Bupa Care Services NZ Ltd v Gillibrand [2013] NZHC 2086; [2013] 3 NZLR 701 (16 August 2013)

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IN THE HIGH COURT OF NEW ZEALAND WHANGREI REGISTRY

CIV 2012-488-557 [2013] NZHC 2086

IN THE MATTER OF the Administration Act 1969

BETWEEN BUPA CARE SERVICES NZ LTD Applicant

AND CHRISTIAN JOHN GILLIBRAND Respondent

CIV 2013-488-361

BETWEEN BUPA CARE SERVICES NZ LTD Plaintiff

AND CHRISTIAN JOHN GILLIBRAND in his capacity as the Exectuor of the Estate of the Late Gordon John Gillibrand Defendant

Hearing: 14 August 2013

Counsel: A N Isac and R M Vokes for Bupa Care Services NZ Ltd

A Holgate for Mr Gillibrand

Judgment: 16 August 2013

_{JUDGMENT OF HEATH J}

This judgment was delivered by me on 16 August 2013 at 10.00am pursuant to Rule

11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Gibson Sheat, Wellington Swanepoel Law, Whangarei Counsel:

_{A Holgate, Whangarei}

BUPA CARE SERVICES NZ LTD v GILLIBRAND [2013] NZHC 2086 [16 August 2013]

Background

[1] Bupa Care Services NZ Ltd (Bupa) operates the Kauri Coast Rest Home and Hospital in Dargaville. Between May 2003 and April 2009, the late Mr Gordon Gillibrand was resident in that facility. Mr Gillibrand died there on 15 April 2011.

[2] At the time of the late Mr Gillibrand’s death, the sum of $51,759 was owing to Bupa. There is no dispute that that amount has been calculated correctly in terms of the contractual arrangements in place. Nevertheless, the executor of the deceased’s estate, Mr Christian Gillibrand (his son) has denied liability for the debt and puts forward an unliquidated equitable set-off (that may, or may not, also become a counterclaim) on the basis that (among other things) Bupa’s treatment of his father was inhumane, and/or “wrongly caused Mr Gillibrand senior’s death”. No sufficient evidential foundation has yet been laid to support those serious allegations.

[3] The estate has only one asset. It is a debt owed by Mr Christian Gillibrand, in his capacity as a trustee of the Chris and Mary Gillibrand Family Trust (the Trust). That Trust had acquired a farm property, at Hoanga and Hillstone Roads in Dargaville, as part of a transaction whereby Mr Gillibrand senior loaned the money ($505,000) to enable the purchase to be effected. As a result of the arrangement, the (then) trustees of the Trust were liable to repay the debt, on demand.

[4] There are two proceedings before me:

(a) Bupa seeks an order removing Mr Christian Gillibrand as executor of the estate, on grounds of conflict of interest and hostility.¹

(b) Bupa sues to recover the debt from the estate.² Judgment is sought in the sum of $51,759.57, together with contractual interest at the rate of

10% per annum on unpaid daily care fees from 4 June 2013 to the date of judgment.

_{It is only the first of those that requires determination, at this stage.}

¹ _{CIV-2012-488-557.}

² CIV-2013-488-361.

[5] There are incidental applications relating to admissibility of evidence and discovery of documents, as well as an application by Mr Gillibrand to stay the removal proceeding pending determination of Bupa’s claim in debt. At the conclusion of argument, Mr Holgate, for Mr Christian Gillibrand, accepted that those applications did not need to be advanced further. They are each dismissed.

Legal principles

[6] Jurisdiction for this Court to remove an executor stems from s 21 of the

Administration Act 1969. Section 21(1)–(3) provide:³

21 Discharge or removal of administrator

(1) ... where it becomes expedient to discharge or remove an administrator, the Court may discharge or remove that administrator, and may if it thinks fit appoint any person to be administrator in his place, on such terms and conditions in all respects as the Court thinks fit.

(2) The administrator so removed or discharged shall, from the date of that order, cease to be liable for acts and things done after that date.

(3) Upon any administrator being discharged or removed as aforesaid (whether or not any other administrator is appointed) all the estate and rights of the previous administrator or administrators which were vested in him or them as such shall become and be vested in the continuing administrator or administrators (including any administrator appointed under subsection (1) of this section) who shall have the same powers, authorities, discretions, and duties, and may in all respects act, as if he or they had been originally appointed as the administrator or administrators.

[7] “Expedience” is a lower threshold than necessity, and imports considerations of suitability, practicality and efficiency. While relevant, misconduct, breach of trust, dishonesty or unfitness need not be established to obtain an order.⁴ Hostility is another factor, though it is usually something that arises as between administrators/trustees and beneficiaries.⁵

[8] The circumstances in which a Court will remove an administrator were explained by Myers CJ, delivering the principal judgment of the Court of Appeal in

³ The term “administrator” in s 21 of the Administration Act 1969 is defined to include an

_{executor: s 2.}

⁴ Harsant v Menzies [2012] NZHC 3390 at para [55]. See also, Farquhar v Nunns [2013] NZHC

_1670.

5. Crick v McIlraith [2012] NZHC 1290 at para [16](d) and Harsant v Menzies [2012] NZHC 3390 at para [57](d)

Hunter v Hunter.⁶ The Chief Justice said that it was necessary to consider relevant issues in a “macroscopic and not microscopic fashion”.⁷ The Court must keep in mind that the removal jurisdiction is ancillary to its principal duty to ensure that an estate is properly administered.⁸

[9] In Hunter v Hunter,⁹ in the context of the particular facts before the Court, Myers CJ expressed the relevant principles as follows:

... As I understand the principle, it is sufficient if the evidence shows, (i) that there is a conflict between interest and duty; (ii) that the trustees have failed to recognize this conflict and to take steps to ensure that their interest should not prevail as against their duty, and have disregarded the interests of the infant cestui que trust; and (iii) that a state of hostility exists between the trustees and the immediate possessor of the trust estate which is calculated to work against the true interests of the estate. ....

[10] While the authorities all seem to deal with cases involving hostility among beneficiaries, the obligations of an executor are also owed to creditors. For example, in the present case, the Will of the late Mr Gillibrand contains the following standard clause:

4. I GIVE DEVISE AND BEQUEATH all the rest of my property both real and personal of whatsoever kind and nature and wheresoever situate or over which I may have any power of appointment or of disposition unto my trustee UPON TRUST in his absolute discretion to sell call in and convert into money such part or parts of my estate as shall not already consist of money and out of the proceeds of such sale calling in and conversion together with my reading moneys:

(a) to pay all my just debts funeral and testamentary and reasonable graveyard expenses and all duties upon the whole of my dutiable estate and all other proper taxes and charges upon the whole of my estate.

(b) to hold and stand possessed of all the rest residue and remainder of my said [property (hereinafter called “my residuary estate”) UPON TRUST for my son the said CHRISTIAN GILLIBRAND absolutely.

_{(emphasis added)}

⁶ _{Hunter v Hunter [1938] NZLR 520 (CA).}

⁷ Ibid, at 528, adopting what was said by Viscount Haldane in Great Western Railway Co v

_{Owners of SS “Mostyn” [1928] AC 57 (HL) at 62.}

⁸ _{Ibid, at 529.}

⁹ Hunter v Hunter [1938] NZLR 520 (CA) at 530.

[11] In Re Tankard,¹⁰ Uthwatt J was asked to consider whether an executor had a duty to pay debts of a testator within one year from his death. Although holding against that proposition, the Judge said:¹¹

... Apart from any provisions contained in the will of a testator which expressly or impliedly deal with the payment of the debts, it is the duty of executors, as a matter of the due administration of the estate, to pay the debts of their testator with due diligence having regard to the assets in their hands which are properly applicable for that purpose, and in determining whether due diligence has been shown regard must be had to all the circumstances of the case. It was contended by the defendants that this was not a duty which was owed to beneficiaries. In my opinion, this contention is not correct. The duty is owed not only to creditors, but also to beneficiaries, for the ultimate object of the administration of an estate is to place the beneficiaries in possession of their interest and that object cannot be fully achieved unless all debts are satisfied. ...

(emphasis added)

[12] Execution of the terms of a Will includes ascertainment of valid debts and payment of them before the net value of the estate is distributed to beneficiaries. In that sense, a putative creditor (such as Bupa) is entitled to receive the same even- handedness of treatment as must be given by an executor to beneficiaries of the estate.

[13] Although in Farquhar v Nunns,¹² I declined to remove executors and trustees of a deceased estate (the testator’s daughters) who were also sole beneficiaries, in the face of claims by his wife, I was satisfied that they had been undertaking administration of the estate competently. Proper execution of the terms of the Will was not at risk.¹³ Farquhar v Nunns can be distinguished from the present case.

The competing contentions

[14] Mr Isac, for Bupa, submits that Mr Christian Gillibrand should be removed as an executor because:

(a) He is in a position of conflict, between duty and self interest. On the one hand, his duty as an executor is to pay out those debts that are

¹⁰ _{Re Tankard; Tankard v Midland Bank Executor and Trustee Co Ltd [1942] 1 Ch 69 (ChD).}

¹¹ _{Ibid, at para 72.}

¹² _{Farquhar v Nunns [2013] NZHC 1670.}

¹³ Ibid, at para [38].

owing and not to take steps to avoid payment of sums properly owed by the estate.

(b) On the other hand, if the debt were accepted, he would be required to

claim the debt from the Trust, in order to extinguish Bupa’s claim.

(c) The nature of the allegations made by Mr Christian Gillibrand in opposition to the removal application¹⁴ are scandalous in nature and reinforce both hostility towards Bupa and his inability to perform tasks as an executor, in a neutral manner.

[15] Mr Holgate accepts that there is a state of hostility between the executor and Bupa but emphasises, in terms of authorities to which I have referred, that none exists between administrator and beneficiary. Without Bupa’s intervention, he submits, as executor of the estate and its sole beneficiary, Mr Gillibrand would have had the ability to forgive the debt owed by the Trust to the estate.¹⁵

[16] In short, Mr Holgate contends that the hostility that exists between Bupa and Mr Gillibrand does not justify exercising a power conferred on the Court as part of its supervisory jurisdiction over estates.

Analysis

[17] I accept Mr Isac’s submission that the jurisdiction to remove is more broadly based than that for which Mr Holgate contends. That is emphasised by the breadth of the term “expedient”, as identified in the earlier authorities.¹⁶ The question is whether, in the circumstances disclosed in this case, Mr Christian Gillibrand has a conflict between his personal interests (to resist payment of the Bupa debt) and his duties as an executor (to pay valid debts owing to third parties).

[18] One of the important components of an executor’s duty is to act

_{independently and impartially. Another way of putting that is to say that he or she}

¹⁴ _{See para [2] above.}

¹⁵ _{There is also a factual issue as to whether that has already occurred.}

¹⁶ See paras [7] and [8] above.

should be even-handed in its administration. Those concepts dictate a dispassionate review of information coming into the possession of the executor when determining if a claim against the estate should be accepted. There is no room for emotion or personal interest to cloud an executor’s judgment.

[19] The authorities suggest strongly that where there is a conflict between the duty of an administrator and the beneficiaries, removal is likely.¹⁷ In Crick v McIlraith,¹⁸ Associate Judge Osborne observed that “hostility as between administrators or trustees and their beneficiaries is not of itself a reason for removal”. His Honour added that such hostility would “assume relevance if it

_{prejudices the interests of the beneficiaries”.}¹⁹ _{In this case, the issue involves a}

creditor, rather than a beneficiary. However, as can be seen from the terms of the late Mr Gillibrand’s Will, the obligation to pay debts rests on the executor.²⁰

[20] In this particular case, in deciding whether to pay Bupa’s debt, Mr Gillibrand is (understandably) influenced in his decision-making by his view (which I take, for present purposes, to be honestly held) that the standard of care that his father received at the rest home had an impact on his death. In addition, he acknowledges a state of hostility towards Bupa, evidenced, in part, by the nature of the claims he has

made.²¹

[21] In my view, Bupa has made out a case for removal because:

(a) A removal order is required to ensure that the estate is properly administered.²² An executor is required to execute the terms of the Will. The late Mr Gillibrand’s Will requires all debts of the estate to

_{be paid before distributions are made to beneficiaries.}²³

¹⁷ For example, Farnsworth v Farnsworth HC Auckland M1767/97, 12 January 1999 (HC); Re

_{O’Reilly (1992) 9 PRNZ 51 (HC); Harvey v Harvey HC Auckland CP736/95, 10 June 1996.}

¹⁸ _{Crick v McIlraith [2012] NZHC 1290.}

¹⁹ _{Ibid, at para [16](d).}

²⁰ _{See cl 4(a) of the Will, set out at para [10] above.}

²¹ _{See para [2] above.}

²² _{See para [8] above.}

²³ See para [10] above.

(b) An independent and impartial mind must be applied in assessing whether a debt is validly claimed. Decision-making should not be clouded either by emotional or (personal) financial considerations.

(c) Mr Gillibrand’s ability to bring an independent mind to the question whether the debt is valid is questionable, to say the least. He has strongly held views (not presently substantiated in any meaningful way) about the impact of Bupa’s care on his father, believing it was causative of death. He also has financial interests to protect; both as sole beneficiary of the estate and the trustee (and beneficiary) of a Trust, a debt from which is the only source from which money could be recovered to pay Bupa.

(d) In any event, even if the Bupa claim were permitted to proceed to trial, with Mr Gillibrand defending it on behalf of the estate, a successful claim would undoubtedly require Mr Gillibrand to retire as personal representative, given that he would need to sue himself to recover any debt owed by the Trust. Questions have also been raised about whether that debt was forgiven by Mr Gillibrand senior. They too require independent consideration.

[22] The nature of those factors mean, in my view, that an independent executor is required to administer the estate.

[23] The remaining question relates to the appointment of a replacement executor. I do have some concerns about the appointment of Public Trust, given its prior involvement in relation to ascertainment of whether a debt was owing. The inquiries made were not as fulsome as I would have expected, even though the precise brief from the Court was addressed.

[24] During the course of the hearing, I sought comment from counsel on the possibility of appointment of Mr Stuart Henderson, a senior lawyer in Whangarei with experience in trusts and estates, to act as executor, if I were to make an order removing Mr Christian Gillibrand. Both counsel supported that. Subsequently, the

Registrar has made inquiries with Mr Henderson and has ascertained that he is able to act. I thank him for agreeing to do so.

[25] I have no doubt that Mr Henderson will take proper steps to determine whether there is any basis for the estate to challenge the Bupa debt, on the basis of an unliquidated equitable set-off or counterclaim. If the debt were accepted, Mr Henderson could also determine what steps to take to get any remaining assets to meet the liability.

Result

[26] For those reasons:

(a) I make an order under s 21 of the Administration Act 1969 removing Mr Christian Gillibrand as executor of the estate of the late Mr Gordon Gillibrand.

(b) I make an order appointing Stuart McDonald Henderson of

Whangarei, Barrister and Solicitor, as executor in his place.

(c) The ancilliary applications in respect of admissibility of evidence, discovery and stay of the removal application pending determination of Bupa’s claim in debt are dismissed.

[27] So far as the debt proceeding is concerned,²⁴ the Registrar shall set it down for a case management conference before an Associate Judge on the first available date after 27 September 2013. That will provide some time for Mr Henderson to make inquiries into the merits of the conflicting claims before the conference is held.

[28] I was asked to reserve costs. I do so. The Registrar shall allocate a telephone conference before me at 9am on the first available date after 11 October 2013 to hear

_{from counsel on costs. Any memorandum in support of a costs claim shall be filed}

²⁴ CIV-2013-488-361.

and served on or before 20 September 2013. Any memorandum in opposition shall

_{be filed and served on or before 8 October 2013.}

_{P R Heath J}

Delivered at 10.00am on 16 August 2013