Love v Batterton [2013] NZHC 742 (12 April 2013)

Last Updated: 9 May 2013

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-2385 [2013] NZHC 742

IN THE MATTER OF The Estate of Olive Elsie Barnes

BETWEEN CHERYL ANNE LOVE Plaintiff/Applicant

AND KAY BATTERTON Defendant/Respondent

AND CRAIG ANTHONY BARNES Third Party

Hearing: 25 March 2013

Appearances: R S Pidgeon for Plaintiff/Applicant

No appearance for the Defendant/Respondent

E St John for the Third Party

Judgment: 12 April 2013

_{RESERVED JUDGMENT OF PRIESTLEY J}

This judgment was delivered by me on Friday 12 April 2013 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:...............................

Counsel/Solicitors:

R S Pidgeon, Pidgeon Law, Auckland. Email: [e-mail]

E St John, Barrister, Auckland. Email: [e-mail]

LOVE V BATTERTON HC AK CIV-2012-404-2385 [12 April 2013]

Introduction

[1] The applications before the Court are unusual.

[2] In essence the plaintiff/applicant (Mrs Love) wants to sue her brother, the third party (Mr Barnes), because she considers Mr Barnes needs to be held to account for alleged irregularities in the administration of the affairs of their late mother, Olive Elsie Barnes (the deceased).

[3] Mr Barnes was never the executor or trustee of the deceased’s estate. That role was performed by an Auckland practitioner, Phillip Batterton, who is now dead. The defendant, Kay Batterton, is Mr Batterton’s widow and executrix of his estate. Mrs Love does not, however, intend to pursue any remedies against Mrs Batterton and indeed seeks an order under r 4.56(1)(a) of the High Court Rules that Mrs Batterton be removed as a defendant.

[4] So in essence Mrs Love is not seeking relief against the executor of the deceased’s estate nor is she making any claim arising out of the division and distribution of the estate. Rather she is focusing on the actions of Mr Barnes whilst the deceased was alive. Procedurally, therefore, Mrs Love wishes to step into the shoes of the deceased’s executors and bring a claim against Mr Barnes whose position, it is alleged, was akin to an executor de son tort.

Background

[5] The deceased died in May 2006 aged 90. Her husband, Harold Barnes, died in 1987. The couple had three children being Mrs Love, Mr Barnes, and Gayle Patricia Leybourne who died in November 2011.

[6] The deceased’s will dated 4 May 2001 was unremarkable. It appointed Mr Batterton as sole executor and trustee. Except for a bequest of an engagement ring to a granddaughter, the estate was bequeathed to the three children in equal shares with the normal gift over to surviving issue if a child predeceased.

[7] The evidence, understandably perhaps, does not deal comprehensively with the relationship between the deceased and her three children. Nonetheless there is sufficient to infer the deceased enjoyed a good relationship with her only son, Mr Barnes, whilst the relationship with her daughters was not particularly close.

[8] Mrs Love’s statement of claim pleads in some detail her brother’s business expertise and experience. His various directorships are listed. I accept that Mr Barnes (although there has been no direct evidence on this topic) is a man of business acumen whose income and assets enabled him to ensure his mother’s financial needs were met. Certainly he appears to have been in a stronger financial position than his two sisters.

[9] The deceased was clearly an active woman who enjoyed her independence. She lived in a unit, 1/13 Gretel Place on the North Shore. Renovations to her property were funded by Mr Barnes and, in circumstances I shall shortly describe, he became the owner of the property.

[10] In May 2001, shortly after the deceased executed her will, the Gretel Place property was sold. Thenceforth the deceased lived in various retirement villages and rest homes until her death. Enduring powers of attorney in favour of Mr Barnes were signed by the deceased in July 2002. There is clear and undisputed evidence that Mr Barnes subsidised his mother’s care from his own assets to a considerable extent.

[11] The late Phillip Batterton was a close friend and trusted advisor of the entire family. He had been the best man at a family wedding. It was he who prepared the deceased’s will, the enduring powers of attorney, and attended to the conveyancing transactions for Gretel Place. In September 2006 (approximately four months after the deceased’s death) Mr Batterton had a stroke whilst on holiday overseas. Some of the evidence suggests that Mr Batterton might not initially have been seriously incapacitated (or did not regard his health as preventing him from practising as a solicitor). Probate of the deceased’s will was granted to Mr Batterton on 17 April

2007. Suggestions at the time that either Mr Barnes or Mrs Love would apply to be administrators of the estate did not proceed.

[12] It is common ground that the deceased’s estate is insolvent. Shortly after the deceased’s death Mr Barnes drew three cheques on his late mother’s bank account for each of the three beneficiaries of $8,557.79. His evidence was that this was an equal division of the sum standing to the deceased’s credit when she died, although previous payments into her bank account were all made by him personally.

[13] Since her mother’s death Mrs Love has consulted a number of solicitors who have made inquiries. Proceedings were not launched, however, until 2 May 2012, a date doubtless influenced by the impending sixth anniversary of the deceased’s death.

Mrs Love’s claim

[14] Mrs Love, in essence, asserts that Mr Barnes took advantage of the deceased’s declining health and has failed to account for assets which were properly the deceased’s. As a result, her entitlement under the deceased’s will has been considerably diminished. The statement of claim relevantly alleges:

(a) The deceased from 1998 exhibited unjustified paranoid concerns about her pending death.

(b) The deceased was diagnosed with dementia of an Alzheimer’s type at the North Shore Hospital Memory Clinic in November 2001 (this was six months after the date of her will).

(c) The deceased had her driver’s licence cancelled in January 2002.

(d) Whilst president and treasurer of the North Shore Stroke Club in 1999 the deceased behaved in ways inconsistent with those roles.

(e) Mr Barnes “unilaterally” took the deceased’s Ford Laser motor

vehicle in 2002 and has failed to account for it.

(f) Mr Barnes wrongly appropriated the sale proceeds of the deceased’s

unit in Gretel Place.

(g) Certain chattels, being in the main china, ornaments, jewellery, Mrs Love’s university textbooks, essays, and lecture notes, and the late Mr Harold Barnes’ ashes are unaccounted for.

(h) Mr Barnes wrongly exercised his powers under the enduring powers of attorney to draw cheques to himself after the deceased died.

(i) Mr Barnes breached an alleged fiduciary duty to his mother by charging her a commission for what was effectively a private sale of Gretel Place.

(j) Mr Barnes wrongly reimbursed himself $50,000 from the deceased’s assets for what was in truth a gift to the deceased in 1986 (a 70th birthday present) to fund an overseas trip for the deceased and a female friend.

[15] These various allegations form the basis of two pleaded causes of action. The first is breach of fiduciary duty, it being alleged that Mr Barnes owed a fiduciary duty to the deceased. The second and alternative cause of action included alleged undue influence and/or unconscionability.

[16] The statement of claim seeks to recoup not only the losses (unquantified) which Mrs Love says should be returned to the deceased’s estate. It also seeks indemnity costs, general damages of $25,000 for mental stress anxiety, depression, humiliation, strain, disturbance, worry, and general inconvenience, and a further

$25,000 for exemplary damages.

What does Mr Barnes say?

[17] Mr Barnes asserts his sister’s allegations are not new. As early as 2004 her

then solicitors filed proceedings in the Family Court which were not, however,

advanced. Such proceedings were apparently designed to appoint a welfare guardian for the deceased. Correspondence between Mr Batterton and Mrs Love’s solicitors led, it would seem, to a family meeting in December 2004 which involved Mr Batterton and a solicitor acting for the deceased’s two daughters, at which full explanations relating to the care of the deceased and the sale of Gretel Place were given.

[18] Another solicitor engaged by Mrs Love wrote to Mr Batterton in 2008. This led to a letter in March of that year indicating that Mrs Love would not be proceeding with any claim against Mr Batterton in respect of her late mother’s estate or matters relating to the transfer of the deceased’s property to Mr Barnes.

[19] The Gretel Place sale, clearly carefully constructed by Mr Batterton to ensure that when the time came the deceased would qualify for a degree of taxpayer subsidy for rest home care, was also explained by Mr Barnes. Mr Barnes purchased the property from his mother on 11 May 2001. The purchase price was $176,186. That figure reflected the value of the life interest the deceased granted to herself before sale. By using actuarial tables, Mr Batterton calculated the value of the life interest at $43,300.

[20] From the sale proceeds the deceased repaid Mr Barnes $116,490. This figure was the total of various payments or “loans” made by Mr Barnes to his mother from

1980. They were:

(a) 1986 trip to Japan $ 40,000 (sic) (b) 1989 loan $ 10,000

(c) 1 August 1988 car purchase $ 20,490 (d) 1996 – 1998 kitchen and deck renovations $ 12,000

(e) Vehicle running and service costs

$100 per month since 1980 $ 24,000

(f) Alcohol purchase

$50 per month since 1980 $ 10,000

Making a total of $116,490

[21] A 4 March 2002 settlement statement from Mr Batterton’s firm (Mr Barnes having sold the property for $225,000 to a third party), shows payments to Mr Barnes of $177,491 and payment to the deceased for her life interest of $37,313.

[22] What then occurred was the utilisation of equivalent sums to acquire a unit for the deceased in Parklane Retirement Village. A deposit of $173,600 was required together with a facilities fee of $43,400. Mr Barnes lent his mother the first sum. The second sum was paid from the $37,313 life interest plus cash to her credit in her solicitor’s trust account.

[23] The deceased stayed in Parklane Retirement Village for approximately a year. She sold her unit there in February 2003 for $205,251. She was repaid a further

$38,000 by way of refund on her facilities fee. She then moved to Northbridge where she stayed until August 2004. Northbridge required an entry figure of

$145,000. When she left Northbridge in August 2004 she was repaid $99,000. In the meantime Mr Barnes had been regularly topping up his mother’s bank account which he did until her date of death. The deceased’s bank statements suggest that the

$99,000 was credited to her account and that in July 2006 Mr Barnes paid a further

$80,000 into it. The monthly rest home fees (for both Northbridge and subsequently) were high.

[24] In late 2004 or early 2005 Mr Barnes, with assistance from Mr Batterton, produced a schedule of all the payments he had made on the deceased’s behalf between 20 May 2002 and 14 June 2004. These sums totalled $151,550.06. The largest item of expenditure, $130,500, was made to Northbridge Life Care Trust to secure the deceased accommodation in Northbridge Retirement Village. Significantly in December 2005 WINZ wrote to the deceased advising that she was eligible for a residential care subsidy because her assets totalled $10,333 (the subsidy cut-off being $150,000).

[25] Mr Barnes does not deal in his affidavits with the china, silverware, and personal documents raised in his sisters’ affidavits.[1] I think this is an extraordinary oversight on the part of him and his advisors, given the emotional attachment such items have to family members. At the very least the explanation I was proffered from the Bar should properly have been in evidence. Nor does Mr Barnes endeavour to explain why it was he used his bank operating powers under the deceased’s

enduring powers of attorney to operate her bank account after her death.

The law

[26] Mr Pidgeon essentially relies on r 4.23 of the High Court Rules and in particular on subr (3). Rule 4.23 relevantly provides:

4.23 Trustees, executors, and administrators

(1) Trustees, executors, and administrators may sue and be sued on behalf of, or as representing, the property or estate of which they are trustees, executors, or administrators.

(2) There is no need to join persons beneficially interested in a trust or an estate to a proceeding because the trustees, executors, and administrators represent those persons.

(3) However, the court may, at any stage, order that a beneficially interested person be made a party, either in addition to or instead of the trustees, executors, or administrators.

[27] Counsel additionally relies on r 4.56(1)(b) to join Mr Barnes as a defendant. Rule 4.56 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.

[28] In essence, under r 4.23(3), Mrs Love seeks to become a plaintiff instead of the executor of the deceased’s estate for the purpose of clawing back into the estate assets which she considers her brother has effectively misappropriated from the deceased. In terms of r 4.56(1)(b) Mr Pidgeon submits that Mr Barnes ought to be joined as a defendant as a mechanism for doing justice and because his presence before the Court is required.[2]

[29] Judicial glosses have been added to the process. In a situation where a beneficiary seeks leave to commence proceedings it is usually necessary to demonstrate special circumstances.[3] Those authorities essentially suggest such circumstances exist if failure to appoint a beneficiary could lead to a serious injustice or that such an appointment is necessary to protect the interests of a beneficiary.

[30] It is clear from the wording of both the relevant rules that this Court is being asked to exercise a discretion. It is trite law that such a discretion must be exercised

_{on a principled basis.}

Discussion

[31] Mr Pidgeon relies on a number of factors which he submits, in combination, lead to a conclusion that Mr Barnes exploited his mother’s infirmities and breached various equitable duties.

[32] First, Mr Pidgeon submits that from 1998 onwards the deceased began a steady descent into dementia or Alzheimers. Secondly, well before 8 March 2002 (when enduring powers of attorney were executed), Mr Barnes had been acting for his mother. Furthermore, the enduring powers of attorney (of which Mrs Love says she was unaware until 2009) were probably invalid because the deceased lacked the capacity in July 2002 to execute them.

[33] Thirdly, it was wrong for Mr Barnes to have treated as loans transactions which were essentially gifts. Mr Pidgeon focused on renovations and improvements to the Gretel Place property, the 1986 trip with Mrs Sharp,[4] the various Gretel Place transactions, and the charging of an $8,000 commission for the sale of Gretel Place.

[34] With some force Mr Pidgeon submits that the presumption of advancement might apply as between a son and mother. Various problematic features included there being no written loan documents, no inter vivos demand having been made, the transactions being historic, and the “natural position of a wealthy son towards his aging mother” all point to such a presumption.

[35] Mr Pidgeon’s submissions did not grapple with those sums paid by Mr Barnes to meet the Northbridge and Parklane retirement village costs, nor did he dwell on Mr Barnes’s expenditure during the last two years of the deceased’s life.

[36] Mr Pidgeon’s submissions included a careful analysis of the substantive law

relating to breaches of fiduciary duty, unconscionability, and limitation issues. It is unnecessary for me to deal with these issues. Pleaded breaches include failing to act

in the deceased’s best interests and the utmost good faith; failure to ensure the deceased was advised independently by a solicitor not labouring under a conflict of interest; and failure to account for chattels and to give a full account to the deceased of the proceeds of the sale of Gretel Place.

Analysis

[37] It is easy, with the advantage of hindsight, to point to aspects and phases of this family’s life which could have been improved. In an ideal world the deceased might have had a better relationship with her two daughters. The three siblings might have consulted on a regular basis over their mother’s welfare in her declining years. Mr Batterton might have written to the deceased setting out with precision the destination of sale proceeds of Gretel Place and advising the deceased thereon. Mr Barnes might have provided Mr Batterton, or indeed his sisters, with running totals of his significant expenditure on his mother. The conference, which the three adult

children attended with their solicitors in December 2004,[5] might have agreed on

regular exchanges of information; the financial advantages and implications of the Gretel Place sale could have been set out in a letter from Mr Batterton to all family members; the whereabouts of family chattels and Mr Harold Barnes’s ashes could have been the subject of inquiry a decade ago.

[38] But regrettably none of these optimal actions occurred. They did not occur for understandable reasons. The relationship between Mrs Love and the deceased had not been good. Regular communication between the siblings was not a habit. Mr Batterton was the family’s trusted solicitor and had known them and their affairs for many years. The deceased was content for her son to arrange her affairs.

[39] Although the burden of caring for elderly women usually devolves on daughters and daughters-in-law, in this case it fell upon Mr Barnes who was able to bankroll his mother’s increasing needs as she moved into residential care. The habits of poor family communication, and possibly the deceased’s whims, led to carelessness or indifference over chattels, Mrs Love’s university textbooks, and her

_papers.

[40] Importantly, the deceased trusted her only son and was content for him to organise her affairs on her behalf. Mr Batterton was a knowing and willing facilitator of relevant transactions. He described the Gretel Place transaction to WINZ as being an arms-length transaction. Certainly it was structured that way, but one suspects the transaction was also motivated by a desire to ensure the taxpayer subsidies were available to the deceased sooner rather than later and that money was retained in the Barnes family rather than siphoned off in rest home fees. There is nothing dishonourable or disgraceful about such transactions. Faced with the problems of longevity and parents afflicted by ill health and dementia, many New Zealand families structure or plan similar outcomes.

[41] It is pertinent that Mr Batterton saw no impropriety in the Gretel Place transactions or in the repayment to Mr Barnes of significant loan sums. Nor did he consider the arrangements being made for his client (the deceased) were contrary to her interests. Furthermore, I am prepared to infer that, for a number of years, the deceased trusted Mr Barnes and, as so many elderly parents do, was content to leave to him the management of her affairs. It is usually a relief to the elderly to relinquish the stress and burden of finances and decision making. This, I am satisfied, was the true relationship between the deceased and her son.

[42] Quite simply, there is no evidence to point to the contrary. Mr Barnes might have been wiser, knowing, as he must have, his sisters’ suspicions and distrust, to have taken aboard their concerns and communicated with them more fulsomely. His failure to do so has involved him in this proceeding.

[43] Prior to 2002 and the Gretel Place sale, Mr Barnes might not necessarily have wanted to buy his mother’s home and offset against its purchase price monies he had advanced to his mother. But even if he had exercised such forbearance, in the following years, his financial outlay on his mother’s behalf was considerable. What money the deceased might have retained short term would rapidly have been consumed with retirement home capital payments and rest home fees. The evidence points no other way. Certainly it does not suggest that Mr Barnes unjustly enriched himself at his mother’s expense. Nor does it suggest that, in managing his mother’s affairs, Mr Barnes breached the fiduciary duties (if there were any) he owed her.

[44] The various transactions in which Mr Barnes was involved, the monies he paid out, and the repayments he received, all point towards putting arrangements in place to care for a failing parent. Thus, an important factor in the exercise of my discretion, is my inability to see a pattern of conduct or behaviour by Mr Barnes which would result in a court ordering him to disgorge large sums to his mother’s estate. Additionally, there are problems with evidence. The death of potential witnesses does not always equate with prejudice. In any litigation involving an estate, the deceased is never present. So I am unmoved by Mr St John’s submission that the late Mrs Barnes’s absence would cause prejudice. But the death of Mr Batterton has the potential to be prejudicial. He would not be present to answer obvious criticisms or expand on his notes. However, his notes and the conveyancing documents are all in evidence.

[45] Any proceeding launched by Mrs Love would face affirmative defences. Mr St John has legitimately raised issues arising out of the Limitation Acts[6] and laches. Certainly there have been delays, but whether fatal, I need not decide. Suffice to say considerable time and expense would be consumed grappling with defences available to Mr Barnes.

[46] On the basis of this analysis I have reached the firm view that the discretions I have under rr 4.23(3) and 4.56(1)(b) should be exercised against Mrs Love. The deceased’s estate is currently insolvent. Any proceeding against Mr Barnes seeking payments from him in respect of monies allegedly siphoned out of his mother’s estate would almost certainly fail. The amounts paid by Mr Barnes from his own pocket are large and there would be dominant set-offs. There was nothing dishonest or contrary to the deceased’s interests in the Gretel Place transactions. This is not a situation where there are special circumstances which justify this proceeding being brought. The interests of the beneficiaries of the deceased’s estate would not be enhanced or protected by allowing such a claim. Nor would the interests of justice

_{be served.}

Result

[47] Pursuant to r 4.56(1)(a) the name of Mrs Kay Batterton as a defendant is struck out.

[48] Pursuant to r 4.23(3) I refuse an order that the applicant, Mrs Love, be made a party to this proceeding as plaintiff.

[49] The plaintiff’s application under r 4.56(1)(b)(i) to join Mr Craig Anthony

Barnes as a defendant is dismissed.

[50] The leave of the Court to bring the foreshadowed claim is similarly refused. [51] I am unsure whether, procedurally, these orders bring the entire proceeding to

an end. I suspect so. Nonetheless I direct counsel are to confer and to advise the case officer within 10 working days whether any further conference or mentions hearing is required.

Costs

[52] The plaintiff is in receipt of a grant of legal aid. In terms of the legislation therefore I make no costs order against her in respect of her failed applications.

[53] Costs will lie where they fall. In any event, had the plaintiff not been in receipt of a grant of legal aid I would have invited submissions with a view to making an identical order. My preliminary view would have been that better communication between the parties at a much earlier stage could have cut this litigation off at the pass.

Additional comment

[54] Although I technically have no power to direct in this area, it would be my hope that Mr Barnes would see some merit in conferring with his immediate family and wracking his brains over the possible whereabouts of the 14 personal items and

chattels listed in [35] of the plaintiff’s statement of claim. If, as he has pleaded, much of the china and silverware on his mother’s instructions was disposed of at the Glenfield Salvation Army hospice shop, then he should say so. But some of the items are clearly of personal significance which I suspect the late Mrs Barnes would have wanted to distribute amongst her descendants. If Mr Barnes knows where these items are, it would be better for him to say so and/or give some thought to letting his sister have some of them. Clearly the late Mr Harold Barnes’ ashes and Mrs Love’s university notes and text books are unlikely to have ended up with the Salvation Army. Children are entitled to know where their parents’ remains are. Hopefully Mr Barnes can oblige his sister in that regard.

[55] Given that Mr Barnes is represented by reputable solicitors of the old school, I respectfully request Mr Barnes’ solicitor on the record, Mr Christopher Dickie, to take instructions and to file and serve a short memorandum, marked for my attention, in 10 working days advising the Court what progress he considers can be made on the matters I have specified in this section of my judgment. There this additional matter will rest.

..........................................
Priestley J

---

[1] I was given an explanation from the Bar that Mr Barnes has no knowledge of the whereabouts of such items (including his late father’s ashes) and that in all probability the deceased disposed of these items in her lifetime. I cannot properly weigh that explanation as evidence, however, since it was not before me nor had it been tested in cross-examination.

[2] _{Mainzeal Corp Ltd v Contractors Bonding Ltd (1989) 2 PRNZ 47.}

[3] The special circumstance relied on here is that the deceased estate is insolvent. Similar considerations applied (litigation expense) in L v Jefferson & Hacking HC Auckland CP 347 SD

00, 16 August 2001 at [308] per Penlington J. See also Hayim v City Bank NA [1987] 1 AC 730,

748 per Lord Templeman (PC).

[4] Mrs L R Sharp, as a result of an approach from Mrs Love, has sworn a short affidavit which states that she went on a trip with the deceased at the “expense” of Mr Barnes but that neither she nor the deceased would have gone on the trip if it was a loan from Mr Barnes which was to be repaid. This is a hypothetical assessment made by an elderly friend of the deceased 26 years after the event.

[5] Supra [17].

[6] In all probability the Limitation Act 1950 would apply here given that money sums prior to 1

January 2011 are involved (s 59 Limitation Act 2010).