Yozin-Smith v Yozin
[2022] NZHC 2750
•26 October 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1880
[2022] NZHC 2750
BETWEEN NORMA HAZEL YOZIN-SMITH
Plaintiff
AND
ROSALIE MAY YOZIN
First Defendant
HELEN JEAN MENZIES
Second Defendant
Hearing: 15 August 2022 Appearances:
Elizabeth Heaney for the Plaintiff Melissa Allan for the Defendants
Judgment:
26 October 2022
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
This judgment was delivered by me on 26 October 2022 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Morgan Coakle (E M R Heaney/S J Telford)), Auckland, for the Plaintiff Patterson Hopkins (Luke Dixon), Auckland, for the Defendants
Counsel:
Melissa Allan, Barrister, Auckland, for the Defendants
YOZIN-SMITH v YOZIN [2022] NZHC 2750 [26 October 2022]
Introduction
[1] This judgment determines two interlocutory applications. The first application is brought by the plaintiff in these proceedings, Ms Norma Yozin-Smith. It seeks to join defendants to the proceedings.
[2] The second application is brought by Ms Rosalie Yozin and Helen Menzies, respectively being the first and second defendants in these proceedings.1 It seeks strike out or summary judgment of Norma’s second and third causes of action against them.2
Background
[3] Norma, Rosalie and Helen are the daughters of Zorka Yozin and Milan Yozin. They also have a brother, Maurice, who is not involved in these proceedings.
[4] Rosalie lived with Zorka for most of her life and became Zorka’s carer in Zorka’s later years. On 12 September 2013, Zorka appointed Rosalie her enduring power of attorney. Rosalie was also an authorised signatory on Zorka’s bank accounts.
[5] Zorka died on 12 October 2014, leaving a will dated 6 October 2011. In that will, Zorka appointed Norma, Rosalie and Helen executors of her estate. They are also the estate’s sole beneficiaries.
[6] In 2015, Maurice brought a claim against the estate under the Family Protection Act 1955. Those proceedings eventually settled in October 2018.
[7] Also after Zorka’s death, a dispute arose regarding Milan’s estate. Milan died in 1975, leaving Zorka a life interest in several lots of land in Swanson, Auckland.
1 Given the two applications, by which the parties are both variously “applicants” and “respondents”, I will at times for convenience refer to Rosalie and Helen collectively as “the defendants”. This label does not reflect any pre-determination as to whether they should be joined as defendants to the substantive proceeding in their capacities as executors of the deceased’s estate.
2 Given the near commonality of surnames in these proceedings, and meaning no disrespect, I will refer to all relevant parties by their given names.
Norma, Rosalie, Helen and Maurice were entitled to the residue of the estate in equal shares. The dispute arose because there was a proposal for the Swanson property to be sold; Rosalie and Helen wished to retain certain lots of the land, but the siblings could not reach an agreement on the value of those lots.
[8] In 2016, Rosalie and Helen brought proceedings in respect of the disputed lots. Those proceedings were unsuccessful in this Court and in the Court of Appeal. In 2020, the Supreme Court declined to grant Rosalie an extension of time to apply for leave to appeal — bringing the dispute regarding Milan’s estate to an end.
[9] Neither Milan nor Zorka’s estates have been finally distributed. Norma argues that the delay has been caused largely by Rosalie and Helen’s defence of Maurice’s Family Protection Act claim and their unsuccessful pursuit of their claim in relation to Milan’s estate.
[10] Norma has lived in the United Kingdom since 1985. In November 2012, she and her husband learned that he was terminally ill. He required around-the-clock care until he died in July 2016. Norma was also involved in litigation in that jurisdiction at the time of Zorka’s death, and continues to be involved in it. She says she therefore relied on Rosalie and Helen to provide her with information about Zorka’s estate.
[11] Norma says she became concerned about Rosalie and Helen’s actions as executors of Zorka’s estate. She also became concerned about Rosalie’s dealings with Zorka’s property during her lifetime, after Rosalie filed a third executors’ affidavit in relation to Maurice’s Family Protection Act proceedings. Norma then took steps to obtain records pertaining to Zorka’s bank accounts. She claims those records reveal a number of questionable transactions by which it appears Rosalie misappropriated Zorka’s funds for her sole benefit.
[12] Norma sought an explanation as to the suspicious transactions. Unsatisfied with Rosalie’s answer, she has brought these proceedings. She seeks that Rosalie and Helen be removed as executors of Zorka’s estate, and claims that Rosalie breached her fiduciary duty to Zorka during her lifetime and that Rosalie unduly influenced Zorka.
[13] Norma’s breach of fiduciary duty and undue influence claims are brought by way of derivative action. The defendants apply to have these causes of action struck out or for summary judgment on the basis that they are time barred.
Norma’s notice of application to join defendants
[14] Norma seeks an order that the defendants be joined to the substantive proceedings in their capacities as executors of Zorka’s estate.3
[15]The grounds on which the orders are sought are:4
(a)The plaintiff and the defendants were appointed as executors under the last will of the deceased dated 6 October 2011 which probate was granted on 21 November 2014 by the High Court at Wellington under file number CIV-2014-485-603852.
(b)The plaintiff and the defendants are also the beneficiaries of the deceased’s estate.
(c)By her statement of claim the plaintiff alleges that during the deceased’s lifetime, the first defendant misappropriated funds belonging to the deceased and that those funds would otherwise have formed part of the deceased’s estate.
(d)The beneficiaries, including the plaintiff, have a beneficial interest in the deceased’s estate and in the funds misappropriated by the first defendant being recovered by the estate.
(e)The plaintiff and the defendants, in their capacity as executors of the deceased’s estate, have a duty to protect the estate’s interest and the beneficiaries’ interests in the estate.
(f)In order to protect the estate and the beneficiaries’ interests in the estate, the plaintiff and the defendants, in their capacity as executors, ought to take all necessary steps to recover funds misappropriated by third parties during the deceased’s life time, including by the first defendant.
(g)The first defendant has not volunteered to return the funds misappropriated by her. Therefore the only option for the recovery of the funds is for proceedings to be commenced against her.
(h)The executors of the deceased’s estate may only bring proceedings if they unanimously agree to do so.
(i)The first defendant in her capacity as executor of the deceased’s estate and separately the third party who has misappropriated the
3 On notice interlocutory application to join defendants dated 1 October 2021 at [1].
4 At [2].
deceased’s funds has a conflict of interest, which makes it impossible for her to advance the claim on behalf of the estate.
(j)In these special circumstances the plaintiff, in her capacity as a beneficiary of the deceased’s estate, has standing to bring a derivative action against the first defendant for the recovery of the misappropriated funds to the estate.
(k)The common law requires that a beneficiary plaintiff bringing a derivative action against a third party must apply to join the executors of the estate as defendants to those proceedings.
Norma’s affidavit dated 30 September 2021
[16] Norma has made an affidavit in support of her application to join defendants. She deposes that she is the daughter of Zorka, and that Zorka died on 12 October 2014. She says she is an executor and beneficiary of Zorka’s estate, along with the defendants, who are her sisters. She says Zorka left a will dated 6 October 2011, to which probate was granted on 21 November 2014.5
[17] Norma says Rosalie lived with Zorka in the family home for most of her life and became Zorka’s carer as she grew elderly. Zorka authorised Rosalie to operate her bank accounts on her behalf. Norma says she became concerned about statements Rosalie made, and she accordingly obtained copies of Zorka’s bank statements and cheque details from October 2018 to January 2019. She says she discovered there were various withdrawals from the accounts that appeared to have been made by Rosalie for her sole benefit.6
[18] Norma deposes that her solicitor wrote to Rosalie on 16 September 2021, asking her to explain the withdrawals. She says she does not believe Rosalie’s explanations. Norma says further that while she has no issue with Rosalie receiving free accommodation and working the family land as a business, she is very concerned with how Zorka’s financial affairs were managed by Rosalie, and about Rosalie’s conduct as an executor of Zorka’s estate. She says she does not believe Zorka would ever have allowed her bank accounts to be so depleted that she did not have sufficient funds to pay for her own estate expenses.7
5 Affidavit of Norma Hazel Yozin-Smith in support of on notice interlocutory application to join defendants and application for directions for service dated 30 September 2021 at [1]–[5].
6 At [6]–[7].
7 At [8]–[9].
[19] Finally, Norma deposes that because the executors are unable to unanimously agree, her only option is to bring a derivative action as a beneficiary of Zorka’s estate. She says she understands that to do so she will have to apply to join executors of Zorka’s estate, being the defendants and herself, to the proceedings.8
Norma’s correcting affidavit dated 11 February 2022
[20] Norma has also made a supplementary affidavit correcting two inaccuracies in her earlier affidavit. In general terms, the first correction concerns an inaccurate description of Zorka as having been in a “coma” when Rosalie withdrew $16,000 from Zorka’s bank accounts. Norma says it would be more accurate to describe Zorka as being “in a comatose state” at this time. The second correction concerns various clarifications in respect of an apparent management agreement in place between Rosalie and the executors of her father’s estate.9
Defendants’ notice of opposition to application to join defendants
[21]The defendants oppose Norma’s application on the following grounds:10
(a)ZORKA MILKA YOZIN (“deceased”) died on 12 October 2014 leaving a will dated 6 October 2011 probate of which was granted to the plaintiff and the respondents on 21 November 2014 under CIV- 2014-485-603852.
(b)The plaintiff and the respondents are and have been administrators of the deceased’s estate at all material times since probate was granted to them.
(c)By her amended statement of claim dated 23 January 2022, the plaintiff alleges (a) breach of fiduciary duty and (b) undue influence on the part of the first respondent against the deceased during her lifetime.
(d)The plaintiff purports to sue the first respondent qua beneficiary by derivative action in right of the deceased’s estate. Derivative actions are only available where there are sufficient special circumstances to warrant departure from the ordinary rule that management of the deceased’s estate and title to sue are vested in the administrators of the deceased’s personal estate.
8 At [10].
9 Affidavit of Norma Hazel Yozin-Smith correcting her earlier affidavit dated 30 September 2021 (dated 11 February 2022) at [1]–[8].
10 Notice of opposition to application to join defendants dated 1 April 2022 at [3].
(e)The special circumstances relied on by the plaintiff do not obtain because the plaintiff was at all material times entitled to sue by virtue of her status as an administrator of the deceased’s estate and to name the first and second respondents as defendants in the statement of claim if they refused to join in commencing the proceedings qua co- administrators.
(f)Whether the proceedings were commenced by a beneficiary derivative action or by the plaintiff qua administrator, the administrators of the deceased’s estate are necessary and proper parties. The plaintiff needed to join the administrators to the proceedings from the outset. It was not necessary for the plaintiff to make a separate application for them to be joined to the proceeding qua co-administrators.
(g)Unless and until the necessary and proper parties have been joined, the proceedings are not properly constituted and cannot proceed to judgment. Improperly constituted proceedings are not effective for the purposes of stopping the limitation period(s) from running under the Limitation Act 2010.
(h)The deceased having died on 12 October 2014, the second and third causes of action’s primary period for the purposes of the Limitation Act 2010 expired no later than 12 October 2020.
(i)To the extent the plaintiff relies on a late knowledge date for the second and third causes of action (which late knowledge is denied), the plaintiff had knowledge of the facts or was reasonably able to gain knowledge of the facts said to give rise to the second and third causes of action before 3 October 2018 being the date on which she pleads and deposes to having gained access to the deceased’s bank account statements.
(j)In any event, the plaintiff either had knowledge of or was reasonably able to gain knowledge of the facts said to give rise to the second and third cause of action prior to 1 October 2018, with the effect both the primary period and the late knowledge period for those causes of action had expired before the proceedings were commenced on 1 October 2021.
(k)Where the necessary and proper parties to a proceeding have not been joined by the time the limitation period expires, the Court will not permit an amendment or adjustment to the parties that would deprive a party or potential party of an accrued limitation defence.
(l)The Application is an impermissible attempt to circumvent an accrued limitation defence and to delay the expeditious administration of the deceased’s estate and ought therefore to be dismissed.
Defendants’ interlocutory application for strike out or summary judgment
[22]The defendants seek orders:11
(a)That the second and third causes of action in the plaintiff’s amended statement of claim be struck out; and
(b)For summary judgment against the second and third causes of action in the plaintiff’s amended statement of claim; or
(c)In the alternative to 1 (a) and (b), should those orders be declined, directing a separate preliminary hearing to determine whether the second and third causes of action against the first applicant are statute-barred;
(d)If any of the orders above is or are granted, the terms on which it or they should be granted;
(e)The costs of and incidental to this proceeding be awarded to the first defendant and second defendant.
[23]The orders are sought on the general grounds that:12
(a)The respondent NORMA HAZEL YOZIN-SMITH (“plaintiff”) and the applicants ROSALIE MAY YOZIN and HELEN JEAN MENZIES in their personal capacities (together “defendants” or “first defendant” and “second defendant” separately) are the parties in the substantive proceedings CIV-2021-404-1880 (“proceedings”);
(b)ZORKA MILKA YOZIN (‘deceased”) died on 12 October 2014 leaving a will dated 6 October 2011 probate of which was granted to the plaintiff and the defendants on 11 November 2014 out of the Wellington Registry of this Honourable Court under CIV-2014-485- 603852. The plaintiff and the defendants are and have been administrators of the deceased’s estate at all material times since probate was granted to them.
[24] The defendants’ interlocutory application also particularises grounds relating to the specific sought orders, including that Norma’s fiduciary duty and undue influence claims do not disclose reasonably arguable causes of action; that there are limitation issues in respect of both claims and that the claims are improperly constituted.13
11 Interlocutory application on notice for orders striking out of second and third causes of action, for summary judgment or for a separate preliminary hearing dated 1 April 2022 at [1].
12 At [2].
13 At [2].
Helen’s affidavit dated 1 April 2022
[25] Helen has made an affidavit in support of both the defendants’ notice of opposition to Norma’s application and the defendants’ interlocutory application for strike out or summary judgment. She deposes that she opposes the application for joinder because she does not consider the substantive proceeding has any merit and is in any event time-barred. She says Zorka died in October 2014 and the distribution of her estate has been delayed long enough. She says it has not been until now that Norma has raised concerns about the amount of the estate and made the claims she now makes in these proceedings.14
[26] Helen says she supports the application for strike out or summary judgment of Norma’s claims against Rosalie. She says Rosalie looked after Zorka in the last few years of Zorka’s life. Helen says it was always clear to her that Rosalie had Zorka’s best interests at heart. She says she does not share Norma’s concerns about the propriety of Rosalie’s withdrawals. Finally, she says she is now 75 years old, in poor health and recovering from recent surgery. She says the family has been involved in disputes ever since Zorka died and that it is now time for everybody to move on.15
Rosalie’s affidavit dated 1 April 2022
[27] Rosalie has also made an affidavit in support of both the defendants’ notice of opposition to Norma’s application and the defendants’ interlocutory application for strike out or summary judgment. She deposes that Zorka’s estate is not particularly large or complicated and it has been largely converted into cash. She says that after having paid the costs of administration of the estate, and other costs and liabilities including a settlement of a Family Protection Act claim brought by Maurice, there remains around $395,854.11 in the estate. Rosalie states that other than the present proceedings, the only outstanding step to complete administration is the sale or disposal of a Toyota car, completion of final tax returns, other minor administrative matters, and distribution of the estate in terms of Zorka’s will. She says that Norma
14 Affidavit of Helen Jean Menzies in support of: 1. Notice of opposition to join defendants;
2. Interlocutory application on notice for orders striking out second and third causes of action, for summary judgment or for a preliminary hearing dated 1 April 2022 at [3]–[9].
15 At [10]–[13].
refuses to agree to distribute the estate, only delaying further the administration of a very simple estate.16
[28] Rosalie deposes that after Zorka died, the family became involved in Family Protection Act proceedings filed by Maurice against Zorka’s estate. She says the executors filed affidavits in those proceedings setting out the estate’s assets and liabilities. She says Norma had direct oversight of the affidavits and that Norma appeared to be satisfied with them. She says it was not until 21 December 2018 that Norma indicated she would not consent to the estate’s distribution. Rosalie deposes that the following December she returned home after doing her shopping to find Norma in Zorka’s old bedroom. She says Norma was crouched beside Zorka’s filing cabinet and had obviously been going through it. Norma told Rosalie that she was looking for Zorka’s powers of attorney.17
[29] Rosalie deposes that she next heard from Norma in an email of 30 March 2021. In that email, Norma stated she had not been actively prosecuting her issues with Zorka’s estate because she had a large number of other issues to deal with urgently. Rosalie says that to the best of her knowledge these other issues were disputes that Norma was pursuing against her neighbours at that time. She says Norma still refuses to allow distribution of the estate.18
[30] Next, Rosalie deposes that she received a letter from Norma’s solicitors on 16 September 2021, which queried the value of the estate and the management of Zorka’s affairs while she was alive. She says she did her best to answer the queries as comprehensively as she could within a short time frame. She deposes she did not receive a response to her answers and assumed that she had addressed all of Norma’s queries. She says, however, that Norma instead filed these proceedings on 1 October 2021, eventually serving Rosalie on 27 January 2022.19
16 Affidavit of Rosalie May Yozin in support of: 1. Notice of opposition to join defendants;
2. Interlocutory application on notice for orders striking out second and third causes of action for summary judgment or for a preliminary hearing dated 1 April 2022 at [9]–[14].
17 At [15]–[29].
18 At [30]–[32].
19 At [33]–[37].
[31] Rosalie deposes that she is astonished that, seven and a half years after Zorka’s death and probate being granted, Norma has filed proceedings alleging that she owes money to Zorka’s estate. She says she does not intend to address those allegations as they are time-barred, except to say that she unreservedly denies them. She denies there are any discrepancies between the reconciliation statements she prepared for the estate and the executors’ affidavits filed in the Family Protection Act proceedings. She says further that she does not accept that Norma was unaware of the matters on which she relies in her statement of claim before October 2018, or that Norma, as an executor, was not reasonably able to obtain that information and material before 1 October 2018.20
[32] Rosalie says she is very concerned about the legal and accounting expenses that will be incurred if she is required to address Norma’s allegations in detail. She says the costs of appointing an accountant would be considerable and unwarranted given the size of the estate and the amounts Norma is querying.21
[33] Rosalie says there is some additional relevant background to the present proceedings: the siblings were previously involved in protracted litigation over their father’s estate. She says the proceedings concerning both parents’ estates, but particularly their father’s estate, have led to an unfortunate breakdown in family relationships. She says she believes Norma’s refusal to consent to the distribution of Zorka’s estate are not due to bona fide concerns about events predating Zorka’s death, but instead because of ill-will Norma bears Rosalie following the proceedings regarding their father’s estate.22
Norma’s notice of opposition to application for strike out or summary judgment
[34] Norma opposes the defendants’ application. The grounds of opposition are many and detailed. In essence, they entail that Norma’s fiduciary duty and undue
20 At [38]–[46].
21 At [47]–[49].
22 At [50]–[56].
influence claims are properly pleaded; the claims were commenced within time; and the claims are properly constituted.23
Norma’s affidavit dated 6 May 2022
[35] Norma has made an affidavit in support of her notice of opposition to the defendants’ application. She deposes that she accepts she could have obtained the relevant bank statements from the date probate was granted, but that she did not because she had implicit trust in Rosalie and had no reason to suspect any wrongdoing by her. She says it was only on 27 September 2018, when Rosalie swore and filed an executor’s affidavit purporting to set out the assets and liabilities of Zorka’s estate, that she became concerned. It was then that she took steps to obtain Zorka’s financial information.24
[36] Norma deposes that while she wanted to pursue matters further at the time, she was unable to because of the ongoing intensive litigation by the defendants throughout 2019 in respect of their father’s estate. Despite the delay in bringing proceedings, she says she commenced them within three years from the very earliest point that she could have become aware of the defendants’ wrongdoing.25
[37] Responding to Rosalie’s affidavit of 1 April 2022, Norma says the defendants have refused to engage with her on the distribution of her share of Zorka’s personal effects. She says she agrees that Zorka’s estate is neither large nor complicated, but that its administration has been complicated by the Family Protection Act proceedings; Rosalie’s refusal to open a separate executors’ account to keep track of the estate income and expenditure; the defendants’ failure to provide her with requested information; and the defendants’ failure to engage with her regarding the valuation and distribution of Zorka’s personal effects.26
23 Notice of opposition to interlocutory application on notice for orders striking out of second and third causes of action, for summary judgment or for a separate preliminary hearing dated 9 May 2022 at [3].
24 Affidavit of Norma Hazel Yozin-Smith in support of notice of opposition to the interlocutory application for order striking out the second and third causes of action, for summary judgment or for a separate preliminary hearing and in response to the affidavits of Rosalie May Yozin and Helen Jean Menzies of 1 April 2022 (dated 6 May 2022) at [6]–[16].
25 At [17]–[24].
26 At [25]–[31].
[38] Next, Norma deposes that Rosalie withdrew $16,000 from Zorka’s bank account on the basis that the sum was a “repayment of a loan”. She says that Rosalie subsequently advised her by email that she had withdrawn a sum of $12,000. Norma says she was confused by Rosalie’s email but she did not question Rosalie at the time because she was in the midst of trying to arrange emergency accommodation for her terminally-ill husband. Norma says there should have been sufficient funds from the
$16,000 withdrawal to pay the initial estate costs, and that in spite of this Rosalie later claimed that she had paid Zorka’s funeral expenses from her own funds. She says this representation also confused her, but she again trusted Rosalie that it was correct.27
[39] Norma says the first time she was provided information as to the final balances in Zorka’s bank accounts was once the remaining funds in those accounts were deposited into a solicitor trust account. She says she was somewhat shocked to see the low total balance in the account, and that she could not understand how Zorka could have been almost financially destitute at the time of her death. While she had concerns at this time, she deposes she still did not suspect any wrongdoing on Rosalie’s part. She says she believed Rosalie and the estate’s solicitor would ensure all correct procedures were followed in the winding up of Zorka’s estate.28
[40] Norma says she has not consented to the final distribution of Zorka’s estate because she is concerned that not all of the funds belonging to the estate have been accounted for, and there has been no agreement as to the distribution of Zorka’s personal effects. She says that while she would like very much for the ongoing litigation to be ended, she takes her duties as executor and trustee of Zorka’s estate seriously and is not prepared to distribute the estate without resolving outstanding matters. She says the delays in the administration of the estate have largely been as a result of Maurice’s Family Protection Act proceedings, the defendants’ proceedings in respect of their father’s estate and the defendants’ refusal to provide her with information regarding Zorka’s estate.29
27 At [32]–[37].
28 At [38]–[45].
29 At [48]–[50].
[41] Norma deposes that after probate was granted in respect of Zorka’s will on 20 November 2014, Rosalie never sent her any invoices relating to the estate’s expenditure, apart from the funeral director’s invoice. She says Rosalie never sent her Zorka’s financial documents. She deposes that at that stage she had no reason to doubt the veracity of what Rosalie told her in respect of Zorka’s financial position. She admits to travelling to New Zealand without Rosalie’s knowledge and entering her home without consent, but says she had to do so to obtain copies of vital information. She says that information revealed to her for the first time that Zorka had not only been financially supporting Rosalie for most of her life, but had also been reimbursing Rosalie for all items she bought to maintain or refurbish the home.30
[42] Norma says she believes a total of $71,482.16 ought to be repaid to Zorka’s estate by Rosalie because during Zorka’s lifetime and either in breach of her fiduciary duty to Zorka or by undue influence of her, Rosalie paid that amount from Zorka’s accounts to herself or for her benefit. She says she is concerned about the costs she has incurred and will incur in pursuing her claim — she would not have had to incur the costs if Rosalie had provided an adequate explanation of the subject transactions.31
[43] Finally, Norma deposes that she is bringing these proceedings because of her genuine belief that Rosalie abused Zorka’s trust and confidence to benefit herself.32
Helen’s reply affidavit dated 9 June 2022
[44] Helen has made an affidavit in reply to Norma’s affidavit of 6 May 2022. She deposes to her knowledge that Zorka was very involved in her own finances and that Rosalie only assisted her to the extent necessary to overcome Zorka’s physical limitations. She says further that Norma was very well informed about Zorka’s financial position, and that she knows this because she was copied into large amounts of correspondence between Norma and Rosalie in which Norma queried small matters of financial detail.33
30 At [61]–[93].
31 At [102]–[105].
32 At [110].
33 Affidavit of Helen Jean Menzies in reply dated 9 June 2022 at [6]–[7].
Rosalie’s reply affidavit dated 9 June 2022
[45] Rosalie has also made an affidavit in reply to Norma’s affidavit of 6 May 2022. She reiterates that she categorically denies Norma’s allegations against her. She says Norma’s suspicions about her withdrawal are unfounded and that Norma well knew about the financial difficulties Zorka had experienced before her death. She says further that if Norma had genuine concerns about the state of Zorka’s finance, she had all the information she needed to undertake a review — she did not need to rely on Rosalie to provide her with Zorka’s bank account statements. Rosalie points to a range of correspondence annexed to her affidavit, which she says exemplify Norma’s “extreme fastidiousness” and comprehensive knowledge of Zorka’s estate.34
[46] Rosalie deposes that she is at a loss to explain what it was about her third executors’ affidavit, prepared in respect of Maurice’s Family Protection Act proceedings, that caused Norma to write to Zorka’s banks and seek copies of Zorka’s bank account statements. She says that affidavit dealt with transactions that occurred well after Zorka’s death. Further, Rosalie deposes that she entirely rejects the “whole thrust” of Norma’s affidavit that Rosalie was taking money out of Zorka’s account without Zorka’s knowledge. She says she never managed Zorka’s financial affairs, but instead only assisted with typing up schedules and filling in tax forms. Zorka received all her bank statements through the mail and checked them herself, without discussion with Rosalie.35
Submissions
Norma’s submissions on joinder application
[47] Ms Elizabeth Heaney, for Norma, submits that Norma is bringing the derivative claims on behalf of Zorka’s estate in her capacity as a beneficiary; the derivative claims have been filed within the limitation period and served on the defendants; where a derivative action is brought by a beneficiary of an estate it is necessary that the executors be joined as defendants; where a party is properly a plaintiff but does not consent to being joined as one the proper procedure is to apply
34 Affidavit of Rosalie May Yozin in reply dated 9 June 2022 at [4]–[18].
35 At [23]–[32].
join them as a defendant; the joinder of the executors to the derivative claims do not result in a cause of action being commenced outside of the limitation period; and there is nothing in the Limitation Act 2010 to prevent the executors being joined after the expiration of the primary or late knowledge period.36
[48] On derivative actions brought by beneficiaries, Ms Heaney submits that a beneficiary may bring a derivative proceeding on behalf of an estate on showing special circumstances. She says it is not strictly necessary for Norma to establish the special circumstances in her submissions in support of her interlocutory application, because a plaintiff may bring derivative action without first obtaining the Court’s leave. Submissions on the point would usually be dealt with in the substantive proceedings.37
[49] Notwithstanding that observation, Ms Heaney submits that the special circumstances allowing Norma to bring the derivative claims are that the beneficiaries of Zorka’s estate have a beneficial interest in the estate and in the funds allegedly misappropriated by Rosalie being recovered by the estate; the executors of Zorka’s estate have a duty to protect the estate’s interests; the executors ought to take all necessary steps to recover funds misappropriated by third parties; Rosalie denies the derivative claims and has not volunteered to return the funds; the executors and trustees of Zorka’s estate may only bring proceedings for recovery of funds if they unanimously agree to do so; Rosalie has a conflict of interest that makes it impossible for her to advance the derivative claims on behalf of the estate; and it is clear from Rosalie’s denial of the derivative claims and the defendants’ opposition to Norma’s interlocutory application that the defendants would never agree to the derivative claims being brought against Rosalie.38
[50] Next, Ms Heaney submits it is necessary for Norma to join the executors as defendants to the derivative claims and she has followed the correct procedure to do so. She says in derivative actions brought on by beneficiaries on behalf of estates, as here, the executors are not joined as defendants in the usual sense. She says that relief
36 Submissions in support of the plaintiff’s on notice interlocutory application to join defendants dated 5 July 2022 at [20].
37 At [21]–[30].
38 At [31].
is sought only against Rosalie in her personal capacity. If that relief is granted, it will need to be by way of an order in favour of the executors. In that sense, the executors stand in the position of plaintiffs rather than defendants. Ms Heaney submits it was proper in the circumstances for Norma to name Rosalie as the defendant to the derivative claims and to then apply to join Rosalie and Helen, in their capacity as executors, as defendants in her interlocutory application.39
[51] Ms Heaney submits that r 4.56 of the High Court Rules 2016 requires the joinder of the executors as defendants. She says the Court has jurisdiction to add a party if it considers the party ought to have been joined or where that party’s presence before the Court is necessary to adjudicate on and settle all questions involved in the proceeding. She says the current approach in New Zealand to the joinder of parties is liberal, especially in matters involving equitable principles. Here, she submits, the joinder of the executors as defendants to the derivative claims is not only in the interests of justice, but is also necessary. The executors’ rights will be directly affected by a judgment in the substantive proceedings. Therefore, they ought to be joined as defendants even though no relief is sought against them in that capacity.40
[52] Ms Heaney submits the substantive proceedings, including the derivative claims, were filed within the applicable limitation period and have been served on the defendants. She submits the expiration of the limitation period was 1 October 2021 at the very earliest, because the earliest start date of the primary period under the Limitation Act is 1 March 2012. She submits that was the date of the first known suspicious transaction. And she submits the latest start date of the primary period is 11 October 2014, being the date of the last known suspicious transaction. In any event, Ms Heaney submits, the relevant date for present purposes is the late knowledge date
— the date Norma either gained or ought to have reasonably gained knowledge of the acts of Rosalie upon which Norma’s derivative claims are based.41
[53] Ms Heaney says the late knowledge date here cannot be the date of probate, because while Norma was entitled to obtain the bank statements recording the
39 At [32]–[45].
40 At [46]–[52].
41 At [53]–[54].
suspicious transactions from that date, she did not at that time have those bank statements. Nor did she have any reason to suspect that Rosalie had acted in breach of her fiduciary duties to Zorka or had unduly influenced her. It was only upon Norma’s receipt of Rosalie’s third executors’ affidavit in the Family Protection Act proceedings that Norma became concerned Rosalie was not being truthful about Zorka’s financial affairs. And Norma, after requesting Zorka’s bank account records, did not receive all the relevant documentation until around 13 January 2019. For that reason, Ms Heaney says, the late knowledge date at the very earliest was 4 October 2018 — when Norma received the first of the bank statements. She submits the date should more properly be seen as sometime in late January 2019, after all banking records had been received and inspected. Accordingly, Ms Heaney submits, Norma’s substantive proceedings were commenced within the limitation period.42
[54] Next, Ms Heaney submits that the substantive proceedings were properly constituted when filed. She says it is not a requirement of the common law that executors are joined as defendants to derivative actions brought by beneficiaries at the outset, provided they are joined as defendants at some point. In any event, she submits, the joinder of the executors as defendants to the derivative claims does not result in a new cause of action being commenced outside the expiration of the limitation period. And she submits there is nothing in the Limitation Act to prevent executors being joined after the expiration of the primary or late knowledge period.43
[55] Concluding, Ms Heaney reiterates special circumstances exist which permit Norma to bring the derivative claims; it is necessary that the executors are joined as defendants to those derivative claims; Norma has followed the correct procedure to join the executors as defendants; the derivative claims have been filed within the limitation period and served on the defendants; joinder of the executors as defendants now does not result in a new cause of action being commenced after expiration of the limitation period; the Limitation Act does not, in any event, prevent parties being joined after the expiration of the limitation period; and a limitation defence is not
42 At [56]–[62].
43 At [63]–[72].
relevant to the executors if joined as defendants, because no relief is sought against the executors in the derivative claims.44
Defendants’ submissions on joinder application
[56] Ms Melissa Allan, for the defendants, submits that the reasons for the delay in the administration of Milan and Zorka’s estates are largely irrelevant for the purposes of the present interlocutory applications. But she submits that Norma’s assertions that the defendants caused the delay are factually incorrect and unsupported by the evidence. She submits that Norma’s derivative actions are defective because the executors of Zorka’s estate were not named as defendants; the defendants are sued only in their personal capacity. She says Norma has sought to cure that fundamental defect by applying for an order to join the defendants to the proceedings in their capacity as executors of Zorka’s estate.45
[57] Ms Allan submits the defendants oppose Norma’s application for joinder on the grounds that there are no special circumstances to justify a beneficiary’s derivative action, and in any event the executors should have been joined at the outset. She says the ordinary rule is that all aspects of the management of an estate, including whether to sue or defend an action, are vested in the executors. A beneficiary may sue derivatively on behalf of the estate if there are special circumstances to justify the exception. In general, the plaintiff-beneficiary must show some kind of fraud on the part of the executor, collusion between the executor and potential defendant, or a conflict of interest that prevents the executor from fairly discharging his or her duty. She submits that no such circumstances attach here: Norma could have acted in her capacity as executor without unanimity, as the act of one executor suffices to bind the estate. And the proper procedure where one of several executors refuses to join in proceedings as a plaintiff is to file a proceeding as an executor and to join the remaining executors as defendants.46
44 At [73].
45 Synopsis of submissions of first and second defendants in opposition to interlocutory application by plaintiff for joinder dated 12 July 2022 at [3]–[7].
46 At [8]–[14].
[58] Ms Allan says a beneficiary has no cause of action to sue on behalf of a deceased estate unless the special circumstances doctrine applies. She submits the standing of a plaintiff is part of the cause of action, and if standing cannot be established, the claim must be dismissed. Norma, being an executor of Zorka’s estate, was free to commence the proceedings in the ordinary way, in her capacity as executor, and to join Rosalie and Helen (in their capacities as executors) as defendants if they refused to join the proceedings as plaintiffs. There were, accordingly, no special circumstances justifying an exception to the ordinary rule. Ms Allan says Norma has no standing in her capacity as beneficiary and her derivative claims cannot succeed.47
[59] Next, Ms Allan submits that the proceeding is defective because all executors should have been named as parties at the outset. She submits r 4.56 of the High Court Rules cannot avail Norma because it relates to join a person as a plaintiff to a proceeding without consent — it says nothing about who may be joined as a defendant. She submits these proceedings are clearly defective as Norma does not have standing to bring the claim in her personal capacity and cannot now join the executors as defendants.48
[60] Turning to the limitation issues, Ms Allan submits s 53(3) of the Limitation Act applies. She says a derivative claim is, by definition, one in which the beneficiary sues in place of the estate’s personal representative. Further, she submits, the late knowledge period runs from the date on which the plaintiff had sufficient knowledge to begin investigation. On Norma’s own case, it was the receipt of the third executors’ affidavit on 27 September 2018 that caused her to begin investigating Zorka’s bank account documentation. Ms Allan says it must follow that the late knowledge period started running no later than that date.49
[61] Concluding, Ms Allan says Norma lacks standing to bring her claim in her personal capacity and her claim should be dismissed. She says further that Norma’s claims are time barred and should either be struck out or dismissed by way of summary judgment.50
47 At [15]–[21].
48 At [22]–[29].
49 At [30]–[37].
50 At [38].
Defendants’ submissions on strike out and summary judgment
[62] Ms Allan submits the defendants raise a limitation defence. The limitation period of six years expired on 12 October 2020 at the latest, but Norma’s statement of claim was not filed until 1 October 2021. Her amended statement of claim was not filed until 26 January 2022. There are no viable grounds for Norma having late knowledge.51
[63] Ms Allan submits that strike out is available to defendants pleading limitation defences. It must be clear that the claims are so untenable that they cannot possibly succeed, on the basis that the facts pleaded are assumed to be true. The Court can consider evidence both for and against the claim, so long as it does not contradict the facts in the claim.52
[64] Ms Allan submits summary judgment is available if the defendants can prove on the balance of probabilities that none of the causes of action in the statement of claim can succeed. It is not appropriate where there are disputed facts.53
[65] Ms Allan submits the derivative claims are money claims under the Limitation Act, s 12. The applicable limitation period is six years. The cause of action accrues when the last factual element required to entitle the plaintiff to relief occurs. The events giving rise to the claims could only have occurred before 12 October 2014, when Zorka was alive (having died on that date) and thus the limitation period expired no later than 12 October 2020.54
[66] Ms Allan submits that the late knowledge provisions do not apply. Zorka had knowledge of the relevant matters and it is her knowledge that is relevant.55 This is because any cause of action subsisting on a person’s death vests in his or her personal representatives, and the ordinary limitation rules apply. Section 53(3) of the Limitation Act provides that a personal representative may take advantage of any late
51 Synopsis of submissions of first and second defendants in support of: interlocutory application by first and second defendants for strike out or summary judgment of second and third causes of action in plaintiff’s amended statement of claim dated 5 July 2022 at [2].
52 At [14]–[15]
53 At [16].
54 At [18]–[20].
55 Citing the Singaporean decision Faraj v India International Insurance Pte Ltd [2022] SGHC 123.
knowledge period that the deceased could have sought to use if they had not died. Zorka had knowledge of the relevant matters (the allegedly suspicious transactions) within the primary period, so the late knowledge provision could not have been invoked. Logically, Norma should be in no better position than Zorka in relation to the claim.56 If Zorka could not have invoked the late knowledge period, the plaintiff is likewise barred from relying on it.57
[67] Ms Allan discusses the following sections of the Limitation Act in relation to the above submission. Section 53(3) provides that if a claim is taken by a personal representative invoking late knowledge, s 14 applies “as if facts that the claimant knew, or ought to have known, include any facts that the personal representative gained knowledge or, or ought to have gained knowledge of, after the time of the deceased’s death”. Section 14(2) provides that a plaintiff does not have a late knowledge period unless she proves that she neither knew nor ought to have reasonably known, all the matters referred to in s 14(1)(a)–(e). She submits that there is no case law on the interaction of ss 14(2) and 53(3).58
[68] Ms Allan submits that even if the plaintiff can rely on her personal late knowledge, the late knowledge period expired no later than 27 September 2021.59 The proceedings were not filed until 1 October 2021. The test for “ought reasonably to have gained knowledge” is set out in Driver v Radio New Zealand.60 The late knowledge period runs from the date the claimant “knows enough to make it reasonable for him to begin to investigate whether he has a case against the defendant”. Norma made extensive enquires between 2014 and 2018, so the late knowledge period should run from 27 September 2018 at the latest. Ms Allan says Norma’s own evidence is that the receipt of the Rosalie’s third executors’ affidavit made her suspicious enough to inquire with Zorka’s banks.61
56 At [22], [24], [25], [28] and [29] and [33].
57 At [33].
58 At [25]–[27].
59 At [22].
60 Driver v Radio New Zealand Ltd [2019] NZHC 2375.
61 At [34]–[38].
[69] Alternatively, Ms Allan submits, if the claim is not time barred, the proceedings are not yet properly constituted so as to stop the limitation period from running.62 Accordingly, the claims should be either struck out, or in the alternative, the subject of summary judgment. She says the defendants seek costs.63
Norma’s submissions on strike out and summary judgment
[70] Ms Heaney submits that Norma is entitled to rely on the late knowledge exception. She says there is no evidence Zorka knew of the facts forming the basis of the derivative claims at the date of Zorka’s death. Zorka was elderly and had a dependent relationship with Rosalie. She could not be taken to know that there were fraudulent transactions simply because she received her bank statements and approved the transactions on her accounts. And she submits the claim includes transactions that occurred after Zorka’s death.64
[71] Ms Heaney submits that s 53(3) of the Limitation Act does not apply because Norma is bringing the claim in her capacity as beneficiary in a derivative action. She is not “making … a claim on behalf of the deceased’s estate” under s 53(1). The authority cited by the defendants is therefore not relevant and, in any case, not binding.65
[72] Next, Ms Heaney submits that the earliest Norma gained knowledge or reasonably ought to have gained knowledge of the relevant facts was 4 October 2018, when she received copies of Zorka’s bank statements showing the suspicious transactions:
(a)Norma had limited knowledge of Zorka’s financial affairs during Zorka’s lifetime, relying on Rosalie to manage affairs.
62 At [23].
63 At [39]–[40].
64 Synopsis of plaintiff’s submissions in opposition to the defendants’ interlocutory application for order striking out second and third cause of action, for summary judgment or for separate preliminary hearing dated 12 July 2022 at [12]–[16].
65 At [11] and [17]–[18].
(b)Norma’s inquiries into Zorka’s financial affairs from December 2014 were in the course of her position as executor of the estate and because Rosalie had more intimate knowledge of Zorka’s financial information.
(c)Despite being shocked that Zorka died with less than $7,000 in her bank account, Norma reasonably relied on Rosalie’s contention that Zorka was financially stretched before her death. In general, Norma’s trust and reliance on Rosalie meant she did not reasonably suspect she had a claim against Rosalie.
(d)Norma’s involvement in previous proceedings did not give her late knowledge because her involvement was limited, nor were the proceedings on point.
(e)Rosalie’s 27 September 2018 affidavit was not sufficient to give Norma late knowledge of the claim. Norma was concerned that the affidavit was purportedly sworn on behalf of the executors without her consultation or consent. But she would not have had a reasonable suspicion at that point of breach of fiduciary duty and undue influence. Such suspicion would only have been “vague and unsupported”.
In Ms Heaney’s submission, the proceedings filed on 1 October 2021 were therefore within the late knowledge period.66
[73] In any case, Ms Heaney submits, there is clearly a factual dispute as to when Norma had or ought reasonably to have had knowledge of the material facts. Accordingly, it is inappropriate for strike out or summary judgment to be ordered.67
[74] Concluding, Ms Heaney reiterates there is no evidence Zorka had knowledge of the facts forming the basis of the derivative claims; s 53(3) of the Limitation Act does not apply; Norma is entitled to rely on the late knowledge exception; the earliest Norma gained knowledge or reasonably ought to have gained knowledge of the
66 At [19]–[29].
67 At [30].
relevant facts was 4 October 2018; the defendants have not been able to establish that Norma’s derivative claims are statute barred; and the defendants’ application for summary judgment must fail.68
Defendants’ supplementary submissions on summary judgment
[75] In supplementary submissions, Ms Allan speaks to the effect of r 5.28(3) of the High Court Rules. She submits that rule permits several causes of action to be included in one statement of claim. She submits that the rule stipulates that a plaintiff may not combine in one statement of claim a cause of against a person as an executor and a cause of action against the same person in her personal capacity, except for in certain prescribed circumstances.69
[76] Ms Allan says r 5.28(3) does not appear to have received judicial consideration in New Zealand. But she says English authorities make it clear that the rule and its predecessors were introduced to avoid difficulties arising from the rule that a plaintiff could not obtain two judgments, one de bonis propriis and the other de bonis testatoris, in one action.70
[77] Ms Allan says that in this case Norma’s amended statement of claim combines a cause of action against the defendants in their capacities as executors (the first cause of action) with claims against Rosalie in her personal capacity for acts and omissions that allegedly occurred before Zorka’s death (the second and third causes of action).
She submits the amended statement of claim is outside the scope of r 5.28(3).71
[78] Next, Ms Allan submits that Norma seeks to rely on the procedural defects in her claim to prevent the defendants from obtaining summary judgment that would be available to them but for her breach of r 5.28(3). Ms Allan says that is unjust and inequitable: a party cannot profit procedurally from her own procedural default. Especially so, in Ms Allan’s submission, in circumstances where Norma is seeking an equitable remedy. Consequently, Ms Allan submits, Norma should be put to her
68 At [32].
69 Supplementary submissions on behalf of defendants responding to plaintiff’s submissions on summary judgment and the relevance of HCR 5.28(3) dated 29 July 2022 at [1]–[9].
70 At [10]–[16]
71 At [17]–[18].
election on whether to proceed with her first cause of action or her second and third causes of action. Electing one option will necessarily require discontinuance of the other.72
[79] In summary, Ms Allan submits Norma does not have standing to bring her second and third causes of action derivatively; did have standing to bring her first cause of action but elected not to join the executors as parties in that capacity, with the effect that the first cause of action also must fail; the second and third causes of action are clearly time-barred and must be struck out or dismissed by way of summary judgment; it is no answer to the defendants’ summary judgment application that they have not applied for summary judgment on all of Norma’s causes of action; and that even if the Court is not minded to grant summary judgment or to strike out the second and third causes of action, Norma must be put to her election.73
Legal principles
Joinder
[80]Rule 4.56 of the High Court Rules provides:
4.56 Striking out and adding parties
(1)A Judge may, at any stage of a proceeding, order that—
(a)the name of a party be struck out as a plaintiff or defendant because the party was improperly or mistakenly joined; or
(b)the name of a person be added as a plaintiff or defendant because—
(i)the person ought to have been joined; or
(ii)the person’s presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
(2)An order does not require an application and may be made on terms the court considers just.
(3)Despite subclause (1)(b), no person may be added as a plaintiff without that person’s consent.
72 At [19]–[22].
73 At [23].
[81]Rule 5.28 provides:
5.28 Inclusion of several causes of action
(1)A plaintiff may include several causes of action in the same statement of claim.
(2)Despite subclause (1), claims by or against an Official Assignee in bankruptcy, or a liquidator or a receiver of a company, in that capacity, must not, without leave of the court, be joined with any claim by or against that person in any other capacity.
(3)Despite subclause (1), claims by or against an executor or administrator or trustee, in that capacity, must not be joined with claims by or against that person in a personal capacity unless those personal claims are alleged to arise with reference to the estate or trust in respect of which the person sues or is sued as executor or administrator or trustee.
Strike out
[82]Rule 15.1 provides, relevantly:
15.1 Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading[.]
[83]There are established criteria for strike out:74
(a)A strike out application proceeds on the assumption the pleaded facts are true, unless those pleaded facts are entirely speculative or without foundation.
(b)The cause of action or defence must be clearly untenable.
(c)The jurisdiction is to be exercised sparingly and only in clear cases.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law.
74 Attorney-General v Prince & Gardner [1998] 1 NZLR 262 (CA) at 267; and Couch v Attorney- General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
(e)The Court should be slow to strike out a claim in any developing area of the law, perhaps particularly where a duty of care is alleged in a new situation.
Summary judgment
[84]Rule 12.2 provides, relevantly:
12.2 Judgment when there is no defence or when no cause of action can succeed
…
(2)The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[85] As a general rule in determining summary judgment applications, the Court will refrain from attempting to resolve genuine conflicts of evidence or to assess the credibility of the parties’ statements in their affidavits. But that does not mean spurious defences or contrived factual conflicts are permitted to prevent judgment being obtained.75 A robust approach is to be taken, by which affidavits must have an aura of credibility.76
[86] The wording of r 12.2 (“may give judgment”) indicates a residual discretion in deciding whether to enter summary judgment. That approach applies equally to a defendant’s application under r 12.2(2).77
Limitation Act
[87]Section 11 of the Limitation Act provides:
11 Defence to money claims filed after applicable period
(1)It is a defence to a money claim if the defendant proves that the date on which the claim is filed is at least 6 years after the date of the act or omission on which the claim is based (the claim’s primary period).
75 Andrew Beck and others (eds) McGechan on Procedure (online ed, Thomson Reuters) at [HR12.2.08], citing Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 (HC) at 14 and Pemberton v Chappell [1987] 1 NZLR 1 (CA).
76 At [HR12.2.08], citing Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
77 At [HR12.2.11].
(2)However, subsection (3) applies to a money claim instead of subsection (1) (whether or not a defence to the claim has been raised or established under subsection (1)) if—
(a)the claimant has late knowledge of the claim, and so the claim has a late knowledge date (see section 14); and
(b)the claim is made after its primary period.
(3)It is a defence to a money claim to which this subsection applies if the defendant proves that the date on which the claim is filed is at least—
(a)3 years after the late knowledge date (the claim’s late knowledge period); or
(b)15 years after the date of the act or omission on which the claim is based (the claim’s longstop period).
[88]Section 14 continues:
14 Late knowledge date (when claimant has late knowledge) defined
(1)A claim’s late knowledge date is the date (after the close of the start date of the claim’s primary period) on which the claimant gained knowledge (or, if earlier, the date on which the claimant ought reasonably to have gained knowledge) of all of the following facts:
(a)the fact that the act or omission on which the claim is based had occurred:
(b)the fact that the act or omission on which the claim is based was attributable (wholly or in part) to, or involved, the defendant:
(c)if the defendant’s liability or alleged liability is dependent on the claimant suffering damage or loss, the fact that the claimant had suffered damage or loss:
(d)if the defendant’s liability or alleged liability is dependent on the claimant not having consented to the act or omission on which the claim is based, the fact that the claimant did not consent to that act or omission:
(e)if the defendant’s liability or alleged liability is dependent on the act or omission on which the claim is based having been induced by fraud or, as the case may be, by a mistaken belief, the fact that the act or omission on which the claim is based is one that was induced by fraud or, as the case may be, by a mistaken belief.
(2)A claimant does not have late knowledge of a claim unless the claimant proves that, at the close of the start date of the claim’s primary period, the claimant neither knew, nor ought reasonably to have known, all of the facts specified in subsection (1)(a) to (e).
(3)The fact that a claimant did not know (or had not gained knowledge), nor ought reasonably to have known (or to have gained knowledge), of a particular fact may be attributable to causes that are or include fraud or a mistake of fact or law (other than a mistake of law as to the effect of this Act).
[89]And s 53 provides:
53 Personal representative making or defending claim on behalf of deceased’s estate
(1)Personal representative, in this section and for an individual who has died (the deceased), means a person who is the executor, administrator, or trustee of, and is making or defending a claim on behalf of, the deceased’s estate.
(2)A personal representative may take advantage of 1 or more exceptions or modifications set out in this Act that would have been available to the deceased, except that a period that under section 44 does not start to run because of the claimant’s minority is treated as starting at the time of the deceased’s death.
(3)A personal representative may take advantage of any late knowledge period that the deceased could have sought to use had he or she not died and, if the personal representative does so, section 14 applies as if facts that the claimant knew, or ought to have known, include any facts that the personal representative gained knowledge of, or ought to have gained knowledge of, after the time of the deceased’s death.
(4)Section 45 applies to any incapacity of the personal representative after the time of the deceased’s death in the same way as it applies to any incapacity of the deceased before that time.
(5)A personal representative may take advantage of any discretion in section 17, 35, 36, or 50 that the deceased could have sought to use had he or she not died.
Analysis
[90]The issues to be determined in this judgment are:
(a)whether there are special circumstances allowing Norma to bring the derivative claims;
(b)whether the derivative claims are statute-barred. This issue divides into a number of subsidiary questions:
(i)has Norma followed the correct procedure to join the executors as defendants?
(ii)were the substantive proceedings filed within the limitation period?
(iii)does the joinder of Rosalie and Helen as defendants now result in a new cause of action being commenced after the expiration of the limitation period?
(c)the effect of rr 12.2(2) and 5.28(3) of the High Court Rules on the application for summary judgment; and
(d)whether a separate preliminary hearing ought to be ordered to determine the limitation issue.
[91]I deal with each of these issues in turn.
Whether there are special circumstances allowing Norma to bring the derivative claims
[92] One of the grounds upon which Ms Allan says Norma’s substantive proceedings should be struck out is that no special circumstances exist which allow Norma to bring those proceedings. Ms Heaney submits, however, that special circumstances do exist, allowing Norma to bring the derivative claim. Those circumstances are as follows:
(a)the beneficiaries of Zorka’s estate (being Norma, Rosalie and Helen) have a beneficial interest in the estate and in the funds misappropriated by Rosalie being recovered by the estate;
(b)Norma, Rosalie and Helen, in their capacity as executors of Zorka’s estate, had a duty to protect the estate’s interest and the beneficiaries’ interest in the estate;78
78 Pratley v Courteney [2018] NZCA 436, [2017] NZAR 1787 at [18].
(c)to protect the estate and the beneficiaries’ interest in it, Norma, Rosalie and Helen, in their capacity as executors, ought to take all necessary steps to recover funds misappropriated by third parties either during Zorka’s lifetime or after her death, including the funds allegedly misappropriated by Rosalie;
(d)Rosalie denies the derivative claims and has not volunteered to return the funds allegedly misappropriated by her. Therefore, the only option for recovery of those funds is for proceedings to be commenced against Rosalie;
(e)the executors and trustees of Zorka’s estate may only bring such proceedings if they unanimously agree to do so, pursuant to s 38 of the Trusts Act 2019;
(f)Rosalie in her capacity as the executor of Zorka’s estate, and separately the third party who has allegedly misappropriated Zorka’s funds, has a conflict of interest, making it impossible for her to advance the derivative claims on behalf of the estate;79
(g)it is clear from Rosalie’s denials of the derivative claims, Rosalie and Helen’s notice of opposition to Norma’s interlocutory application, and Rosalie and Helen’s own interlocutory application, that they would never have agreed to the derivative claims being brought against Rosalie.
[93] As support for the proposition that these circumstances are special circumstances allowing Norma to bring the derivative claim on behalf of the estate, Ms Heaney relies on a number of authorities as follows:
79 Ramage v Alpers HC Christchurch M467-68/97, 1 June 1999 at 7.
Nawisielski v Nawisielski
[94] In Nawisielski v Nawisielski,80 the applicant was one of the deceased’s children from his first marriage. The deceased had left his entire estate to his second wife and named her as his sole executor. She also received by survivorship a number of properties they owned jointly.
[95] On a derivative basis, the applicant lodged notices of claim under s 42 of the Property (Relationships) Act 1976 against the titles of the jointly owned properties. At the same he applied to have the respondent removed as executor on the grounds she was conflicted. An order was made appointing an independent executor in place of the wife and the applicant withdrew the caveats. The wife sought costs on an increased or indemnity basis. While the case was about the costs claim, the Court received comprehensive submissions from both parties on the merits of their respective positions. In his judgment, Associate Judge Bell referred to the provisional view he had formed as to the existence of special circumstances which would allow the beneficiary to bring a derivative action.81 He held this would include circumstances where the executor of the estate is the same person as the third party against which the estate has a claim, as in the present case.
Ramage v Alpers
[96] In Ramage v Alpers,82 the Court was considering whether an action could be brought by beneficiaries of an estate against the widow of the deceased under the Matrimonial Property Act 1963. William Young J held that a beneficiary of an estate may commence proceedings in his or her own name on behalf of the estate, providing the executor is joined as a party. His Honour held those special circumstances may arise where the executor refuses to participate in the litigation where their participation is obviously appropriate. He also held special circumstances may extend to cases where the executor has a conflict of interest which makes it difficult or impossible for a particular claim to be advanced or defended by the executors.
80 Nawisieleski v Nawisieleski [2014] NZHC 2039.
81 At [20].
82 Ramage v Alpers, above n 79.
[97] Ms Allan submits that Norma’s argument is misconceived. First, she submits that executors may act without unanimity, the act of one executor being sufficient to bind the estate. As authority for this, Ms Allan relies on Birdseye v Roythorne & Co and Fountain Forestry Ltd v Edwards.83 Ms Allan submits the proper procedure where one of several of the executors refuses to join in the proceedings as a plaintiff is to file a proceeding as executor and to join the remaining executors as defendants.84
[98] Ms Allan relies on Singapore authorities as to what amounts to special circumstances. She cites the decision in Wong Moy v Soo Ah Choy85 where the Singaporean Court of Appeal held on situations amounting to special circumstances, where:86
It may be pertinent to see whether the circumstances made it “impossible, or at least seriously inconvenient for the representatives to take proceedings”.
[99] Ms Allan also relies on the Singapore decision of Foo Jee Boo v Foo Jhee Tuang.87 In that decision, the High Court of Singapore considered whether a beneficiary could sue derivatively on behalf of the estate when he was simultaneously an executor of the estate. The ground relied by Jee Boo was that Jhee Tuang, in his capacity as co-executor of his mother’s estate, refused to join the suit against himself as sole executor of his father’s estate. The Court held that Jee Boo could only sue derivatively if there were special circumstances which made it “impossible or at least seriously inconvenient” to prosecute the claim as executor. Ms Allan submitted that the Court held that it was open, indeed obligatory, for an executor in Jee Boo’s position to commence proceedings in the ordinary way and join the uncooperative executors as defendants. It was therefore neither impossible nor inconvenient to bring proceedings in the ordinary way.
[100] By analogy, Ms Allan submits that Norma, as an executor of Zorka’s estate, was free to commence the proceedings in the ordinary way in her capacity as an
83 Birdseye v Roythorne & Co [2015] EWHC 1003 (Ch); and Fountain Forestry Ltd v Edwards
[1975] Ch 1 (Ch).
84 Ms Allan cited several authorities for this proposition at n 7 of the synopsis of submissions of the first and second defendants in opposition to interlocutory application by the plaintiff for joinder.
85 Wong Moy v Soo Ah Choy [1996] 3 SLR 398.
86 At [28]
87 Foo Jee Boo v Foo Jhee Tuang [2015] SGHC 176.
executor, and join Rosalie and Helen (in their capacities as executors) as defendants if they refused to join the proceedings as plaintiffs. She submits it was not “impossible, or at least seriously inconvenient” for Norma to have proceeded in the ordinary way. Accordingly, she submits there are no special circumstances.
[101] On these points, Ms Heaney submitted that the Singapore decisions only demonstrate the existence of other options as to how the proceedings are commenced are only among the criteria to be considered. Interestingly Ms Heaney relies on a fuller extract of the same passage from the Wong Moy decision relied on by Ms Allan (at [98]) , where the Court said:88
In our opinion, all the circumstances of the case should be considered, including the nature of the assets, the position of the personal representative and the reason for the default of the personal representative. It may be pertinent to see whether the circumstances made it “impossible or at least seriously inconvenient for the representatives to take proceedings”.
Conclusion on this issue
[102] My conclusion on this point is that Norma has an arguable case that special circumstances exist and that she is entitled to bring the derivative action on behalf of Zorka’s estate against Rosalie for the misappropriated funds. Consequently, this ground alone is insufficient to justify strike-out or summary judgment of Norma’s second and third causes of action.
Has Norma followed the correct procedure to join the executors as defendants?
[103] Ms Heaney submits that in Nawisielski v Nawisielski¸ Associate Judge Bell made it clear that where derivative actions are brought by beneficiaries, the trustees or executors of the estate must be joined as defendants.89 In coming to that conclusion, his Honour cited the decision in Roberts v Gill & Co90 where the Supreme Court of the United Kingdom considered the joinder of executors as defendants in derivative actions brought by a beneficiary. The leading judgment in that case was given by Lord Collins SCJ. Having surveyed the case law on derivative actions in detail, his
88 Wong Moy v Soo Ah Choy, above n 85, at [28].
89 Nawisielski v Nawisielski, above n 80, at [18].
90 Roberts v Gill & Co [2010] UKSC 22, [2011] 1 AC 240.
Lordship concluded in almost all instances for a derivative action by a beneficiary to succeed, it was necessary to join an executor or trustee as a defendant.91
[104] Ms Heaney submits that while his Lordship held that the executor or trustee must be joined as a defendant at the outset,92 that finding is questionable as it seemed to turn on a concern that to hold otherwise would result in abuse of the processes set out in United Kingdom legislation and procedural rules which do not apply in New Zealand. In addition, Ms Heaney says the other Law Lords did not agree that the executors needed to be joined as defendants at the outset, or made no comment on the timing of the joinder.93
[105] Ms Heaney submits therefore that it is not necessary for the derivative action brought by beneficiaries to succeed for executors to be joined as executors from the outset, provided they are joined at some point.
[106] Ms Heaney then submits that it is clear from the decision in the Roberts case, that the reason the executors must be joined as defendants is so that they are bound by the result of the proceedings. Ms Heaney refers to Lord Clarke SCJ’s judgment:94
The essential reason for the joinder of the trustee, administrator, or company as a defendant in the case of the derivative claim is in order that he or it is bound by the result of the action and entitled to receive the money recovered in the action.
[107] Ms Heaney submits that in derivative actions brought by beneficiaries on behalf of an estate, including the present case, the executors are not joined as defendants in the usual sense — that is, as a party against whom it is claimed there is a right to relief. She submits that relief is only sought against Rosalie in her personal capacity, to be paid to the estate. If that relief is granted it will need to be by way of an order in favour of the executors. In that sense, the executors stand in the position of plaintiffs rather than defendants.
91 At [69].
92 At [71].
93 See the judgments of Lord Hope DP at [83]–[84], Lord Clarke SCJ at [125] and [130] and Lord Rodger SCJ at [93]. Lord Walker SCJ made no comment on the joinder of executors.
94 Robert v Gill & Co, above n 90, at [125].
[108] Ms Heaney submits that when Norma commenced the proceedings, she was prohibited by r 4.56 from naming Rosalie and Helen as plaintiffs without their consent, and that it is clear that consent would not have been given. She then refers to the decision in Johnston v Johnston,95 where the Court considered the correct procedure to be followed where a party is properly a plaintiff but refuses to join in bringing the proceedings. That case took place in the context of a matrimonial separation where the plaintiff wife alleged that she and her husband, during their relationship, had made an oral contract with the husband’s father to purchase land from him, and that on separation the husband’s father refused to perform the oral contract. The plaintiff’s wife brought proceedings seeking a declaration that the contracts were valid and enforceable and orders for specific performance, or damages, or both.
[109] As the husband and wife were co-contractors, the obligations allegedly owed to them by the husband’s father had to be jointly enforced, but the husband refused to join the wife in bringing the proceedings. The wife commenced proceedings as sole plaintiff, naming the husband as first defendant and the husband’s father as second defendant. The husband then brought an application to be dismissed from the proceeding on the ground that he had been improperly joined as a defendant. The basis of the application was that, under what is now r 4.3(1) of the High Court Rules, the wife could not allege she had any right of relief against him.
[110] The Court dismissed the husband’s application and held that where one party would otherwise be a plaintiff, but does not consent to being one, the correct procedure is to commence proceedings against the party against whom the plaintiff seeks relief, and apply to join the unwilling defendant under what is now r 4.56, as a person:96
… whose presence before the Court may be necessary to enable the Court effectually and completely to adjudicate and settle all questions involved in the proceeding.
[111] Ms Heaney submits that the Johnston case is analogous to the present case in that any award made against the husband’s father would have to be paid to both the husband and wife as co-contractors. Similarly here, any award paid by Rosalie for
95 Johnston v Johnston [1991] 2 NZLR 608 (HC).
96 At 613.
wrongs committed against Zorka would have be paid to the executors on behalf of Zorka’s estate.
[112] Ms Allan, on the other hand, submits Ms Heaney’s argument misunderstands the requirements of joinder and the relationship between derivative proceedings and r 4.56. She refers to Nawisieleski and submits that Associate Judge Bell drew a distinction between derivative proceedings and applications under r 4.56. In derivative proceedings, provided there are special circumstances, the beneficiary can bring proceedings on behalf of the estate and must join the executor of the estate as a defendant. Ms Allan submits the plaintiff beneficiary does not need leave of the Court to either commence the claim or to join executors as defendants. She submits that leave is not required and any uncooperative executors can simply be joined as a matter of course.
[113] Ms Allan submits that while r 4.56 prohibits naming individuals as plaintiffs without consent, it does not prevent joining persons as defendants without consent. She submits that Norma’s procedural remedy was to commence proceedings in the ordinary way and to join the defendants (in their capacity as executors) as additional defendants. No application was needed under r 4.56, and r 4.56 does not amount to special circumstances.
[114] Ms Allan then goes on to distinguish the decision in Johnston v Johnston on the basis that:
(a)it was not concerned with derivative proceedings or proceedings involving executors or trustees generally;
(b)it is inconsistent with Nawisieleski, which specifically addressed derivative proceedings and held that executors may, and must, join in such proceedings as matter of course;
(c)it is inconsistent with the very long established practice in both New Zealand and overseas in relation to derivative proceedings and
executor proceedings more generally, not the least of which is the decision in Roberts.
Conclusion on this issue
[115]My conclusion on this point is that Norma had an arguable case that:
(a)Rosalie and Helen, as defendants, did not need to be joined in proceedings at the outset. The judgments of their Lordships in Roberts are sufficiently equivocal on this point that it remains arguable; and
(b)although Rosalie and Helen are joined as defendants, their position is analogous to plaintiffs in the proceedings, as no relief is claimed against them. If the proceedings are successful, an order will be made in their favour as executors of Zorka’s estate.
[116] In my view, the correctness of the manner in which Norma has commenced the proceedings and then sought to join Rosalie and Helen as defendants under r 4.56 is an arguable point. Accordingly, strike-out or summary judgment on the basis that the proceedings were defective from the outset should not be granted.
Were the substantive proceedings filed within the limitation period?
[117] Ms Heaney submits that the earliest start date of the primary limitation period under the Limitation Act is 1 March 2012, being the first known suspicious transaction. The latest start date of the primary period is 11 October 2014, being the last known suspicious transaction. Ms Heaney submits the primary knowledge period is not relevant to Norma’s claim as she would not have had knowledge of those transactions either on 1 March 2012 or 11 October 2014. On both those dates Zorka was alive and Norma had no authority to access Zorka’s accounts.
[118] Ms Heaney submits that the relevant date for the purposes of a defence under the Limitation Act is the late knowledge date, being the date Norma either gained, or ought to have reasonably gained, knowledge of Rosalie’s acts upon which the derivative claims are based, namely the suspicious transactions.
[119] Ms Heaney submits that s 53(3) of the Limitation Act, which provides that personal representatives may only rely on the late knowledge period to the extent the deceased could have, if they had lived, is not relevant to the present case because Norma brings these proceedings in her capacity as beneficiary and not as an executor. She submits that the late knowledge date cannot be the date of probate, being 11 November 2014, because although Norma was entitled to obtain the bank statements recording the suspicious transactions from that date, she did not at the time have those bank statements. Neither did she have any reason to suspect Rosalie had acted in breach of her fiduciary duties to Zorka or had unduly influenced her.
[120] Ms Heaney submits the earliest the late knowledge period could commence was 4 October 2018. This is because on 27 September 2018, the solicitors sent her a copy of the executor’s affidavit filed by Rosalie in the proceeding brought by Maurice against Zorka’s estate, purporting to set out assets and liabilities of the estate. She says it was only upon receipt of that affidavit that Norma became concerned that Rosalie and Helen had not been truthful about the deceased’s financial affairs. Ms Heaney submits it was not until 4 October 2018, when Norma received the first of the bank statements and checked the copies requested, did she have knowledge of the suspicious transactions or ought reasonably to have gained knowledge of them. Ms Heaney submits that more properly the commencement and late knowledge period should be January 2019, when Norma had received all the bank statements and had had time to review the transactions contained therein.
[121] Ms Allan, on the other hand, submits that the argument put forward by Ms Heaney (that s 53(3) of the Limitation Act is not applicable because Norma brings the proceedings as a beneficiary and not as an executor) is untenable. She submits a derivative claim is by definition one in which the beneficiary sues in place of the personal representative. It is the estate’s claim, or more properly the personal representative’s claim, which founds the action. The plaintiff-beneficiary must sue on it “warts and all”.
[122] On this point, I consider that Ms Allan is correct and s 53(3) applies. Consequently, the late knowledge section applies to Norma.
[123] Ms Allan submits that Norma is not entitled to rely on the late knowledge exception for two reasons:
(a)Zorka during her lifetime had knowledge of the matters complained of, and it is her knowledge that governs whether the late knowledge extension is available at all and, if so, on which date it began; and
(b)if Norma is able to rely on her own late knowledge then her claim, even on the best interpretation of the evidence, expired no later than 27 September 2021.
[124] Ms Allan submits a personal representative should be in no better position than the deceased herself. Support for that proposition can be found in the Singaporean decision of Faraj v India International Insurance Pte Ltd.97 The case concerned a claim by an administrator for damages arising from a motor accident in 2013. The victim later died from unrelated causes. The Court accepted that the victim had sufficient knowledge to commence his claim no later than 2014. After his death, the administrator of his estate sued, arguing that he (the administrator) did not become aware of the facts relevant to the claim until 2017 and time should run from that date. The Court held that as administrators sued as representatives only, it is not the knowledge of the personal representative that is relevant, but the knowledge of the deceased.
[125] Ms Allan submits that in this case Zorka had actual knowledge during 2013 and 2014 of the transactions on which claims are based. So, if she had not died, Zorka could not have sought to take advantage of the late knowledge period. Because Zorka could not have invoked the late knowledge period, Norma is likewise barred from relying on that extension. Ms Allan referred to a number of matters which, in her submission, indicated that during that period Zorka was administering her own affairs and knew of the transactions that were occurring in relation to her finances, including the suspicious transactions.
97 Faraj v India International Insurance Pte Ltd, above n 55.
[126] Ms Heaney, on this point, submitted that just because Zorka was aware of the transactions on her accounts did not mean she was aware of the suspicious transactions that were occurring in that period.
[127] In relation to Norma’s late knowledge, Ms Allan submits that the late knowledge period commenced on 27 September 2018 when receipt of the third executor’s affidavit by Norma caused her to begin investigating and collecting evidence. She refers to the decision in Driver v Radio New Zealand Ltd,98 where Clark J adopted the observation of Lord Nicholl in Haward v Fawcetts:99
… knowledge does not mean knowing for certain and beyond possibility of contradiction. It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice, and collecting evidence: “Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice.” In other words, the claimant must know enough for it so be reasonable to begin to investigate further.
[128]Ms Allan also submits that it is material that:
(a)Norma, although a lay person, is well-versed in legal matters and procedure as she has been involved in extended litigation in England for many years. She was also, on 27 September 2018, involved in Family Protection Act proceedings against her mother’s estate and testamentary promises proceedings against her father’s estate; and
(b)Norma was represented by very able legal advisers on 27 September 2019 and subsequently.
[129] Ms Allan refers to the decision in Perrott-Hunt (as administrator of the Estate of Vao Hunt) v Johnston100 for authority for the proposition that legal representation and/or familiarity with the legal system have been held to be relevant to the start date of a claimant’s late knowledge period.
98 Driver v Radio New Zealand Ltd, above n 60, at [32].
99 Haward v Fawcetts [2006] UKHL 9, [2006] 1 WLR 682 at [9] (emphasis added).
100 Perrott-Hunt (as administrator of the Estate of Vao Hunt) v Johnston [2018] NZHC 2568 at [34].
Conclusion on these issues
[130]My conclusions on these issues are:
(a)it is arguable that Zorka did not have sufficient knowledge of Rosalie’s suspicious transactions to exclude the late knowledge period applying to Norma;
(b)it is arguable that Norma did not have late knowledge until she had at least started receiving bank statements and reviewing transactions that occurred and which had been the subject of her suspicions. This would mean the late knowledge period commenced on 4 October 2018 and expired on 3 October 2021. The proceedings were filed on 1 October 2021, being within three years of that date.
Consequently, I am of the view that it is arguable that the proceedings were filed within the late knowledge period and accordingly the limitation defence does not justify strike-out or summary judgment in favour of Rosalie and Helen.
Does joinder of Rosalie and Helen as defendants now result in a new cause of action being commenced after the expiration of the limitation period?
[131] Ms Heaney rejects the argument that proceedings were not properly constituted when the proceedings were commenced because Rosalie, Helen and Norma had not been named as defendants in their capacity as executors at that stage. She also rejects the argument that as the proceedings were not properly constituted, they were not effective for the purposes of stopping the limitation period running under the Limitation Act.
[132] Finally, she rejects the argument that the Court should not permit executors to be joined as defendants following expiration of the limitation period where it would deprive a potential party, in this case Rosalie and Helen, of an accrued limitation defence.
[133] In answer to these arguments, Ms Heaney submits that it is not a requirement that the executors are joined as defendants to derivative actions brought by
beneficiaries at the outset. I have set out my conclusions on this issue at [115] and
[116] above.
[134] Ms Heaney submits that the joinder of executors as defendants to derivative claims does not result in a new cause of action being commenced outside the expiration of the limitation period. She submits the addition of the executors as defendants does not result in the new cause of action as no relief is sought against the executors. Nor does the addition of the executors as defendants result in a new cause of action being brought against Rosalie. The joinder of the executors as defendants simply allows them, on behalf of the estate, to receive any relief granted against Rosalie and results in them being bound by the decision.
[135] Ms Heaney submits that the purpose of the Limitation Act is to encourage claimants to make claims without undue delay, which prevents situations where defendants may not be able to properly defend causes of action because of the plaintiff’s delay. She submits no such prejudice would occur by the joinder of Rosalie and Helen as defendants in their capacities as executors in the derivative claims because:
(a)those claims have already been pleaded in the statement of claim filed on 1 October 2021 and in the amended statement of claim and derivative claims are not altered by the joinder of the executors as defendants;
(b)Rosalie and Helen are already parties to the proceedings in their personal capacities and have been served with the proceedings (including the derivative claims), and they are therefore already aware of the nature of the derivative claims; and
(c)the executors are not required to defend the derivative claims because no relief is sought against them by those claims.
[136] Next, Ms Heaney submits that the Limitation Act does not prevent the joinder of the executors as defendants following the expiration of the limitation period. She
submits there is nothing in either s 11 or s 43 that prevents executors being joined after the expiration of the primary or late knowledge period. In particular, she refers to the Maltese Cat Ltd v Doe101 where Fogarty J explained the effect of s 43 as follows:
[18] The effect of this section is to provide that, even where a limitation defence may be established, the rights upon which the claim is based are not extinguished. The Act provides for defences where the plaintiff has not been sufficiently prompt in claiming, inter alia, the monetary relief they seek. The defence does not, however, pronounce on the validity or otherwise of the claim that, but for the limitation defence, the plaintiff may have established.
[137] Ms Heaney submits the statutory limitation on bringing the proceedings is best described as providing a special defence for defendants rather than imposing a prohibition on the plaintiffs. In the present case, she submits s 43 does not prevent a claim being brought, to which a party may be joined. The effect is to potentially provide the joined party with an affirmative defence and a Court may not grant any relief against it. She submits, however, that in this case the defence would not be relevant to the executors because no relief is sought against them in their capacity as executors, but only against Rosalie in her personal capacity.
Conclusions on these issues
[138]On these issues my conclusions are:
(a)adding Rosalie and Helen as defendants after the limitation period does not create a new cause of action and is not prohibited by the Limitation Act;
(b)Norma has an arguable case that the proceedings were sufficiently constituted to be valid proceedings filed within the limitation period, and that she is entitled to the advantage of the late knowledge exception set out in s 53(3) of the Limitation Act.
101 Maltese Cat Ltd v Doe [2017] NZHC 1728, (2017) 24 PRNZ 254.
The effect of rr 12.2(2) and 5.28(3) of the High Court Rules on the application for summary judgment
[139] Norma has submitted that under r 12.2(2) of the High Court Rules, the Court may only grant the defendant summary judgment if it is satisfied that all three causes of action pleaded in the statement of claim cannot succeed. Rosalie and Helen seek summary judgment (in addition to strike-out) on the second and third causes of action against Rosalie in her personal capacity (and not the first cause of action for removal of the executors). Accordingly, Norma says that the summary judgment application cannot succeed.
[140] Ms Allan, in response in her supplementary submissions of 29 July 2022, says that:
(a)Norma’s point is only relevant if Norma is successful in her interlocutory application to have the executors joined in the proceeding (as otherwise the first cause of action cannot succeed and only the personal causes of action will remain);
(b)even if the executors are joined, Norma has improperly combined a claim against the executors with personal claims against Rosalie in breach of r 5.28(3), and cannot rely on that procedural defect to resist Rosalie and Helen’s summary judgment claim; and
(c)Norma must elect whether she wishes to proceed with the executors’ claim or the personal claim.
[141] Rule 5.28 permits several causes of action to be included in one statement of claim. That is generally the permissive rule, but it is subject to the restriction in r 5.28(3), which provides:
(3) Despite subclause (1), claims by or against an executor or administrator or trustee, in that capacity, must not be joined with claims by or against that person in a personal capacity unless those personal claims are alleged to arise with reference to the estate or trust in respect of which the person sues or is sued as executor or administrator or trustee.
[142] It is clear from r 5.28(3) that the joinder of claims against the executor in that capacity and against an executor in their personal capacity are only permissible if the alleged personal liability arose “with reference to the estate” in respect of which the defendant is sued as executor.
[143] It is common ground between Ms Heaney and Ms Allan that r 5.28(3) does not appear to have been the subject of judicial consideration in New Zealand. However, Ms Allan has referred to two relevant English cases as to the meaning of “with reference to the estate”. The first is Whitworth v Darbishire.102 In that case, the plaintiff sued the defendants as executors to enforce a contract allegedly entered into with the deceased during his lifetime. In the alternative, the plaintiff sued the defendants personally on the grounds that the defendants had, by undue influence and fraud, induced the testator to break his contract with the plaintiff. The Court held that the claims against the defendants personally were not claims which in any way affected the estate. They did not arise out of the estate at all but were causes of action which were applicable to the defendants in their personal capacity only. They had no bearing on their position as executors and they were improperly joined to the cause of action as executors.
[144] The meaning of “with reference to the estate” was also considered in the English decision of Tredegar v Roberts.103 In that case, the defendant was a tenant of the late Lord Tredegar, who owed certain rental arrears. When Lord Tredegar died, the cause of action devolved upon his executor, the plaintiff. At the same time, the plaintiff became entitled, in his personal capacity, to the late Lord Tredegar’s reversionary interest. In due course, the defendant was in arrears to the plaintiff personally. In one statement of claim, the plaintiff sued to enforce the arrears due to Lord Tredegar’s estate and those due to him personally. The defendant sought an order that the plaintiff be put to his election which claim he wished to pursue, failing which election the proceedings should be stayed or dismissed. The Court held that claims by the plaintiff personally did not arise “with reference to the estate” and could not therefore be combined in the statement of claim with the claim against the executors.
102 Whitworth v Darbishire (1893) 41 WR 317.
103 Tredegar v Roberts [1914] 1 KB 283 (KB).
The Court gave the plaintiff 14 days to make an election, with a direction that if he did not elect the proceedings would be stayed.
[145] Ms Allan submits that Norma’s amended statement of claim combines a cause of action against Rosalie and Helen in their capacity as executors (the first cause of action), with claims against Rosalie in her personal capacity for acts or omissions which allegedly occurred before Zorka’s death (the second and third causes of action). Ms Allan submits that, applying Whitworth, the causes of action arising before Zorka’s death, or before Zorka’s estate came into existence, cannot have arisen “with reference to the estate” in respect of which the first defendant was sued as executor. Therefore, the amended statement of claim is outside the rule stipulated in r 5.28(3) and accordingly Norma should be put to an election as to which action is to proceed.
[146] Ms Allan also submits that Norma should not be entitled to rely on her breach of r 5.28(3) to prevent Rosalie and Helen obtaining summary judgment.
[147] Ms Heaney has filed supplementary submissions dated 12 August 2022 in response to Ms Allan’s submissions in respect of the effect of r 5.28(3). Ms Heaney submits that the present case is distinguishable from both the Whitworth and the Tredegar cases because in each of those cases only one of the causes of action pleaded were directly in reference to the estate. The estate had no interest in the other claim
— it would only affect the plaintiff or the defendant as the case may be personally.
[148] Ms Heaney submits in the present case that the first cause of action is in reference to the estate because it concerns who is to administer it. The second and third causes of action are also in reference to the estate, because they concern loss caused to the estate (not Norma personally) as a result of the actions of Rosalie in her personal capacity. Ms Heaney further submits that if Rosalie is found to be in breach of her fiduciary duties to Zorka, and to have unduly influenced her, then those findings would be relevant to Rosalie continuing on as executor of Zorka’s estate. Ms Heaney submits therefore that all the causes of action pleaded are in reference to the estate and Norma is permitted under r 5.28(3) to bring the one proceeding. She is not required to make an election.
[149] Ms Heaney also submits that, unlike Whitworth, in the present case there is no danger of Norma recovering one judgment against the estate and one judgment against Rosalie personally for essentially the same causes of action. This is because Norma’s first cause of action and second and third causes are completely separate, seeking distinct remedies. In the first cause of action, removal of the executors is sought. In the second cause of action, an enquiry is sought. For the same reasons, unlike in Tredegar, there is no risk in the present case of funds recovered by the executors in their representative capacities being mixed with funds held in their personal capacities.
Conclusion on this issue
[150] My conclusion on this point is that Ms Heaney’s submissions are correct and the second and third causes of action against Rosalie personally are with reference to the estate. Consequently, I do not find there has been a breach of r 5.28(3), and Norma is not required to be put to any election in respect of which causes of action are to proceed.
Whether a separate preliminary hearing ought to be ordered to determine the limitation issue
[151] Ms Heaney has submitted in all the circumstances a separate hearing to determine the limitation issue would not reduce the complexity or scale of the litigation and would result instead in undue delay and cost. Ms Heaney submits that essentially the same evidence would be required for the limitation argument as the substantive proceedings.
[152] In my view, Ms Heaney is correct in her submission on this point. A preliminary hearing in respect of the limitation issue would not reduce the complexity or cost of the substantive proceedings.
Result
[153] As a result of the conclusions I have reached at [102],[115],[130], [138], [150] and [152], I am of the view that the following should be the outcome of the various applications:
(a)Rosalie and Helen should be joined as defendants in their capacities as executors, as sought in Norma’s application.
(b)Rosalie and Helen’s application for summary judgment on Norma’s second and third causes of action should be dismissed, as summary judgment cannot be given in respect of all three causes of action under r 12.2(2). In any event, Norma has an arguable position in relation to the second and third causes of action as noted below at [153](c).
(c)Rosalie and Helen’s application for strike-out of Norma’s second and third causes of action should be dismissed as Norma has an arguable case that she was entitled to bring a derivative claim, that the proceedings were properly constituted, that the correct procedure was followed to join Rosalie and Helen as defendants, and that the substantive proceedings were filed inside the relevant period required under the Limitation Act.
(d)Norma should not be put to an election on whether either the first cause of action or the second and third causes of action are to proceed, as there is no breach of r 5.28(3).
(e)A separate preliminary hearing in respect of the limitation issue should not be ordered.
Orders
[154]I make the following orders:
(a)Rosalie and Helen are joined as defendants in the proceeding in their capacity as executors of Zorka’s estate.
(b)Rosalie and Helen’s application for summary judgment against Norma in respect of Norma’s second and third causes of action is dismissed.
(c)Rosalie and Helen’s application for strike-out of Norma’s second and third causes of action is dismissed.
(d)Norma is not obliged to make an election in respect of the amended statement of claim, as between the first cause of action and the second and third causes of action.
(e)No separate preliminary hearing in respect of the limitation issue is to be held.
[155] As Norma has been successful in relation to her application to join Rosalie and Helen as defendants in their capacities as executors, and in opposing Rosalie and Helen’s application for summary judgment and strike-out, my preliminary view is that Norma is entitled to costs on a 2B basis. Counsel are directed to endeavour to agree costs but, if that is not possible, counsel for Norma is to file a memorandum as to costs within 20 working days of the date of this judgment, and counsel for Rosalie and Helen is to file a memorandum as to costs within 5 days of receipt of counsel for Norma’s memorandum.
…………………………….. Associate Judge Taylor
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