Urlich v Urlich
[2015] NZHC 1393
•19 June 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-3163 [2015] NZHC 1393
BETWEEN VINI URLICH
Applicant
AND
IVAN URLICH AS ADMINISTRATOR OF THE ESTATE OF DARINKA URLICH
Respondent
Hearing: 11 June 2015 Appearances:
A Gilchrist for the applicant
G Bogiatto for the respondentJudgment:
19 June 2015
JUDGMENT (NO. 3) OF TOOGOOD J
This judgment was delivered by me on 19 June 2015 at 3:30 pm
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
URLICH v URLICH [2015] NZHC 1393 [19 June 2015]
[1] Darinka Urlich (“Mrs Urlich”) died aged 86 on 14 May 2012, and was
survived by a son, Ivan, and two daughters, Vini and Fina. In her last will, dated
1 July 1996, Mrs Urlich directed that Ivan should have the first option to purchase her home in Herne Bay, Auckland (“the Herne Bay property”), “such option to be exercised within 12 months from the date of [her] death.” The will provided for the purchase price to be “the current market value of the property fixed as at the date the option is exercised by a registered valuer appointed by the President of the Real Estate Institute of Valuers [sic].” The will directed that Ivan, the sole executor and trustee of Mrs Urlich’s estate (“the Estate”), was to receive 50 percent of the residue and Vini and Fina were to receive 25 percent each.
[2] Vini Urlich applied to have her brother Ivan replaced as sole executor and trustee of the Estate. The application was supported by Fina and was founded on, among other things, an allegation that Ivan had improperly manipulated his late mother’s affairs by arranging for her to transfer the Herne Bay property into a family trust (“the Trust”) settled by her on 29 March 2012, only six weeks prior to her death. The beneficiaries of the Trust were Mrs Urlich (during her lifetime), Ivan, and Ivan’s unborn children. It is said that Mrs Urlich was suffering from dementia at the time of settlement of the Trust and, further, that she spoke and understood little English. Ivan denied any improper conduct on his part.
Interim judgment dated 3 March 2014
[3] In an Interim Judgment dated 3 March 2014,1 I adjourned the proceeding part-heard to facilitate an attempt by the parties themselves to resolve or otherwise narrow the issues for determination by the Court and, in any event, to allow time for the filing of further evidence and submissions. There was a brief subsequent hearing on 16 May 2014 at which Mr Gilchrist and Mr Bogiatto indicated that they were content to rely on affidavits and written submissions filed since the release of the
Interim Judgment.
1 Urlich v Urlich [2014] NZHC 348.
[4] I issued Judgment (No. 2) on 28 May 2014.2 In that judgment, I made the following orders:3
(a) Subject to order (b), the respondent is removed as the executor and trustee of the Estate of the late Darinka Urlich and the Public Trust shall henceforth be the sole executor and trustee of the Estate, this order to come into effect on 26 June 2014. In that event, orders (c) and (d) shall be of no effect.
(b) Order (a) shall not come into effect if the respondent formally undertakes, by a memorandum filed in the Court and served on the applicant’s solicitors no later than 25 June 2014, to implement the terms of the proposals set out at [26] [of Judgment (No. 2)].
(c) On behalf of the Estate, the respondent shall engage an independent accountant, nominated by the applicant and paid out of the Estate, to examine the Estate accounts, monitor the financial aspects of the winding up of the Estate, and report to the beneficiaries.
(d) The caveat registered against the title to the Herne Bay property shall be withdrawn by the applicant forthwith upon:
(i) the acceptance by the respondent of any offer to purchase made by the applicant or her sister Fina, or both, in accordance with [26](f); or
(ii) the receipt by the applicant of a cash payment under [26](g)
or [26](i).
(e) Leave is reserved to any party to apply to the Court for further orders as to the implementation of the terms of the judgment.
[5] On 4 June 2014, Ivan filed in the Court an undertaking to implement the terms of the proposals set out at [26] of the second judgment, the relevant parts of which were as follows:
(a) Ivan will give full effect to Mrs Urlich’s last will dated 1 July 1996.
(b) For accounting and administrative purposes, regardless of its ownership, the Herne Bay property shall be treated as if it was an asset of the Estate (which, with the Herne Bay property included, I refer to as “the enhanced Estate”).
(c) The report of a registered valuer on the present market value of the Herne Bay property shall be obtained as soon as is reasonably practicable from a valuer agreed to by Ivan and Vini or, in the event
2 Urlich v Urlich [2014] NZHC 1151.
3 At [36].
that they are unable to agree, by a registered valuer appointed by the
Chief Executive Officer of the Property Institute.
(d) Within 14 days of receipt of the valuer’s report, copies of the report shall be provided to Vini and Fina, together with a draft statement of accounts for all of the assets and liabilities of the enhanced Estate. The statement of accounts shall identify the net amount to be divided between the three beneficiaries of the enhanced Estate in the proportions set out in the will.
(e) Within 14 days of the receipt by them of the valuation report and draft accounts, each of Vini and Fina shall have the opportunity to submit to Ivan their proposals for the realisation of their 25 percent interest in the net value of the enhanced Estate. If Vini or Fina so wish, any such proposal may include a proposal that either or both of them would purchase the Herne Bay property on the basis of the market value determined by the valuer.
(f) If either Vini or Fina, or both of them, propose to purchase the Herne Bay property, the sale of the property shall take place on the terms contained in the standard sale and purchase agreement used by solicitors in Auckland, with settlement to occur within 30 days of receipt of the offer by Ivan, who shall accept it. The purchase price shall be the stated market value, less the share of the enhanced Estate which the purchaser or purchasers would have received following the sale of the property on the same terms to a third party and after deduction of legal fees and any adjustments for rates and insurances.
(g) ... (h) ... (i) ... (j) … (k) …
(l) As to the division of furniture, Ivan shall retain for himself two marine paintings, a mahogany wooden cabinet currently in the lounge, and the tools and boating equipment which he says are owned by him and are currently located under the house. The balance of the furniture shall be shared by Vini and Fina according to their wishes.
(m) Regarding jewellery, Ivan says the only items left are four sets of gold earrings. Each of Vini and Fina shall have a set of earrings and Ivan shall retain the two remaining sets.
(n) Ivan shall accept such further directions regarding administration of the Estate as the Court may consider appropriate, in all of the circumstances, to give effect to the will.
[6] Consequently, the orders at [36](a) of the second judgment had no effect but the orders at [36](c) and [36](d) applied.
Minute dated 9 October 2014
[7] Pursuant to leave reserved, Vini Urlich applied for further orders for the implementation of the terms of Judgment (No. 2) and there was a brief hearing on
9 October 2014 directed to written submissions which had been filed by counsel. By then, the parties had received a report, on 15 August 2014, valuing the Herne Bay property at $1.7 million.
[8] At that hearing, Mr Gilchrist confirmed his understanding that Vini was interested in acquiring the property at the valuation figure, subject to resolution of the issues of legal expenses and valuation fees, and receipt of final estate accounts. Although I accepted the force of Mr Bogiatto’s argument that the time for Vini to elect to acquire the property in terms of the timetabling in Judgment (No. 2) had passed, I considered it to be unrealistic to direct the public sale of the property in circumstances where Ivan had no interest in purchasing it and Vini wished to acquire it. After hearing from counsel, therefore, I issued a Minute the same day in which I said that I proposed to make orders as follows:
(a) Directing the parties to ensure that Mr David Ross, an independent accountant, had available all relevant financial information to complete preparation of the Estate’s final accounts, and authorising Mr Ross to make determinations as to which expenses paid out of estate funds were properly charged to the Estate and which should be charged to any beneficiary personally.
(b)Directing that, if they have not already done so, counsel should provide each other with details of their actual and reasonable fees and disbursements in relation to the proceeding.
(c) Directing Mr Ross to treat as estate expenses:
(i)the actual and reasonable legal fees and disbursements of the parties to this proceeding; and
(ii)the fees paid for the valuation reports commissioned by any party for the purposes of the proceeding.
(d)Directing Mr Ross to provide to the beneficiaries as soon as possible after receiving all relevant information and determining what expenses were appropriately charged to the estate, a final set of estate accounts.
(e) Directing that Vini should have 14 days from the receipt of the final set of accounts from Mr Ross to indicate whether she wished to acquire the Herne Bay property.
(f) If Vini elected to purchase the Herne Bay property, the terms of paragraph [26](f) of Judgment (No. 2) should apply and the Estate should then be distributed to the beneficiaries accordingly.
[9] Mr Bogiatto and Mr Gilchrist agreed at the hearing that they would take further instructions and prepare draft orders on the basis of what I had said I proposed to do. Leave was reserved to the parties to seek further directions at a telephone conference in the event that counsel were unable to agree.
Subsequent events
[10] It appears that Ivan Urlich misunderstood the purpose of my indicating that I proposed to make certain orders while reserving time for counsel to take instructions and to prepare draft orders. He seems to have thought that I was offering a tentative solution for acceptance or rejection by the parties.
[11] My use of the word “propose” may have been infelicitous and I might have made the position clearer by replacing it with “intend”. Indicating to counsel and the parties that I proposed to make the orders set out in the Minute was not simply
floating an idea for consideration by the parties. I was informing the parties of the nature of the orders that would be made and inviting counsel to draft them.
[12] After hearing from counsel on all matters which remained in dispute, including the incidence of costs, I had come to the view that the costs of all parties should be met out of the enhanced Estate. I reached that view because, although Vini had not succeeded in her application to have Ivan removed as trustee, Ivan had felt obliged to make a considerable concession by treating the Herne Bay property as an asset in Mrs Urlich’s estate, rather than insisting that it had become his sole property. Both parties, therefore, had achieved a measure of success.
[13] Nevertheless, it appears that shortly after being notified of my proposed orders Ivan insisted that he would not accept the payment of Vini’s legal costs out of the Estate. He maintained that position throughout the subsequent exchanges between Mr Bogiatto and Mr Gilchrist as to the disposition of the property and the Estate, including following receipt of Mr Ross’s final report on 3 March 2015.
[14] Mr Ross’s report sets out the financial position regarding the estate as at
28 February 2015. The total assets in the enhanced Estate, which (apart from chattels) comprised the Herne Bay property and cash, amounted to $1,747,804.63. Consistently with the indication that I intended to make an order directing Mr Ross to treat the actual and reasonable legal fees and disbursements of the parties as estate expenses, reimbursements due and payments made as shown in the financial statement included Mr Bogiatto’s fees of $63,075.72 and Mr Gilchrist’s and his instructing solicitor’s fees of $70,528.19. The net assets available for distribution amounted, therefore, to $1,578,870.28. In terms of Mrs Urlich’s Will, Ivan’s 50 percent share of the enhanced Estate would have amounted to $789,435.14, with Vini and Fina each receiving half that amount. Mr Gilchrist and Mr Bogiatto accept, however, that Mr Ross’s allocation to the beneficiaries did not include the further costs involved in administering and ultimately distributing the Estate so the figures, while indicative and close to the final figures, were not entirely accurate.
[15] As indicated, the position in October 2014 was that Ivan had declared that he was not interested in purchasing the Herne Bay property and Vini made it clear that
she wished to do so. In December 2014, Vini sold a property in Denver, Colorado the proceeds from which would enable her to purchase the Herne Bay property at the valuation figure of $1.7 million, bearing in mind that she would receive approximately $380,000 (at least notionally) from the distribution of the estate. However, when Mr Ross’s report became available it was clear that the parties were unable to achieve any agreement that the orders which were proposed in October should be made in the terms proposed, because of Ivan’s view that Vini’s costs should not be paid out of the enhanced Estate.
[16] Notwithstanding Mr Bogiatto’s submissions, I am satisfied that had Ivan not maintained his position about costs, contrary to that indicated in my Minute of
9 October 2014, the outstanding matters would have been resolved soon after
Mr Ross completed his report.
[17] Mr Bogiatto says that Vini has disqualified herself from exercising the right to purchase the Herne Bay because she failed to give notice that she intended to do so within 14 days of receiving Mr Ross’s financial statement. However, although I signalled in the October minute that it was my intention to impose that timetable, no orders were made requiring Vini to take that step within that timeframe. In any event, Vini’s intention to purchase the property at the valuation figure was known to Ivan throughout and Vini had taken steps to put herself in a position to make the purchase.
[18] As a result of the delays in implementing a resolution in the terms indicated in my Minute of 9 October 2014, the Herne Bay property has undoubtedly increased in value. Mr Bogiatto has provided the Court with a value assessment by Barfoot & Thompson Real Estate (described as a comparative market analysis) pricing it for sale purposes at between $1.9 and $2 million. Mr Bogiatto submits, therefore, that it would be inequitable to permit Vini to purchase the property at the August 2014 valuation of $1.7 million because that would give Vini a windfall of around
$200,000 – $300,000 and penalise Ivan.
[19] Mr Gilchrist counters that argument by pointing out that Vini realised her equity in her Denver property in December for the purpose of making the acquisition
of the Herne Bay property soon after, and that she has been penalised by losing the benefit of the increase in value of the Denver property.
[20] There was an exchange of correspondence between Mr Gilchrist and Mr Bogiatto in late April and early May 2015 containing proposals to resolve the continuing differences between Vini and Ivan. Vini’s initial proposal of
29 April 2015 was that she would acquire the property on a basis which required some reworking of Mr Ross’s figures and which made an allowance of $50,000 for saved real estate agent’s commission on a market sale. Mr Gilchrist maintained that position in a revised offer in May to purchase on the basis of Mr Ross’s figures but maintaining a reduction in the purchase price to reflect saved commission.
Discussion and decision
[21] Having read the correspondence between the parties’ representatives, I am satisfied that, while Ivan should not be required to accept full responsibility for the delay, matters would have been resolved more expeditiously had he not insisted, almost immediately after receiving the October 2014 minute, that he was not prepared to accept my indication that all parties’ legal costs would be met by the Estate.
[22] I propose, therefore, to make orders in this judgment which will entitle Ivan to a share of the increase in value of the property since August 2014, but not to the full extent claimed. An equitable outcome can be achieved, in my view, if the price Vini is required to pay to purchase the property is increased from the valuation figure to a sum of $1.8 million. The effect of the increase, if Vini pays that sum, will be to benefit Ivan’s share in the estate by $50,000 and to increase Vini’s and Fina’s respective shares by $25,000 each. Vini will obtain the further benefit of any increase in value over $1.8 million.
[23] As to costs, I note from Mr Ross’s financial statements that Mr Bogiatto’s fees were last brought to account by an invoice dated 4 September 2014. Mr Gilchrist’s and Mr Wood’s last invoices were dated 10 October 2014 and
13 October 2014 respectively. Ivan is entitled to have Mr Bogiatto’s fees up to and
including the latter of those two dates paid out of the Estate.
[24] The costs of the parties between 14 October 2014 and 10 June 2015 shall lie where they fall. The costs of the parties for the hearing on 11 June 2015 and for the implementation of the orders made in this judgment shall be met from the enhanced Estate, including all reasonable fees and disbursements incurred with regard to the transfer of the Herne Bay property to Vini, or the sale of the property on the open market.
[25] Vini shall have two weeks from the date of this judgment to notify Ivan, through Mr Bogiatto, whether she wishes to purchase the Herne Bay property for
$1.8 million. If not, the property is to be sold as soon as reasonably possible on the open market and the net proceeds of sale, after deduction of agent’s fees, commissions, solicitors’ fees and the usual adjustments such as for rates and insurance, shall be brought into the enhanced Estate for distribution according to the terms of Mrs Urlich’s will.
Orders
[26] I make the following orders accordingly:
(a) For accounting and administrative purposes, regardless of its ownership, the property at 7 Westwood Terrace, Herne Bay, Auckland (“the Herne Bay property”) shall be treated as if it was an asset of the Estate of the late Darinka Urlich (which, with the Herne Bay property included, is referred to in these orders as “the enhanced Estate”).
(b)Vini shall have until 5pm on 3 July 2015 to make to Ivan, by service on Mr George Bogiatto, Barrister and Solicitor, Auckland in person or by email, an unconditional offer to purchase the Herne Bay property for the sum of $1,800,000 on the terms contained in the standard sale and purchase agreement used by solicitors in Auckland, with
settlement to occur not more than 30 days after receipt of the offer by
Ivan.
(c) If an offer in terms of order (b) is served within the specified time –
(i)Ivan shall accept it as soon as is reasonably practicable after service.
(ii)The actual and reasonable legal fees and disbursements of both the vendor and the purchaser in relation to the transfer shall be borne by the enhanced Estate.
(iii)Contemporaneously with the settlement of the transfer of the property, or as soon thereafter as is reasonably practicable, the enhanced Estate shall be distributed according to the terms of the will subject to the payment of all the actual and reasonable fees and disbursements of all parties, from 11 June 2015, out of the enhanced Estate.
(d)If an offer in terms of order (b) is not served within the specified time –
(i)The Herne Bay property shall be listed forthwith, for sale by public auction, with a reputable firm of real estate agents in the Ponsonby/Herne Bay area, at a reserve set by Ivan after taking the advice of the listing agent. Any party may bid at the auction and acquire the property.
(ii)As soon as is reasonably practicable following settlement of the sale of the Herne Bay property at auction or, in the event the property is passed in, by negotiation thereafter, and after deduction of agent’s commission and sale costs, legal fees, and usual adjustments such as for rates and insurances, the enhanced Estate shall be distributed according to the terms of
the will, subject to the payment of all the actual and reasonable fees and disbursements of all parties from 11 June 2015 out of
the enhanced Estate.
Costs
[27] I make the following costs orders:
(a) Mr Bogiatto’s actual and reasonable fees and disbursements up to and
including 13 October 2014 shall be paid out of the enhanced Estate.
(b)The costs of the parties between 14 October 2014 and 10 June 2015 shall lie where they fall.
(c) The actual and reasonable costs and disbursements of the parties for the hearing on 11 June 2015 and for the implementation of the orders made in this judgment shall be met from the enhanced Estate, including all reasonable fees and disbursements incurred with regard to the transfer of the Herne Bay property to Vini, or the sale of the property on the open market.
Leave reserved for further directions
[28] The parties shall have leave to apply to the Court on notice for such further directions or orders as may be necessary or desirable to give effect to the orders made at [26] and [27]. The Registrar shall refer any such application to me for consideration in the first instance.
……………………………
Toogood J
0
2
1