Urlich v Urlich [2014] NZHC 348 (3 March 2014)

Last Updated: 4 April 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-3163 [2014] NZHC 348

BETWEEN VINI URLICH Applicant

AND IVAN URLICH as Administrator of the Estate of DARINKA URLICH Respondent

Hearing: 3 February 2014

Appearances: A Gilchrist for Applicant

G Bogiatto for Respondent

Judgment: 3 March 2014

INTERIM JUDGMENT OF TOOGOOD J [Application to discharge or remove administrator of estate]

This judgment was delivered by me on 3 March 2014 at 4:30 pm

Pursuant to Rule 11.5 High Court Rules

_{Registrar/Deputy Registrar}

URLICH v URLICH [2014] NZHC 348 [3 March 2014]

Introduction

[1] Darinka Urlich (“Mrs Urlich”) died aged 86 on 14 May 2012, and was

survived by a son, Ivan, and two daughters, Vini and Fina. In her last will, dated

1 July 1996, Mrs Urlich directed that Ivan should have the first option to purchase her home in Herne Bay, Auckland (“the Herne Bay property”), “such option to be exercised within 12 months from the date of [her] death.” The will provided for the purchase price to be “the current market value of the property fixed as at the date the option is exercised by a registered valuer appointed by the President of the Real Estate Institute of Valuers [sic].” The will directed that Ivan, the sole executor and trustee of Mrs Urlich’s estate (“the Estate”), was to receive 50 percent of the residue and Vini and Fina were to receive 25 percent each.

[2] Mrs Urlich’s home, which has remained unoccupied since her death, has a current Capital Value of $1.24 million for rating purposes, but a valuer engaged by the applicant says the property has a market value of $2 million. The respondent’s valuer estimates the market value to be $1.35 million. The residuary estate,¹ which is said to comprise essentially personal effects such as house contents and jewellery, is estimated by the parties to be worth approximately $30,000 after payment of funeral and other expenses and debts.

Application to remove Ivan Urlich as a trustee

[3] Probate of the Estate has been granted but Vini has now applied to have Ivan removed as trustee and seeks to have an independent trustee such as the Public Trust appointed in his place. She bases the application principally upon inferences drawn against Ivan about the improper manipulation of his late mother’s affairs. They arise, she says, because of the part he played in the transfer of the Herne Bay property into a family trust (“the Trust”) settled by Mrs Urlich on 29 March 2012, only six weeks prior to her death. The beneficiaries of that trust are identified as

_{Mrs Urlich (during her lifetime), Ivan, and Ivan’s unborn children. It is said that}

¹ As is explained at [5], the underlying issue in the proceeding is whether the residuary estate should include the Herne Bay property. For the purposes of this judgment, “residuary estate” means the residue of the Estate excluding the Herne Bay property.

Mrs Urlich was suffering from dementia at the time of settlement of the Trust and, further, that she spoke and understood little English.

[4] The effect of the settlement of the Trust and the transfer of the Herne Bay property to it has been, in Vini’s submission, to defeat the entitlement which each of Vini and Fina would otherwise have had to 25 percent of the property’s value when her mother died a short time later and the assets in the Estate crystallised.

[5] Vini argues that Ivan should be replaced as the sole trustee of the Estate so that an independent trustee appointed in his place can investigate the circumstances in which the asset was transferred and, if necessary, take proceedings on behalf of the Estate against Ivan with a view either to an award of damages or to having the asset returned to the Estate for division in accordance with Mrs Urlich’s will.

[6] For Vini, Mr Gilchrist filed comprehensive written submissions in which he discussed the evidence adduced by the parties and referred to relevant authorities. He made it clear at the outset of his oral submissions that he was not inviting the Court to conduct a “mini-trial” of the allegation that Mrs Urlich had been improperly influenced to transfer her major asset out of her ownership shortly before her death. The applicant’s case at this point goes no further than asking the Court to exercise its inherent discretionary jurisdiction to replace Ivan as trustee, in the interests of the beneficiaries as a whole, because of what is said to be the obvious conflict between Ivan’s duties as trustee and his personal interests. It is submitted that an independent and impartial consideration of the allegations is required to assess whether the Estate has any claim against Ivan or any other person to bring the asset back into the Estate.

[7] Mr Gilchrist added also that because of the circumstances of the transfer of the Herne Bay property into the Trust, and Ivan’s initial refusal or reluctance to address the proper inquiries made of him by his sisters, there had been a complete breakdown of trust between Vini and Fina and their brother which also justifies removing Ivan from his role as trustee of the residuary estate, relatively small though it is. Mr Gilchrist referred to the sensitivities that can surface in the distribution of personal effects which may have sentimental value to the beneficiaries.

[8] I questioned Mr Gilchrist about the absence of any affidavit or any other indication that the Public Trust would be willing to accept appointment to the Estate. He submitted that the Public Trust was frequently appointed in cases where executors and trustees appointed by a will are replaced by court order.

[9] I observe, however, that what the applicant is seeking is a decision by the replacement trustee to undertake a forensic investigation into the circumstances of the transfer of the Herne Bay property to the Trust. The Estate has limited resources to fund such an exercise. Before appointing any trustee to replace Ivan, and giving any directions to the new trustee about matters to be investigated, the Court would need to be satisfied that such a course was practical. That may include consideration of the qualifications of the proposed replacement to undertake the role in circumstances which are unusual.

Ivan Urlich’s response

[10] Without conceding that a prima facie case for removal of Ivan was made out on the papers, Mr Bogiatto confirmed that Ivan was prepared to treat the Herne Bay property as if it was an Estate asset. In essence, he suggested that it was intended that Ivan would either purchase the property from the Trust, or it would be sold to a third party, with the proceeding then being divided between Vini, Fina and himself according to the terms of the will.

[11] Counsel submitted that Ivan’s proposal, if accepted by the Court as balanced and reasonable, ought to weigh heavily in favour of the Court exercising its discretion against making an order for removal. When I tested that proposition with Mr Bogiatto, he acknowledged that the proposal may not adequately address all of the issues arising on the pleadings. He accepted, for example, that the proposal assumed that the option to purchase provided in the will remained open to be exercised by Ivan when, on its face, the wording of the will may not support such an interpretation even if the property is returned to the Estate.

[12] Mr Bogiatto also acknowledged that his client’s proposal did not address the applicant’s concerns about Ivan’s ability or willingness to act even-handedly in the

distribution of the personal effects and other assets forming part of the residuary estate.

Terms of adjournment

[13] Nevertheless, I indicated to counsel that I was prepared to give them an opportunity to explore the respondent’s proposal further and take instructions. I indicated I would adjourn the proceeding part-heard to facilitate an attempt by the parties themselves to resolve or otherwise narrow the issues for determination by the Court and, in any event, to allow time for the filing of further evidence and submissions.

[14] I adjourn the application part-heard on the following terms:

(a) The applicant shall file such affidavit evidence as she considers appropriate about the appointment of a trustee to replace the respondent, bearing in mind that the Court is unlikely to make any appointment unless it is satisfied that the proposed replacement is both willing and suitably qualified to undertake the role.

(b) If the respondent wishes the Court to take into account any proposal about how Mrs Urlich’s former home should be treated for the purposes of resolving this proceeding, he shall submit the proposal by affidavit containing such undertakings as he considers appropriate.

(c) The respondent shall have an opportunity to explain how he proposes to distribute his mother’s residuary estate, if not as to the disposition of specific assets then as to a process for making the necessary decisions.

(d) The Registrar shall set this matter down for a one-hour hearing before me on the first available date after 31 March 2014. The hearing may be scheduled to begin at 9am if necessary.

(e) Not less than 10 working days before the hearing,

(i) the applicant shall file any affidavits pursuant to order (a), and

(ii) the respondent shall file any affidavits pursuant to orders (b)

and (c).

(f) Not less than five working days before the hearing, the parties shall file any affidavits in reply.

(g) The parties shall file any further submissions not less than two working days before the hearing.

[15] I certify a two-hour hearing on 3 February 2014. Costs on that hearing are reserved.

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Toogood J