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Hutt and anor v Public Trust and anor [2006] NZCA 269 (25 September 2006)

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Hutt and anor v Public Trust and anor [2006] NZCA 269 (25 September 2006)

Last Updated: 4 October 2006

IN THE COURT OF APPEAL OF NEW ZEALAND

CA165/05

BETWEEN DYLAN ALEXANDER HUTT AND ALANA LAURA HUTT
Appellants

AND PUBLIC TRUST
First Respondent

AND PETER JOHN HOWLAND
Second Respondent

Hearing: 26 July 2006

Court: Glazebrook, Chambers and O'Regan JJ

Counsel: A N Isac and C D Na Nagara for Appellants
R Da Vanzo for First Respondent
K Lakshman for Second Respondent

Judgment: 25 September 2006 at 11am

JUDGMENT OF THE COURT

A The appeal is dismissed.

B Costs of $3,000 plus usual disbursements are awarded to each of the respondents. Liability for those costs is joint and several as between the appellants.

____________________________________________________________________

REASONS OF THE COURT

(Given by Glazebrook J)

Table of Contents

Para No

Introduction [1]
Did a debt arise at the time of the acquisition of the properties? [5]
Should we order Public Trust to institute proceedings
under the Property (Relationships) Act? [12]
Should this Court make orders requiring the executors to
make general discovery? [14]
Should Mr Howland be removed as executor? [15]
Result and costs [16]

Introduction

[1] The appellants are the two adult children of Ms Neele who tragically died of cancer in January 2003. Public Trust and Mr Howland, Ms Neele’s second husband, are the executors and trustees of Ms Neele’s estate. The beneficiaries are the appellants and Ms Neele’s and Mr Howland’s young son, E.
[2] In the High Court the appellants sought orders, among other things, removing Mr Howland from the administration of Ms Neele’s estate and directing Public Trust to investigate Mr Howland’s possible debt owing to the estate in respect of two properties acquired by Ms Neele and Mr Howland as joint tenants. This was on the basis that Ms Neele had provided the bulk of the purchase price.
[3] Goddard J held that it was not Ms Neele’s intention that any debt should arise in respect of the properties. In Goddard J’s view, the only course open to the appellants was to pursue a claim under the Property (Relationships) Act 1976. She noted that Public Trust is willing to lend its name to any proceeding under that Act, provided the appellants fund the litigation and provide a full indemnity. Goddard J considered this stance to be reasonable as it was not appropriate that the estate, limited in size as it is, should fund the proceedings.
[4] The appellants appeal against Goddard J’s decision and seek further orders from this Court. The issues that arise in this appeal are as follows:

(a) Did a debt arise at the time of the acquisition of the properties?
(b) Should this Court make orders:

(i) directing Public Trust to institute proceedings under the Property (Relationships) Act; and
(ii) requiring the executors to make general discovery of all papers in their possession and power relating to Ms Neele’s dealings with her assets between 1996 and 2002?

(c) Should Goddard J have made orders removing Mr Howland as executor?

Did a debt arise at the time of acquisition of the properties?

[5] The appellants argue that a debt must be owing to Ms Neele’s estate with regard to the two properties as she provided the bulk of the purchase price.
[6] In order to assess this submission, we must set out the facts in a bit more detail. Ms Neele separated in 1995 from the appellants’ father and, as a result of Family Court proceedings, the father agreed, on 5 April 2001, to pay Ms Neele $300,000 immediately, with further payments of $100,000 to be made on 1 August 2002 and 1 December 2003.
[7] Ms Neele had entered into a relationship with Mr Howland after separating from her husband. They subsequently married. Mr Howland has a teenage daughter from a previous relationship and Ms Neele and Mr Howland have one son, now aged seven. Ms Neele was diagnosed with cancer just after her son’s birth.
[8] On 23 August 2002 Ms Neele made her will. She left $10,000 each to the appellants. The rest of the estate was to be held on trust for E until he reaches the age of 20. There is power to apply the capital to E’s upbringing. The estate is to be divided among her three children after E turns 20.
[9] Just after making the will, Ms Neele wrote a letter confirming that she wished Mr Howland to inherit the properties through survivorship as it was important for his daughter and their son to have the best upbringing possible. She noted that the appellants were being provided for financially by their father and said that it was her primary concern that E have the best quality of life available and that Mr Howland retain the means to give him that. She also records that her mother has agreed to leave her estate to her grandchildren rather than to her. She said that she felt happy with this proposal knowing that all her children will benefit from her financially in the future. The letter was written knowing that her cancer was terminal.
[10] Public Trust filed an affidavit in this Court outlining the inquiries made of Ms Neele’s solicitor. Public Trust’s conclusion, after those inquiries and perusal of the relevant files, was that Mr Howland’s acquisition of interests in the properties should be regarded partly as recompense to him for services rendered on the properties and partly by way of gift in expectation that he would provide for the future wellbeing of their son. In coming to the conclusion it did, Public Trust was highly influenced by Ms Neele’s letter referred to at [9] above outlining her reasons for benefiting Mr Howland. Goddard J was also highly influenced by that letter when she held that no debt arose.
[11] In our view, the conclusion reached by Public Trust and Goddard J is clearly correct. There is nothing whatsoever to suggest that Ms Neele intended Mr Howland to be indebted to her or her estate with regard to the properties in question. Indeed, as Goddard J pointed out, all of the evidence was to the contrary. We refer, in particular, to Ms Neele’s letter.

Should we order Public Trust to institute proceedings under the Property (Relationships) Act?

[12] Goddard J was quite clearly correct when she held that the way forward (if any) for the appellants was under the Property (Relationships) Act. Public Trust is willing to lend its name to those proceedings (which would be brought in the Family Court) as long as it and the estate have no liability for the costs of those proceedings. That is clearly a responsible and correct stance on its behalf, given the small size of the estate and the risks to the funds for E’s upbringing should the appellants be unsuccessful.
[13] It would be quite inappropriate for us to make the order sought (even if we had jurisdiction to do so, which we doubt).

Should this Court make orders requiring the executors to make general discovery?

[14] As to the proposed discovery order, this was raised for the first time in this Court. The order sought has no connection to any of the issues on the appeal and we thus have no jurisdiction to entertain the application. This is particularly the case as discovery could only be relevant to a claim under the Property (Relationships) Act, and such a claim would be in the Family Court and not the High Court.

Should Mr Howland be removed as executor?

[15] Unless there is an enforceable claim by the executors against Mr Howland in his personal capacity or a claim is to be made against him under the Property (Relationships) Act, we accept Mr Howland’s submission that there is no conflict of interest and no reason for him to cease to be an executor. Goddard J was thus correct not to remove Mr Howland from the administration of Ms Neele’s estate.

Result and costs

[16] For the above reasons, the appeal is dismissed.
[17] Costs of $3,000 each (plus usual disbursements) are awarded to Public Trust and to Peter John Howland in respect of this appeal. Liability for those costs as between the appellants is to be joint and several.

Solicitors:
Fitzherbert Rowe, Palmerston North for Appellants
Public Trust, Lower Hutt for First Respondent

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[1]	The appellants are the two adult children of Ms Neele who tragically died of cancer in January 2003. Public Trust and Mr Howland, Ms Neele’s second husband, are the executors and trustees of Ms Neele’s estate. The beneficiaries are the appellants and Ms Neele’s and Mr Howland’s young son, E.
[2]	In the High Court the appellants sought orders, among other things, removing Mr Howland from the administration of Ms Neele’s estate and directing Public Trust to investigate Mr Howland’s possible debt owing to the estate in respect of two properties acquired by Ms Neele and Mr Howland as joint tenants. This was on the basis that Ms Neele had provided the bulk of the purchase price.
[3]	Goddard J held that it was not Ms Neele’s intention that any debt should arise in respect of the properties. In Goddard J’s view, the only course open to the appellants was to pursue a claim under the Property (Relationships) Act 1976. She noted that Public Trust is willing to lend its name to any proceeding under that Act, provided the appellants fund the litigation and provide a full indemnity. Goddard J considered this stance to be reasonable as it was not appropriate that the estate, limited in size as it is, should fund the proceedings.
[4]	The appellants appeal against Goddard J’s decision and seek further orders from this Court. The issues that arise in this appeal are as follows:

[5]	The appellants argue that a debt must be owing to Ms Neele’s estate with regard to the two properties as she provided the bulk of the purchase price.
[6]	In order to assess this submission, we must set out the facts in a bit more detail. Ms Neele separated in 1995 from the appellants’ father and, as a result of Family Court proceedings, the father agreed, on 5 April 2001, to pay Ms Neele $300,000 immediately, with further payments of $100,000 to be made on 1 August 2002 and 1 December 2003.
[7]	Ms Neele had entered into a relationship with Mr Howland after separating from her husband. They subsequently married. Mr Howland has a teenage daughter from a previous relationship and Ms Neele and Mr Howland have one son, now aged seven. Ms Neele was diagnosed with cancer just after her son’s birth.
[8]	On 23 August 2002 Ms Neele made her will. She left $10,000 each to the appellants. The rest of the estate was to be held on trust for E until he reaches the age of 20. There is power to apply the capital to E’s upbringing. The estate is to be divided among her three children after E turns 20.
[9]	Just after making the will, Ms Neele wrote a letter confirming that she wished Mr Howland to inherit the properties through survivorship as it was important for his daughter and their son to have the best upbringing possible. She noted that the appellants were being provided for financially by their father and said that it was her primary concern that E have the best quality of life available and that Mr Howland retain the means to give him that. She also records that her mother has agreed to leave her estate to her grandchildren rather than to her. She said that she felt happy with this proposal knowing that all her children will benefit from her financially in the future. The letter was written knowing that her cancer was terminal.
[10]	Public Trust filed an affidavit in this Court outlining the inquiries made of Ms Neele’s solicitor. Public Trust’s conclusion, after those inquiries and perusal of the relevant files, was that Mr Howland’s acquisition of interests in the properties should be regarded partly as recompense to him for services rendered on the properties and partly by way of gift in expectation that he would provide for the future wellbeing of their son. In coming to the conclusion it did, Public Trust was highly influenced by Ms Neele’s letter referred to at [9] above outlining her reasons for benefiting Mr Howland. Goddard J was also highly influenced by that letter when she held that no debt arose.
[11]	In our view, the conclusion reached by Public Trust and Goddard J is clearly correct. There is nothing whatsoever to suggest that Ms Neele intended Mr Howland to be indebted to her or her estate with regard to the properties in question. Indeed, as Goddard J pointed out, all of the evidence was to the contrary. We refer, in particular, to Ms Neele’s letter.

[16]	For the above reasons, the appeal is dismissed.
[17]	Costs of $3,000 each (plus usual disbursements) are awarded to Public Trust and to Peter John Howland in respect of this appeal. Liability for those costs as between the appellants is to be joint and several.