bill that decided to allow personal representatives to apply. The legislative history is conveniently summarised in the Report of the Justice and Electoral Committee of 30 October 2000:
The bill was considered by the Government Administration Committee of the 45th Parliament, which made its report to the House on
15 September 1999. That report was considered by the House on
29 February 2000.
On 16 May 2000, the Associate Minister of Justice released Supplementary Order Paper No 25 (the SOP). On 1 June 2000, the House referred the bill and the SOP to this committee for consideration, with an instruction that the committee have the power to incorporate in the bill the provisions of the SOP and to make any related amendments to the bill.
[31] The SOP made several significant changes including extending the Matrimonial Property Act 1976 to apply to de facto partners (including same-sex partners) and changing the name of the statute to the Property (Relationships) Act 1976.
[32] Consistent with the tenor of the SOP, cl 86(1A) was to be amended by the substitution of “partner” for “spouse”. However the Justice and Electoral Committee recommended that references to “spouse” should be reinserted and that the term “de facto partner” should be used in relation to de facto couples. Ultimately s 88(2) was passed with the deletion of the “de facto” qualifier.
[33] Reverting to the submissions made to the Judge in S v P, it would seem that the reason advanced for the change was also overstated. The correct position appears to be as stated in the following commentary:11
The Report of the Justice and Electoral Committee did not give any reasons for the last minute insertion of s 88(2). Nor was there any discussion about the change during the parliamentary debates. It is safe to assume, though,
10 Relationship Property in New Zealand, above n 7 at [6.2.2]. The full history of legislative reform is related in Chapter 1: A Chequered Policy History.
11 Nicola Peart “Relationship Property on Death” (2004) 6 NZLJ 269 at 270.
that s 88(2) was inserted in response to submissions identifying the risk of dependent family members being rendered destitute if the estate could not seek a division. However, it seems that the implications of this late change were not appreciated, because the Act provides no guidance on the consequences of granting leave to the personal representative.
The Judge’s consequent misunderstanding of the legislative history may be significant given the importance which he attached to the evolution of s 88(2).12
Analysis
[34] Although the purpose of Part 8 was to remove the anomaly whereby a surviving spouse could be worse off under the Matrimonial Property Act 1963 than a separated spouse under the Matrimonial Property Act 1976, in fact the equality with which the PRA treats spouses and partners on separation is not replicated in the death provisions. As is explained in Relationship Property on Death:13
The death provisions differ from the inter vivos provisions. These differences reflect the fact that on death only one of the parties has an ongoing need for property, whereas on separation both parties have that need. Given this fundamental difference, the Act does not treat the surviving spouse or partner and the estate equally. It tips the balance firmly in favour of the surviving spouse or partner, for example, by making the estate’s application for a division of relationship property conditional on obtaining leave and by presuming that the estate is relationship property if the surviving spouse or partner seeks a division.
[35] Section 87 is an example of the “policy driven favouritism”14 shown to the survivor. As both counsel and the Judge in S v P all agreed, s 87 does not permit a personal representative to challenge a s 21 agreement. The Judge there identified as the central issue as being whether a personal representative can use s 88(2) to mount a challenge to an agreement or may only the persons named in s 87 (spouse, partner or creditor) bring such an application. The Judge then observed that commentators had not been united in their views on that issue, citing a number of examples, to which still others could be added. I do not propose to canvass the range of opinions
on the point.
12 At [22] above.
13 N Peart, M Briggs and M Henaghan Relationship Property on Death (Brookers, Wellington
2005) at [2.2.1].
14 Relationship Property in New Zealand, above n 7, at [6.2.2].
[36] The plain meaning of s 87 is to provide for the entitlement of a surviving spouse or partner to challenge a s 21 agreement and, via s 47, to preserve the right of creditors to challenge such an agreement. It does that by defining in s 87(1) a set of circumstances in which the section is to apply. It certainly has the appearance of what one might describe as an “operative” section. Indeed its structure in addressing a defined set of circumstances suggests that its content is definitive of the rights or entitlements which apply in those circumstances. I consider that that view gains support from s 10C(e) of the PRA which states:
10C Application of Act in other circumstances
This Act also applies:
…
(e) in the circumstances described in section 87, after the death of one of the spouses or partners.
[37] However the plaintiffs’ argument, adopting the reasoning in S v P, is that s 87 is “a merely permissive provision” which “confirms” that a surviving spouse or partner can challenge a s 21 agreement. The passage from S v P relied upon, which also employs the “permissive” description, states that the provisions of s 87 “affirm the rights” of a surviving spouse or partner (and a creditor) to set aside an agreement.
[38] What then is a “permissive section”? The phrase does not seem to be recognised in any of the standard texts on statutory interpretation. There are two possible meanings available from the discussion in S v P. First, in para [15] there is reference to counsel’s argument from which the phrase appears to have been derived:
[15] Counsel for the trustee, Mr Barkle, acknowledged that s 87 permitted only a surviving spouse or partner to challenge an agreement. He submitted that s 87 was a permissive section and that just because it made no mention of a trustee being able to make a challenge an agreement did not mean this could not occur if the jurisdiction to bring such a claim was found elsewhere in the Act.
The meaning of “permissive” there appears to be in the sense of non-exclusive.
[39] There is also the passage at para [31] which for convenience I set out again:
[31] I consider the provisions of s 87 affirm the rights of a surviving spouse or partner and a creditor to set aside an agreement. When I consider how s 87 and s 88(2) evolved, I find s 87 to be a permissive section setting out how agreements may be challenged. Section 87 does not exclude nor does it have any primacy over other sections of the Act. To the extent that there are other sections that can provide the necessary jurisdiction to challenge an agreement, then those provisions are able to operate alongside s 87.
This suggests that the evolution of the sections (as the Judge understood it to have been) was influential in the categorisation of s 87 as a permissive section. However, as I have noted above, the Judge was regrettably misinformed as to the relevant legislative history.
[40] In my view the concept which underlies the depiction of s 87 as “permissive” can best be gleaned from the “confirm” and “affirm” terminology. In effect it amounts to saying that s 87 does no more than recognise or affirm a right which is already provided for in the statute independent of s 87.
[41] Presumably that existing iteration of the rights of a surviving spouse or partner is to be found in s 88(1)(a). For it would not make sense for the personal representative’s right to challenge an agreement to be derived from the right to apply for an order under s 25(1)(a) but for the spouse or partner to have no equivalent right under s 88(1)(a). If the spouse or partner’s right to challenge did arise under s 88(1)(a), then it would follow that s 87 would be relegated to an affirmatory status.
[42] There are several reasons why I do not find the so-called permissive status of s 87 an attractive or acceptable interpretation. First, although courts are increasingly willing to treat words in statutes as mere surplusage, as Statute Law in New Zealand recognises, it is more difficult to “ignore” entire clauses and that will only be done in
extreme circumstances.15
15 J F Burrows and R I Carter Statute Law in New Zealand (4th ed, LexisNexis, Wellington, 2009)
at 315.
[43] Secondly, as noted above16 the structure of s 87 suggests that it was intended to address the circumstances with which it is concerned in a definitive manner. It does not present as a provision which is merely repetitive of a right conferred elsewhere in the statute.
[44] Thirdly, it is possible to reconcile s 87 and s 88 as addressing distinct types of claim: s 87 relating to challenges to s 21 agreements; s 88(2) (like s 88(1)(a)) relating to applications for the division of relationship property.
[45] Fourthly, and consistent with the second point above, s 87 preserves the s 47 rights of creditors. There is no equivalent saving in s 88.
[46] Fifthly, s 87(3) requires the Court to have regard to whether the estate of the deceased spouse or partner has been wholly or partly distributed. It is essentially similar in that respect to s 21J(5) which is concerned only with agreements made under s 21B. However there is no equivalent provision in s 88. The consequence of the plaintiffs’ argument would be an asymmetric outcome concerning that factor.
[47] I am mindful of the hypothetical scenarios to which the commentators refer in support of the argument that it is difficult to see a plausible justification for preventing a personal representative from mounting a challenge to a s 21 agreement. However I am unable to accept the proposition that s 87 is merely permissive with a right of challenge available to a personal representative by virtue of s 25(1)(a) via s 88(2). If that had been Parliament’s intention, then I would have expected that s 87 (which subsisted with s 88(1)(a) from the outset of the Part 8 reform) would have been amended accordingly.
[48] While cognisant of the difficulties with the legislation recognised by the Court of Appeal in Whyman,17 in my view it would be usurping the legislative function to place a construction on these provisions which would confer on a personal representative a parallel and incompatible right of challenge to a s 21
agreement.
16 At [36].
17 Public Trust v Whyman, above n 3, at [41].
[49] For these reasons I am driven to the conclusion that a personal representative’s right to apply for an order under s 25(1)(a) does not extend to include an entitlement to challenge a s 21 agreement. However, should my conclusion be erroneous, I proceed on the alternative hypothesis to consider the s 88(2) discretion to grant leave.
Should leave be granted in these circumstances?
[50] I agree with Mr Harrison that my task is to consider whether an alternative administrator should be appointed under s 21. However in my view, in making a determination of what in the circumstances is “expedient”, it is not sufficient to simply identify a theoretical conflict of interest on the ground that another party wishes the executrix to act contrary to her genuine assessment of a foreshadowed claim. As did the Court of Appeal in Whyman18 in the context of s 88(2), I consider that it is necessary to identify some credible claim against the estate.
[51] The plaintiffs seek to have their father’s estate augmented so that funds are available to respond to their claim under the Family Protection Act. However, because of the s 21 agreement, s 78(1)(c) gives priority to Sheila’s entitlement. Hence the plaintiffs wish to have a new administrator appointed to challenge the s 21 agreement. That would involve establishing the state of serious injustice which s 21J(1) requires. That is a more substantial threshold than the “serious injustice” threshold in s 88(2) as interpreted by the Court of Appeal in Whyman.
[52] Having regard to the circumstances and terms of the agreement between Alec and Sheila and the terms of their wills, including the provision for the plaintiffs to participate in both estates in due course,19 I agree with Ms Fisher that realistically there is little prospect of a successful challenge to the s 21 agreement. Indeed I consider that the setting aside of the agreement would amount to a serious injustice to Sheila. Consequently I am not satisfied even on the Whyman approach that
refusing leave under s 88(2) would cause serious injustice to the plaintiffs.
18 At [16].
19 At [5]-[6] above.
[53] In those circumstances I do not consider that it is expedient to remove Sheila as executrix and to visit potentially extensive litigation on this family. The application is declined accordingly. However, as Sheila proposed and in order to provide some comfort for the plaintiffs as to the maintenance of the capital of the estate,20 I make an order that John Healy be appointed as an additional administrator.
[54] Finally I note that it appears that the plaintiffs may consider that leave is not in fact required under s 88(2) in order to mount a challenge under s 21J. In his submissions Mr Harrison refers to s 88(3)(a) which enables the personal representative of a deceased spouse to apply for orders under s 25(1)(b) without leave. His submission suggests that s 25(1)(b), which confers on the Court the power to “make any other order that it is empowered to make by any provision of this Act”, should extend to the power to set aside an agreement under s 21J(1).
[55] I do not consider that an order under s 21J is within the ambit of an order envisaged by s 25(1)(b). None of the texts advocate such a position. No doubt that is because there was provision at the outset in cl 86(2)(a) for a personal representative’s right to apply for a s 25(1)(b) order along with the presence of cl 84.21
Costs
[56] The application having been unsuccessful, the defendant is prima facie entitled to costs. My preliminary view is that such costs should be on a 2B basis. However if costs at a different level are sought or if costs are opposed, the party seeking a different outcome may file a brief memorandum within 10 working days
and the other party may respond within 10 working days.
Brown J
20 See [12] above.
21 See [24]-[25] above.
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