Turvey v Turvey

[2020] NZHC 2403

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

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

CIV-2018-485-175

[2020] NZHC 2403

UNDER

section 19 of the Administration Act 1969

BETWEEN

PATRICIA TURVEY

Plaintiff

AND

DARYN ALAN TURVEY

Defendant

CIV-2018-485-849

UNDER

the Trustee Act 1956

BETWEEN

PATRICIA TURVEY

Applicant

AND

DARYN ALAN TURVEY

First Respondent

CORNWALLIS TRUSTEES LIMITED

Second Respondent

Hearing:	7 September 2020
Appearances:	G J Woollaston for plaintiff/applicant Defendant/first respondent in person No appearance for second respondent
Judgment:	16 September 2020

RESERVED JUDGMENT OF DOBSON J

TURVEY v TURVEY [2020] NZHC 2403 [16 September 2020]

Introduction

[1]    These two proceedings were brought on for hearing pursuant to a direction that they be heard together,  but  not  formally  consolidated.  The  plaintiff/applicant (Mrs Turvey) is the widow of Francis Bernard Turvey (the deceased) who died in September 2007. The defendant/first respondent is Mrs Turvey’s and the deceased’s son (Daryn).

[2]    In the first intituled proceeding (the estate claim) Mrs Turvey seeks orders removing Daryn as the sole trustee and executor of the estate of the deceased and appointing her to that position, with those changes deemed to have taken effect from the date of the deceased’s death. No application for a grant of probate in the deceased’s estate has been made by Daryn. There are diametrically opposed claims advanced by each of them in respect of Daryn’s neglect of his obligations as trustee and executor of the deceased’s estate and, on Daryn’s account, wrongful appropriation of estate assets and frustration of all attempts to administer the estate by Mrs Turvey and Daryn’s brother, Glenn, with whom she is aligned. Daryn’s claims are advanced in a counterclaim originally incorporated in his statement of defence.

[3]    There is a preliminary issue in respect of the estate claim, given that a notice of discontinuance had been filed on Mrs Turvey’s behalf on 12 December 2019. Daryn, acting for himself, opposed the discontinuance being finalised until costs claims were dealt with. He also sought acknowledgements as to his continuing status as a trustee.1

[4]    In the second proceeding (the trusts claim), Mrs Turvey commenced an originating application seeking orders under s 43 of the Trustee Act 1956 for Daryn’s removal as a trustee of each of two mirror trusts that were formed by her and the deceased in May 1989. The only asset of those trusts appears to be a residential property at 227 Marine Drive, Lowry Bay. The trustees of each of the trusts are registered as proprietors of that property as tenants in common in equal shares.

1      Given the extent of cross-over between the two proceedings, this concern may well have been in respect of (and arguably extended to) Daryn’s position as trustee of the mirror trusts relevant to the second proceeding.

[5]    Daryn was appointed as a co-trustee with Mrs Turvey in December 2007, some three months after the death of the deceased.

[6]    In recent years, an independent solicitor, Mr Graeme Reeves, acting through a trust company he controlled, Cornwallis Trustees Limited (Cornwallis), was appointed to the mirror trusts with the apparent intention that he would be able to direct management of the trusts given the complete inability of Mrs Turvey and Daryn to co- operate in discharging their trustee obligations. Cornwallis has most recently purported to resign its position as trustee. Neither Mr Reeves nor Cornwallis have taken any steps in the second proceeding.

Factual allegations

[7]    Regrettably, these two proceedings are only part of wider litigious strategies that have arisen out of divisions within the Turvey family. On the issues canvassed before me in these two proceedings, both sides were inclined to advert to their view of the merits in other litigation in an attempt to support the merits of the positions they contended for in these proceedings.

[8]    In their respective affidavits, Mrs Turvey and Daryn make extensive allegations of wrongdoing against the other, with (on some issues) less than complete refutation in their reply affidavits of allegations made against them by the other. Daryn had given notice that he wished to cross-examine Mrs Turvey on her affidavits. However, after assessing the range of relevant issues arising in both proceedings, I conveyed my firm view that I would not be helped by further testing of the statements Mrs Turvey has made that disparaged Daryn’s conduct and asserted the correctness of her position. This she had done in some respects on terms that do not accord with the legal position.

[9]    Having considered the affidavits and opening submissions that had been filed in advance, I tested Mr Woollaston and Daryn relatively extensively on the prospects of obtaining limited agreement on a process for settling the gravamen of complaints motivating these two proceedings, if not the parameters of settlement of them. After a prolonged morning adjournment, it became apparent that a resolution within the parameters I had proposed was not feasible. As I endeavoured to emphasise to the

parties during the hearing, litigation of this type generally makes intra-family divisions worse, rather than reducing the scope of family arguments. I accordingly deal with the essentials of the grounds for the claims and defence of them, having reflected on all the evidence on terms that I intend should facilitate resolutions with a minimum of future formal claims.

The estate claim (CIV-2018-485-175)

[10]   The deceased’s will, made in 2002, was in simple terms. It appointed Daryn as the sole executor and trustee, forgave any debts owing to the deceased by his trust and gave all articles of personal use, ornament or of a household or domestic nature, including motor vehicles, to Mrs Turvey to use during her lifetime, with such items thereafter going to the Orana Trust. The deceased’s residuary estate was also to pass to the Orana Trust, which is another trust of which members of the wider Turvey family are the beneficiaries.

[11]   In Daryn’s initial defence to the statement of claim he sought competing orders, including orders for full access to all the assets belonging to the deceased’s estate, and a requirement for Mrs Turvey to account for all missing property, including a boat, a BMW motor vehicle, firearms, and woodworking and mechanical tools.

[12]   Since the discontinuance was filed on behalf of Mrs Turvey, directions made by various judges acknowledge the notice of discontinuance and address matters raised by Daryn in terms that are capable of applying only to his counterclaim, or to the status of Mrs Turvey’s discontinuance (as applicant) being unresolved. There is no formal record of the Court rejecting the notice of discontinuance which, in accordance with the High Court Rules 2016, has effect from the time of its filing.

[13]   Although it is not recorded in the minute made by the Judge, I understand that when an agent for Mr Woollaston appeared at a call of the proceedings before Doogue J on 16 December 2019, the agent attempted to tender to the Judge an incomplete or non-original copy of a notice of discontinuance and that the Judge rejected that as a matter of form.2 Doing so could not have signalled any substantive

2      Turvey v Turvey HC Wellington CIV-2018-485-849, 16 December 2019 (minute of Doogue J).

doubt over the entitlement of the applicant to discontinue the proceedings when she had elected to do so. The signed original of the discontinuance on the court file is dated 12 December 2019 but is endorsed with a court stamp as received on 6 March 2020.

[14]In the last minute prior to the hearing, Cooke J observed:3

[5] Mr Daryn Turvey sought leave to amend his counterclaim in CIV-2008-485-175. He advised that the applicant in that proceeding had said that the proceeding had been discontinued, but that had not been formerly [sic] confirmed. I advised that any argument about whether the proceeding was still alive could take place at the substantive hearing which I contemplated. I indicated that an amended statement of counterclaim could be filed, however.

[15]   I am not persuaded that the continuation of a counterclaim is sufficient reason to relieve Mrs Turvey of the usual consequences of filing a notice of discontinuance. Having done so without reaching an agreement on costs, she was left vulnerable to an application for costs (to the extent they might be sought in accordance with the High Court Rules by a self-represented lay litigant), and the discontinuance of the claim could have no impact on the status of an existing counterclaim.

[16]   A further consideration is Mrs Turvey’s limited interest in the estate. She pleads that Daryn has failed to procure a grant of probate for the will of the deceased and failed to gather in, account for and administer the assets, interests and entitlements of the estate in accordance with the provisions of the will. She did not plead any complaint of Daryn’s disruption of her enjoyment of the use of personal items in which the will granted her a life interest. The only contingent interests she pleaded in the administration of the estate were rights of action “incidental and/or predicated upon [due administration of the estate] by way of rights to bring claims under the Family Protection Act and the provisions of the Property (Relationships) Act 1976”. In oral submissions, Mr Woollaston also alluded to the prospect of Mrs Turvey bringing a claim under s 182 of the Family Proceedings Act 1980.

[17]   Given that there are no realised assets in the estate and the only prospects identified by Daryn are liabilities owed to the estate by Mrs Turvey or Glenn, the

3      Turvey v Turvey HC Wellington CIV-2018-485-849, 17 June 2020 (minute of Cooke J)

question arises as to the existence of any material interest for Mrs Turvey. In seeking to have herself appointed as a substituted executrix of the estate, in the context of all the other contentions it is difficult to avoid the inference that she would wish to raise claims against the estate on family protection or property relationship grounds for tactical purposes as a set-off against claims which the estate might make out against her or Glenn. Certainly, there appears to be no clear justification for claiming an interest in what are presently non-realised assets, where the liability to pay such claims could only be attributed to her or other family interests aligned with her. It is also apparent that Mrs Turvey would prefer that any assets that are realised in the estate of the deceased not pass to the Orana Trust as is provided for in the will.

[18]   The affidavits filed respectively by Mrs Turvey and Daryn contain fundamental conflicts in their recollection of who had control of various assets that ought to have comprised part of the estate of the deceased. I incline to the view on all of the evidence that Mrs Turvey and/or her son, Glenn, had control of the BMW motor vehicle and a boat which appears to have been sold. I am left unsure about who appropriated the deceased’s various collections of tools, but would also be inclined to find that it is more likely than not that they came under the control, and in the possession, of Mrs Turvey and/or Glenn.

[19]   Equally, I am not in a position to make definitive rulings on this application as to monetary amounts that might be owed to the estate. I am satisfied, however, that given the many facets of the bitter exchanges between the parties, Daryn’s omission to apply for a grant of probate thus far cannot constitute neglect on his part to an extent that warrants his removal as executor under the will. Although a period of 13 years since the death of the deceased is an extraordinary length of time, I am satisfied that Daryn is not entirely responsible for the failure to ascertain whether the assets of the estate warranted an application for probate. He has inarguably been frustrated in such attempts by the obstruction he has encountered in attempting to deal with other family members.

[20]   Mr Woollaston argued that one of the claims Daryn has threatened to pursue would be for his own personal benefit, which created a conflict sufficient to disqualify him from acting as executor of the deceased’s estate. In brief, Daryn claims that he

provided the funds for Glenn and the deceased to purchase a racing truck, the entity providing that advance being a separate trust of which members of Daryn’s immediate family are the beneficiaries. Daryn claims that subsequent to the death of the deceased, Glenn disposed of the racing truck and has not accounted for his one half of the advance. Daryn contemplates using his status as executor of the deceased’s estate to require Glenn to refund the amount of the estate’s half interest, and if restored to the estate Daryn would contemplate discharging the estate’s obligation to his own family trust.

[21]   Daryn would be wise to take independent advice on pursuit of any such steps as part of his executorship, but I am not persuaded that the prospect of his pursuing such initiatives is sufficient to require him to step aside as executor of the estate.

[22]   I direct that Daryn is to have until 29 January 2021 to elect whether to make application for a grant of probate of the estate of the deceased. If application is made, then the terms of this judgment are to be treated as a sufficient explanation for the delay in such application being made.

[23]   Given confirmation of Daryn’s status as the executor of the estate of the deceased, it follows that he has lawful authority to require others to account to him in that capacity for any assets they held, or the proceeds of assets. Although Glenn is not a party to this proceeding, he was present in court and participated in my exchanges, and I treat him as equally amenable to compliance with these directions as Mrs Turvey is to be. There have been inconsistent and unsatisfactory explanations as to the disposition of the boat and the BMW motor vehicle. Full details of their disposition and an accounting for the proceeds obtained for them are to be made as soon as reasonably practicable. To the extent other claims can be adequately substantiated, Daryn obviously has authority to pursue those as well.

Costs

[24]   Mr Woollaston sought costs on this proceeding. The outcome does not warrant that. As I indicated during the course of argument, even if I had been persuaded that grounds for removal of Daryn as executor were made out, I would be far from satisfied

that such an order was warranted in circumstances that required Daryn to make a contribution to Mrs Turvey’s costs in this proceeding.

[25]   Daryn also sought costs. As a self-represented lay litigant, he is not entitled to claim costs but can seek reimbursement of disbursements relevantly incurred in relation to this proceeding.4 I order that he is entitled to such disbursements.

The trusts claim (CIV-2018-485-849)

[26]   There has been a long-standing and irreparable breakdown in the working relationship between Mrs Turvey and Daryn in their capacity as trustees of the mirror trusts. Regrettably, the involvement over recent years of Mr Reeves, involving himself under the corporate guise of Cornwallis, has not provided the leadership that might be expected to require the other two trustees to subjugate their personal enmity to objective discharge of their obligations as trustees.

[27]   Mrs Turvey and Daryn have both committed substantial resources to their attempts to make out their claims that it is the other that has caused the dysfunctionality. Mrs Turvey complains that Daryn has been physically violent and abusive towards her to the extent that she has sought protection orders against him, and claims she has been forced to relocate to Taupō to avoid the risk of physical confrontations. Daryn complains that Mrs Turvey’s false allegations of this type have been completely contrived and have wrongly caused substantial embarrassment and harm to his immediate family.

[28]   For his part, Daryn complains that Mrs Turvey has failed to care for the property at 227 Marine Drive, has neglected its maintenance and failed to pay outgoings to an extent that substantially depreciates the value of the asset. Further, that she has been involved in or condoned undisclosed letting of the property by Glenn and appropriation  of  rental  received  without  accounting  to  the  trusts  for  it.  Mrs Turvey’s response to criticisms about the state of the property is to attribute responsibility for it to Daryn. She acknowledges only a very modest extent of rental

4      McGuire v Secretary for Justice [2018] NZSC 116 at [55], [56] and [82]; Commissioner of Inland Revenue v New Orleans Hotel (2011) Ltd [2019] NZCA 4.

income from a short-term leasing arrangement, the extent of which she claims to have been applied to the upkeep of the property.5

[29]   Daryn complains that Mrs Turvey’s conduct is directed, or at least influenced, by Mr Les Fugle, whom Daryn characterises as being determined to subvert the proper interests of the trustees and beneficiaries of the mirror trusts. Mr Fugle has featured prominently in related litigation brought by the court-appointed trustees of the Orana Trust, in relation to misadministration of a company owning a building in central Wellington on behalf of the Orana Trust. Daryn supports his distrust of Mr Fugle by reference to trenchant criticisms of him in a recent Court of Appeal decision, where he was described as deceitful and conducting himself in a manner that amounted to a serious and visible departure from the standards of fair dealing expected in the management of a company.6    That judgment describes Mr Fugle as a cousin of    Mrs Turvey, and cites examples of him denying a liability of which there was clear evidence.

[30]   Daryn cited Mr Fugle’s involvement in various of the dealings in relation to the trusts’ property and specifically cited an aside inadvertently left in the final version of a letter dated 11 November 2019 which Daryn had received from Mr Woollaston about discovery. A draft of the letter appeared to have been discussed with Mr Fugle where a statement about the proceeds of the sale of the BMW vehicle was endorsed:

[LES, DO WE HAVE ANY PAPERWORK TO PROVE THIS AT ALL – HE’LL BE SURE TO ASK FOR IT.]

This clearly supports Daryn’s concern that Mrs Turvey’s position in the proceedings is being directed, or at least influenced, by Mr Fugle.

[31]   I do not consider these competing criticisms raised by each of the trustees against the other can possibly be resolved definitively in favour of one or other of them to an extent that would justify one of them remaining as a trustee of the mirror trusts,

5      The day after the hearing, Daryn filed an unsolicited affidavit and memorandum recording that he had visited the property that day and received confirmation from occupants there that a number of them were rent-paying tenants. He deposed that they said that their tenancy had been arranged by Mrs Turvey and Glenn, who had instructed them not to disclose any details to Daryn. This contradicted the position as relayed in the assurances by Mr Woollaston during the hearing.

6      Vey Group Ltd v Vance [2020] NZCA 232 at [4], [36], [40] and [49].

subsequent to the exclusion of the other. Governance of the mirror trusts requires that they be put in the hands of a competent trustee entirely independent of both factions, with clear directions to resolve the future of the only asset, and achieve an outcome. This seems likely to involve the winding up of the trusts and distributions by the trustee in proportions reasonably decided by it, reflecting the terms of the trust deeds and conduct relevant to the value of the asset.

[32]   By the end of our exchanges at the hearing, Daryn did not oppose orders for the removal of both existing trustees, and their replacement by an appropriately competent independent trustee. He maintained his opposition to his removal if it left Mrs Turvey remaining as a trustee. I am satisfied that both existing trustees should be replaced.

[33]   As to the identity of a new independent trustee, Daryn invited consideration of Messrs Vance and Millard QC who were appointed by the Court as replacement trustees for the Orana Trust. Daryn recommended them, given their extensive involvement with the legal and factual issues arising in that related dispute, and their familiarity with the personalities involved. Mr Woollaston opposed appointment of Messrs Vance and Millard on the grounds of cost. Whilst he accepted the appropriateness of their appointment for the Orana Trust where a significant commercial building was involved, he submitted that the more modest value of the residential property in issue here did not warrant the involvement of such senior practitioners. Further, Mr Woollaston foreshadowed the prospect that Messrs Vance and Millard may have to sue the mirror trusts in their present capacity as trustees of the Orana Trust, which he submitted would present an unacceptable conflict.

[34]   Mr Woollaston advised that he had approached the Public Trust when the trusts claim was commenced and received an indication that the Public Trust would be prepared to accept a court appointment as trustee of the mirror trusts. I direct that he is to renew that invitation, on terms allowing the appropriate Public Trust personnel to consider the terms of this judgment. I do not dismiss the prospect of inviting Messrs Vance and Millard to accept appointment, but consider that Mr Woollaston’s original proposal of the Public Trust ought to be explored first. It is not unheard of for

professional trustees to sue themselves in respect of legal obligations they allegedly owe in other capacities.

[35]   Mr Woollaston is to file a memorandum within 20 working days confirming whether the Public  Trust  is  prepared  to  accept  appointment.  If  it  is  not,  then Mr Woollaston should propose an alternative independent trustee, on notice to Daryn. Assuming the Public Trust accepts appointment, or for the alternative independent trustee subsequently appointed, I make the following observations and directions.

[36]   Sale of the property appears the prudent course. It will be for the new trustee to determine whether it is prudent to borrow money for repairs or renovation to optimise the sale price. For the avoidance of doubt the trustee’s powers will extend to securing any borrowings against the property for that purpose. This judgment authorises the completion of transfer of the property from the current trustees to the new independent trustee.

[37]   The new independent trustee is also charged with reviewing the management of the mirror trusts by current trustees to assess responsibility for any impairment to its value, and is to provide a full accounting for the terms on which any letting of the property has been undertaken, and the income and expenditure related to that.

[38]   If the new independent trustee establishes to its satisfaction that one or other of the current trustees have been responsible for quantifiable diminution in value of the property, as well as or alternatively responsible for generating rental income for the property which has not been committed to its upkeep, then such amounts are to be taken into account by the trustee in settling proposals for ultimate distributions to beneficiaries of the trusts. If the new independent trustee considers it appropriate, directions may be sought from the Court on its proposals for final distribution, but it is not a requirement of these orders that such application be made.

Costs

[39]   I took Mr Woollaston to seek costs on this proceeding so long as there was an order removing one or both of the existing trustees, on any terms. The orders I have made are on terms that were not seriously opposed by Daryn and do not achieve

Mrs Turvey’s preferred outcome of remaining as a trustee, without Daryn but with a new independent trustee. In all the circumstances as I have assessed them to be, I am not persuaded that Mrs Turvey is entitled to any award of costs. The originating application was made inviting the Court to exercise its supervisory jurisdiction over conduct of trusts. The circumstances make it patently clear that relief on certain terms was appropriate, but this point has been reached in circumstances where I consider that each side should bear their own costs.

[40]There will accordingly be no order as to costs in the trusts claim.

Summary of orders

[41]Orders in the estate claim:

(a)Daryn is to remain as sole executor and trustee of the estate of the deceased and, by 29 January 2021, he is to elect whether to apply for probate of the estate;

(b)as soon as reasonably practicable, Mrs Turvey and Glenn are to account to Daryn for any assets, or the proceeds of any assets, of the estate that have been, or are, held by them;

(c)Daryn has full authority to investigate and pursue any claims he considers can validly be made out on behalf of the estate against any persons or corporate entities but only to the extent that he considers such claims can be pursued economically;

(d)there are no orders as to costs, but Daryn is entitled to reimbursement of disbursements relevantly incurred in relation to the estate claim.

[42]Orders in the trusts claim:

(a)Mrs Turvey and Daryn are removed as trustees of the mirror trusts and will be replaced by the Public Trust (if it confirms that it is prepared to

accept appointment) or by an alternative independent trustee proposed by Mr Woollaston and acceptable to Daryn;

(b)in the event of the Public Trust not accepting appointment and the parties not agreeing upon an alternative new independent trustee, they are to jointly refer their preferences to the Court for decision;

(c)the property at 227 Marine Drive, Lowry Bay is to be transferred into the name of the new trustee;

(d)the new trustee is to determine whether the property should be renovated prior to being marketed and is authorised to secure borrowings against the property for that purpose and proceed with its sale;

(e)the new trustee is to review the management of the trusts by the current trustees and form a view on any potential claims against the trustees for actions by them or on their behalf that have adversely affected the value of the trust property, or any letting of the property that has resulted in income being earned that has not been committed to maintaining the property or paying outgoings on it;

(f)in the event that the new trustee concludes that there has been such conduct adversely affecting the value of the trust property, or income not accounted for, then the new trustee is to take that matter or those matters into account in arriving at its decision on distribution, as provided for in (g) below;

(g)once the net proceeds of sale are ascertained, the new trustee is to determine the respective entitlements of the beneficiaries to portions of that amount, in terms of the trust deeds, and in that analysis the trustee is to have regard to the amounts quantified as the responsibility of any trustee or beneficiary under (f) above;

(h)there is no order as to costs.

Dobson J

Solicitors:

Dewhirst Law, Palmerston North for Mrs Turvey

Copy to:
D A Turvey