Tolley v Hona

[2021] NZHC 2481

IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE ROTORUA-NUI-A-KAHUMATAMOMOE ROHE

CIV-2020-463-000055

CIV-2020-463-000056 [2021] NZHC 2481

IN THE MATTER OF

AND

the Property Law Act 2007

IN THE MATTER OF

the Protection of Personal and Property Rights Act 1988

BETWEEN

NGAHUIA ROBERTA TOLLEY DOUGLAS-DAVIS JULIAN HONA MADELEINE NGAROMA WILLIAMS NGAIRE IRIHAPETI KHAN

Plaintiffs

AND

MARGARET HAANA DENYS HONA

Defendant

Hearing:

23 July 2021

Appearances:

P Birks for the Plaintiffs

No appearance for the Defendant

Judgment:

21 September 2021

INTERIM JUDGMENT OF WALKER J

This judgment was delivered by me on 21 September 2021 at 3 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

TOLLEY & ORS v HONA [2021] NZHC 2481 [21 September 2021]

[1]    The plaintiffs and the defendant are siblings. They, along with the estate of their late mother and late sister, are registered owners of the former family home at  4 Knight Place, Rotorua (the Property). The parties have fallen out after the death of their mother, Emma Atamira Hona, aged 80 years, on 24 June 2017. The defendant is living in the Property, refuses to engage with other family members and has not paid rent or outgoings. She has excluded the plaintiffs from the Property.

[2]    There are two proceedings before the Court. The first is an application under s 339 of the Property Law Act 2007 (the Act) for the sale of the property to the third named plaintiff and associated orders. In the second proceeding the plaintiffs seek to recover funds belonging to their mother which they allege the defendant misapplied in breach of fiduciary duty when she was purporting to look after their mother’s property affairs.

[3]    The defendant has not filed a statement of defence or taken any steps in the proceedings. The plaintiffs proceed by way of formal proof. There is proof of service on the defendant. Mr Birks has confirmed that all non-parties who may have an interest in the proceedings have been served, including the Public Trust in Rotorua.

Background

[4]    As some of the parties share a common surname, I shall refer to those individuals by their first names to distinguish them.

[5]    The title to the Property produced in evidence to the Court records the registered proprietors as Emma as to a one half share and Ngahuia Roberta Tolley, Madeleine Ngaroma Williams, Douglas-Davis Julian Hona, Denys Haana Hona, Ivonne Kristina Hona and Ngaire Irihapeti Hona as to a one half share. The Property is described as an estate in fee simple of 819 square metres or less (Lot 151, DP South Auckland 5621). There is no mortgage registered. There is a statutory land charge against the share or interest of Douglas pursuant to s 32 of the Legal Services Act 2000 registered against the title on 4 October 2010. There is no current registered valuation for reasons which are explained below. The September 2020 rateable value

reassessment  on  the  One  Roof  website  is  recorded as $390,000.    The plaintiffs anticipate that the market value significantly exceeds this.

[6]    Ngaire Khan (formerly Ngaire Hona) has taken the lead on behalf of the plaintiffs. Ngaire was appointed by the Family Court at Rotorua on 18 May 2010 as welfare manager for her mother pursuant to s 12 of the Protection of Personal and Property Rights Act 1988.1 Each of the other plaintiffs has provided an affidavit confirming that Ms Khan is authorised to give evidence on behalf of the plaintiffs to set out the background. Ms Tolley and Douglas Hona live in Brisbane. Madeleine Williams lives in Christchurch. Ivonne is deceased and survived by her two children. Ivonne’s estate is administered by the Public Trust in Rotorua. Ivonne’s estate has not joined in the proceeding. It is curious that the Public Trust has not taken any steps in the proceedings, a point to which I will return.

[7]    Ngaire’s affidavit sets out the background. She deposes that her mother suffered from dementia for many years before her death. She was diagnosed with early stage dementia in about 2000. At that time, Madeleine and Douglas moved into the family home to care for her. Douglas was originally appointed welfare guardian under an enduring power of attorney. Madeleine was appointed property manager.

[8]    By 2009, Emma’s health had deteriorated to such an extent she was unable to care for herself. The enduring powers of attorney were invoked. Proceedings were commenced in the Family Court under the Protection of Personal and Property Rights Act. The Family Court made an order appointing the Public Trust as temporary property manager. At a judicial settlement conference an agreement was reached by family members that the defendant be appointed as property manager of their mother’s affairs. The defendant was at that time completing a commerce degree at the Waiariki Polytechnic. Family members considered that she was more financially literate than other members of the family.

[9]    I pause to interpolate that little documentation relating to the Family Court process has been made available to the Court save for exhibits to the affidavit of    Ms Khan sworn on 9 June 2020. Mr Birks sought a direction that this Court order the

1      The appointment provided that this may be reviewed at Ngaire’s request.

Registrars of the Family Court and District Court at Rotorua to make the relevant court files available. I doubted that I had jurisdiction to make those orders or that it should be necessary. As parties to the Family Court proceeding, the plaintiffs ought to have been able to request to search the Court file. As it happens, that material is not essential to the determination of the issues before the Court at this stage.

[10]   When the order appointing  the defendant  property manager was made  on  18 May 2010, the existing interim order in favour of the Public Trust came to an end. The order applied to all the property of their mother and provided that the defendant as appointed manager had all the powers specified in schedule 1(a)–(e) of the Protection of Personal and Property Rights Act. The order stipulated that the manager must apply for a review of the order no later than 18 May 2013.

[11]   The defendant thereafter took control of their mother’s bank accounts but did not immediately take over the care of their mother as she was still completing her tertiary education. Ngaire moved into the Property with her children to provide the day-to-day welfare care for their mother. When that became difficult for Ngaire (who had two young children) arrangements were made for their mother to stay with another family member in Christchurch until the defendant had completed her degree.

[12]   As I understand it, the only income that Emma was receiving in this period was superannuation, paid regularly into her bank account which the defendant managed.

[13]   The defendant moved into the Property with her own family, including her partner.

[14]   On 10 December 2010, Emma returned from Christchurch to live once again at the Property, now with the defendant and her family. Emma died on 24 June 2017. The death certificate records that she died at the Cantabria Rest Home in Rotorua. It is not apparent how long Emma was at the Rest Home before her death but given the reference to advanced dementia, I surmise that it was for quite some time.

[15]   Emma’s will was dated 29 June 2004. She appointed the Public Trust to be the executor and trustee to deal with the residuary estate as follows:

4.         Gift of Residue

I GIVE –

My residuary estate to be divided equally among my children NGAHUIA ROBERTA TOLLEY and MADELEINE NGAROMA WILLIAMS and DOUGLAS JULIAN HONA and DENYS HAANA MARGARET HONA-PAKU and IVONNE KRISTNA

HONA and NGAIRE IRIHAPETI HONA living at my death. However if this gift to any such beneficiary does not take effect THEN any benefit to which that beneficiary would have been entitled is to be taken equally by those of his or her children who are living at my death.

[16]   The effect of the will is that each of the siblings (and Ivonne’s estate and/or children) are ultimately entitled to a one-sixth share of the Property made up of their share of the residue of their mother’s estate and their shared ownership of one half of the Property.

[17]   At around the time that the Public Trust was appointed administrator, the family asked for financial records that the defendant was obliged to retain during the period she had been appointed to look after her mother’s affairs. The defendant did not respond. Initially, she evaded the questions. Ultimately she became obstructive. The family became concerned about the lack of co-operation from the defendant. They set about making their own enquiries. They discovered that the defendant had caused their mother’s bank account with the Credit Union to be closed and a new bank account opened with Westpac Bank. This information was included in a document entitled “Statement of Property” and described as the manager’s statement of property required by s 45(2)(a) of the Protection of Personal and Property Rights Act filed in the Family Court at Rotorua. The account was opened in the name of Emma Atamira Witariana. The name Witariana was a given name of her former husband, Robert Arapeta Witariana Hona, who died before Emma.

[18]   When the family obtained copies of the Westpac bank statements they became suspicious about some of the transactions evidenced in the statements. Another concern was that the defendant had not fulfilled her responsibilities during the period in which she was property manager because she failed to advise the Family Court of changes or provide other required information. They then discovered that the property management order had expired on 18 May 2013 and never been extended. The

irregularities in the Westpac bank statements and failure to keep financial records led them to make a formal complaint to Police on 14 July 2018.

[19]   As a result of the Police inquiries, the defendant was charged with theft by a person in a special relationship. The defendant pleaded guilty. The Police summary of charges to which the guilty plea was entered referred to the role and obligations of a person appointed manager, the circumstances in which the defendant opened a new bank account into which her mother’s superannuation payments were received and that the defendant had spent a total of $130,818.25 of those funds without legal authority. According to the summary of facts, a significant portion ($85,401.10) was spent at gambling establishments.

[20]   The defendant was sentenced to community work and ordered to pay reparation of $8,305.62 to the Public Trust as administrators of Emma’s estate. Enquiries made of the Public Trust office indicates that only $872 has been paid as reparation as of 19 July 2021.

[21]   The plaintiffs acknowledge that some of their mother’s money spent by the defendant was legitimately for the benefit of their mother and that some of the claims for reimbursement made by the defendant are also legitimate. The defendant was apparently entitled to claim $5,000 per year under the property management order. Ngaire sets out in her affidavit those payments which the plaintiffs maintain were not legitimate and for which the defendant has never accounted.

[22]   The defendant has lived in the Property for many years. She has not paid rent. She paid the rates directly from her mother’s account between 2015 and 2017. It is unclear from the evidence whether there are rates arrears. She has more recently failed to pay fire insurance. One of the plaintiffs has paid the fire insurance from November 2017 at the request of the Public Trust.

[23]   In July 2017, the defendant served trespass notices on family members. These were renewed in December 2019. The circumstances of the trespass notices are also unclear since at law property owned by tenants in common means that each owner owns a specified share of all of the property; each owner is equally entitled to enjoy

all of the property and may not exclude the other co-owners. Ngaire deposes that there are two large, aggressive dogs on the Property and a three-strand barbed wire fence has been added to the top of the existing fence which she describes as fortification rather than fencing.

The issues

[24]   In the proceedings relating to the Property (CIV-2020-463-000055) the plaintiffs seek orders under s 339(1) and s 339(4) of the Act as follows:

(a)A registered valuer be entitled to enter the Property to complete a formal valuation in order to fix the value.

(b)For sale of the property to the third-named plaintiff Madeleine Ngaroma Williams at a price to be fixed by the Court.

(c)The shares in the Property owned by Ngahuia Tolley, Douglas Hona and Ngaire Khan be gifted to Madeleine Ngaroma Williams subject to any outstanding moneys owed to the Public Trust and the Legal Services Agency.

(d)Directions as to how the proceeds of sale are to be applied or divided including directions that:

(i)Any moneys owed by the defendant to the Fines Registrar of the District Court at Rotorua be paid from the proceeds of sale;

(ii)Moneys owed by Douglas Hona due to be paid to the Legal Services Agency be paid to the agency;

(iii)Moneys owed to the estate of Ivonne Kristina Hona be paid to the Public Trust Office as Administrator of her Estate;

(e)For eviction of the defendant on completion of sale.

(f)The costs of this proceeding on an increased basis.

(g)Such other orders the Court considers just.

[25]   In essence, the plaintiffs wish to keep the Property as a family home by sale of the Property to Madeleine Williams with the respective shares of all the plaintiffs being set off against the purchase price. Thus, Ms Williams will arrange payment of the shares of the estate of Ivonne and the defendant, with the other plaintiffs being content to gift their share of the home to Madeleine. In short, Ms Williams will need to pay consideration equal to two-sixths of the value of the Property.

[26]   In the proceedings seeking recovery of allegedly misappropriated funds (CIV-2020-463-56) the plaintiffs plead that the defendant owed a fiduciary duty to the plaintiffs and breached such duty by:

(a)refusing or neglecting to properly look after her mother’s financial affairs and faithfully execute the trust imposed on her;

(b)exploiting and taking advantage of their mother to her detriment and that of the plaintiffs;

(c)misappropriating moneys she was entrusted to look after by virtue of the property order;

(d)failing to faithfully comply with the property manager’s order by not making an application to renew the original order on expiry to their mother’s detriment and to their detriment;

(e)concealing and refusing to provide to the plaintiffs any information or explanation as to the true state of the administration of her office;

(f)obtaining unlawful financial benefits in breach of her obligations as property manager under the trust imposed on her by the plaintiffs who had agreed to her appointment; and

(g)failing to take appropriate care and to protect their mother’s interests as required by the trust imposed on her as representative of the plaintiffs.

[27]   The prayer for relief claims the sum of $130,818.26 and costs. This is based on the amount recorded in the Police summary of facts. However, in written submissions filed on behalf of the plaintiffs, Mr Birks refers to amounts likely spent to benefit Emma and other appropriate set-offs so that the claim appears to be reduced to $118,234.31.

Property issues

[28]The Act provides:

339     Court may order division of property

(1)A court may make, in respect of property owned by co-owners, an order—

(a)for the sale of the property and the division of the proceeds among the co-owners; or

(b)for the division of the property in kind among the co-owners; or

(c)requiring 1 or more co-owners to purchase the share in the property of 1 or more other co-owners at a fair and reasonable price.

(2)An order under subsection (1) (and any related order under subsection (4)) may be made—

(a)despite anything to the contrary in the Land Transfer Act 2017; but

(b)only if it does not contravene section 340(1); and

(c)only on an application made and served in the manner required by or under section 341; and

(d)only after having regard to the matters specified in section 342.

(3)Before determining whether to make an order under this section, the court may order the property to be valued and may direct how the cost of the valuation is to be borne.

(4)A court making an order under subsection (1) may, in addition, make a further order specified in section 343.

(5)Unless the court orders otherwise, every co-owner of the property (whether a party to the proceeding or not) is bound by an order under subsection (1) (and by any related order under subsection (4)).

(6)An order under subsection (1)(b) (and any related order under subsection (4)) may be registered as an instrument under—

(a)the Land Transfer Act 2017; or

(b)the Deeds Registration Act 1908; or

(c)the Crown Minerals Act 1991.

[29]   Orders may be sought under s 341. The mandatory criteria which the Court must consider in the exercise of its discretion to make orders under s 339(1) are set out in s 342.  Section 343 provides a broad discretion, subject to the parameters of   ss 339 and 343.2

[30]The Court of Appeal has said of this provision:3

Under this new broad discretionary regime it is appropriate for a judge to stand back from the submissions and proposals of the parties, and consider what, on an overview, taking into account the relevant considerations, is the most just and practical way through the impasse before the court, even if the answer may not reflect the orders sought by the parties. By definition the cases that come before the court arise where parties are locked into an ownership position which they cannot resolve because of the positions they have taken, and where a way out may be by a path neither has to that point contemplated.

[31]   The relevant criteria under s 342 clearly favour orders being made under the Act because the plaintiffs own two thirds of the property; they are in an intolerable position and unable to take any benefit from the property while the defendant remains uncooperative and reaping the benefit of living in the Property without financial contribution; there is no evidence of improvements or maintenance by the defendant of any significant amount; the conduct of the defendant and her abuse of trust in particular has disadvantaged the plaintiffs and there is nothing unique about the property save the family ties to it. There is no evidence of hardship faced by the defendant given that she has chosen not to defend this proceeding.

2      Bayly v Hix [2012] NZCA 589, [2013] 2 NZLR 401 (CA) at [33].

3 At [32]. See also Yozin v New Zealand Guardian Trust Co Ltd [2019] NZCA 202, (2019) 20 NZCPR 426.

[32]   At the hearing, I proposed to Mr Birks that it is preferable for orders to be staged. The first stage, as accepted by Mr Birks, is that the property needs to be valued. This has not proved possible to date because of the defendant’s refusal to permit a valuer to attend the property. In fact, some security concerns have been signalled by Mr Birks. One reason for approaching the issue in a staged manner is that an eviction order ought to be straightforward once the transfer of property has been effected.

[33]   I record that no claim is currently pleaded for occupation rent under s 343(f) of the Act in addition to an order under s 339(1). It is not inconceivable that rent owed for the period of occupation to date would exceed the defendant’s ultimate share in the Property, subject to offsetting rates payments or other legitimate set-off amounts.

[34]   I grant leave to the plaintiffs to amend the statement of claim to include a claim for occupation rent. Any amended statement of claim would need to be served on the defendant.

[35]I make the following orders/directions:

(a)The defendant is ordered to allow access to the property at 4 Knight Place to a registered valuer selected by the plaintiffs (and security personnel if required) for the purpose of conducting a valuation inspection to establish the sale and rental value, at a time and on a date nominated by the plaintiffs.

(b)The defendant is to ensure that (a) the registered valuer is not impeded in his or her task and (b) may safely undertake the task and must ensure that any dogs on the Property are restrained.

(c)A copy of the written property and rental valuation report is to be served on the defendant and provided to the Court within 14 days of the inspection taking place.

(d)The Property is to be sold to Madeleine Ngaroma Williams, with the purchase price to be determined by the Court, following receipt of the valuation.

(e)The purchase price to be paid by Madeleine Ngaroma Williams, once determined by the Court, will be paid into a nominated solicitor’s trust account to be retained pending further directions and orders of the Court subject to sub-paragraph (g) below.

(f)The plaintiff, Ngaire Irihapeti Khan, is authorised to sign any documents on behalf of the plaintiffs and defendant necessary to transfer ownership to Madeleine Ngaroma Williams.

(g)The nominated solicitor may deduct and pay any amounts legally required to be paid in connection with the sale of the Property including the conveyancing costs, costs of the registered valuer (and security personnel if required) together with the amount required to clear the statutory land charge under the Legal Services Act 2000 of no more than $6,000.

(h)Leave to the plaintiffs to apply for further directions/orders as required and to amend the statement of claim.

(i)Further directions are to be made to determine distribution of the sale proceeds if no agreement can be reached between the parties.

(j)The plaintiffs are entitled to costs of these proceedings, the quantum of which is to be fixed once directions are made as to distribution of the sale proceeds.

(k)There will be a case management conference by telephone allocated by the Registrar on filing of the report of the registered valuer.

(l)This judgment and the sealed interim orders are to be served on the defendant along with a memorandum setting out in clear and

straightforward language the consequences of any failure to comply with an order of the Court.

Reparation claim

[36]   The second proceeding is a claim for reparations relying on an asserted breach of fiduciary duty. The fundamental issue with this claim is that the primary duty, and possibly the only duty, was owed  to  Emma  rather  than  other  family  members. Mr Birks was not able to refer the Court to any case in which it was held that a fiduciary obligation was owed to family members who stood to benefit from the will of a testator to whom fiduciary obligations were owed.

[37]   Yet there is clear evidence of misappropriation of funds, subject to potential limitation period issues and the question of the appropriate claimant. It is therefore curious that the Public Trust, as administrator of Emma’s estate, has not seen fit to take any step in the proceeding. The Court would benefit from participation by the Public Trust.

[38]   In all the circumstances and given the staged approach to the Property issues represented by these interim orders, I adjourn proceeding CIV-2020-463-55. I grant leave for joinder of the estate of Emma should the Public Trust determine it wishes to take a step after consideration of this interim judgment and in the knowledge that there are to be funds held by solicitors and ostensibly owed to the defendant for her share of the Property, less any set-off determined. I direct that a copy of this judgment be provided to the Public Trust accordingly.

[39]   This judgment is in all respects an interim judgment. The plaintiffs are to file a memorandum within 10 working days of receipt of the valuation report so that further directions may be made.

............................................................

Walker J