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High Court of New Zealand Decisions |
Last Updated: 18 May 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
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CIV 2017-404-0084
[2018] NZHC 985 |
IN THE MATTER OF
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the estate of Ivy Jackson
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BETWEEN
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RAYMOND BARRY JACKSON
First Plaintiff
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AND
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RAYMOND BARRY JACKSON
Second Plaintiff
STEPHEN JAMES JACKSON
First Defendant
LINDA MARGARET JACKSON
Second Defendant
METRO LAW
Third Defendant
IRON BRIDGE REAL ESTATE LIMITED
Fourth Defendant
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Hearing:
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29 September 2017, 3 October 2017, 9 November 2017,
24 November 2017
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Counsel:
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C Orton for applicant (First & Second Defendant) R Butler and Y Zhang
for Respondent and Plaintiffs
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Judgment:
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8 May 2018
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JUDGMENT OF DUFFY J
JACKSON v JACKSON [2018] NZHC 985
This judgment was delivered by me on 8 May 2018 at 4.00 pm pursuant to
Rule 11.5 of the High Court Rules.
Registrar/ Deputy Registrar
Solicitors/Counsel:
Corban Revell, Henderson Ross Holmes, Albany
Rowan Butler, Barrister, Auckland
[1] This proceeding concerns the estate of Ivy Jackson, who died on 6 April 2015. She and her husband, the late Fred Jackson, had three children: Raymond Jackson (the plaintiff), Stephen Jackson (the first defendant), and Andrea Jackson (who died in March 2015). The second defendant, Linda Jackson, is Stephen Jackson’s wife. I shall refer to the parties by their first names to avoid confusion.
[2] Raymond issued proceedings against Stephen and Linda and others on 23 January 2017. There are six causes of action. Summary judgment was sought on the second and third causes of action. The second cause of action, which was against Stephen, alleged he had breached his fiduciary duties to Ivy as the holder of her enduring powers of attorney by converting at least $756,721.06 of her funds for his own use; failing to consult with Ivy on the sale of Ivy and Fred’s former home at Forrest Hill, North Shore, Auckland City (the Forrest Hill property); and failing to ensure the sale of the property achieved the best price. The third cause of action is against Stephen and Linda as administrators and executors of Ivy’s estate and alleges they breached their duties in this role through their failure to manage the estate in an even-handed way for the benefit of all potential beneficiaries, and in essence by placing their own interests above the proper management of the estate.
[3] On 3 May 2017, on the non-appearance of the defendants, Bell AJ entered summary judgment for Raymond on the second and third causes of action:1
[4] Stephen was to pay Raymond $836,725.16 (plus interest) for funds removed from the ANZ and Westpac accounts using his enduring powers of attorney;
[5] Stephen and Linda were to pay Raymond $258,255.75 (plus interest) for funds removed from the ANZ and Westpac accounts after Ivy died; and
[6] Stephen and Linda were to pay Raymond costs of $15,876.00 (inclusive of disbursements).
1 Jackson v Jackson [2017] NZHC 860.
[7] Stephen and Linda now apply to set aside the summary judgment, broadly on the grounds that they did not appear at the hearing before Bell AJ because they were unaware of it, and there has been a miscarriage of justice.
Factual background
[8] The evidence available to the Court involved (a) affidavits filed in support and in opposition to the application to set the summary judgment aside; (b) affidavits sworn in a related proceeding under the Administration Act, which were included in the bundle of documents filed in this proceeding; (c) affidavits filed in a Family Protection Act claim brought by Raymond against Ivy’s estate which were also included in the bundle of documents filed in this proceeding. Accordingly, the evidence was presented in an unhelpful piecemeal state. Nowhere was there to be found a complete factual account of circumstances relevant to the determination of the present application.
Sale of family home and deaths of Fred, Andrea and Ivy
[9] Ivy and Fred owned the Forrest Hill property, which was their family home, from 3 November 1969 until it was sold in January 2014. Each is recorded as registered proprietor on the certificate of title of the property. On 6 January 2014, Ivy suffered a stroke and was hospitalised. On 10 January 2014 Ivy was discharged from hospital and she moved to a rest home. Fred moved with her to the rest home. They were in their late eighties and infirm. They were told and they each seemingly accepted they could not return to live at the Forrest Hill property.
[10] On 13 January 2014, Ivy executed two enduring powers of attorney in favour of Stephen: one for property and the other for welfare, each of which was in evidence before me. There is in evidence a copy of an enduring power of attorney in relation to property that Fred executed also on 13 January 2014 in favour of Stephen. I have found no copy of an enduring power of attorney given by Fred in relation to his welfare, although I note that Raymond says such was granted. It may be there has been an omission to include a copy of this document in the evidence.
[11] On the same day, using the powers of attorney, Stephen signed a listing agreement with a real estate agent for the Forrest Hill property. Also on 13 January, he signed an agreement to sell the Forrest Hill property for $670,000. The sale and purchase agreement records Ivy and Fred as vendors of the Forrest Hill property.
[12] On 24 January 2014, the sale of the Forrest Hill property settled. After all the expenses were paid, the proceeds of sale came to $646,507.28. Those funds were paid into a Westpac account held jointly by Ivy, her husband Fred, and Stephen.
[13] Stephen has not said in evidence why it was that the house was sold on the same day it was listed, nor has he explained whether he made any independent enquiries regarding the suitability of the listed price the real estate agents suggested for the property. The statement of claim alleges that on 6 March 2014 the Forrest Hill property sold for $795,000 and on 20 November 2014 it sold again for $913,000.
[14] It is clear from reading Stephen’s affidavit filed in the Family Protection Act proceeding that he and Linda arrived in New Zealand on 7 January 2014 and remained here until approximately a week after the Forrest Hill property was sold. In his affidavit Stephen says he had no knowledge of how to contact Raymond, and he had not then spoken with Raymond since 2008 when he saw him at Andrea’s wedding. This suggests to me that at the time, because Stephen knew his parents would not be returning to the Forrest Hill property he would have been keen to sell it, as he seemingly was reluctant to return to Australia until the property was sold.
[15] Fred died on 7 October 2014. In November 2014 Ivy had another stroke. On 15 March 2015 Andrea died. Then on 6 April 2015 Ivy died.
Ivy’s wills
[16] Ivy executed a number of wills before her death. The evidence is silent regarding whether Fred made a will or not.
[17] On 15 October 2012 Ivy executed a will prepared by Schnauer and Co. Her friends Kiri Price and Tony Price were appointed the executors and trustees of the will. All the estate was left to Fred, provided he survived her for more than 14 days. If he
did not, the Forrest Hill property was left in equal shares to the children, Stephen, Andrea and Raymond. The residue went to Kiri and Tony Price in equal shares.
[18] On 28 December 2013, Ivy executed a home-made will in which she appointed Fred as executor and trustee of her will with Stephen and Linda assuming this role should Fred pre-decease Ivy. All the estate went to Fred. In the event he pre-deceased Ivy, the Forrest Hill property was to be divided equally between Stephen, Andrea and Raymond. Stephen and Linda were the absolute beneficiaries of any other property she held at the time of her death.
[19] On 15 January 2014, two days after the sale agreement for the Forrest Hill property was executed but before it settled, Ivy executed a new will, which was prepared by Metro Law. Once again Fred was appointed executor and trustee but if he pre-deceased Ivy or he was unwilling to assume this role Stephen and Linda were appointed executors and trustees. Fred was the primary beneficiary with all property going to him provided he survived Ivy by 30 days. If Fred did not survive Ivy and she still owned the Forrest Hill property on her death it was to be sold and the proceeds divided equally between her three children. The remainder of her residuary estate was to be distributed to Stephen and Linda jointly. The will declared that she had excluded Raymond and Andrea from her will because she had made provision for them during her lifetime.
Appointment giving Stephen a power of attorney and his management of that power, particularly in relation to bank accounts
[20] The evidence show that Stephen and Linda have lived in Australia since 1987. Raymond lives in New Zealand. The evidence show that Andrea lived in Whangaparoa as at 2012. There is no evidence about where she lived at the time her parents moved to the rest home or after that time. Despite Stephen and Linda living outside New Zealand, whereas Raymond resided in Whangarei and Andrea seemingly lived in Whangaparoa, Stephen and Linda were the persons whom Ivy appointed as trustees and executors of her last two wills and Stephen was given the powers of attorney by both his parents.
[21] At the time Ivy and Fred moved into the rest home there were ANZ and Westpac bank accounts.
[22] The ANZ accounts which were mostly in the name of Ivy and Fred involved an account into which Fred’s superannuation was paid. Another ANZ account was a term investment account that was opened on 22 January 2014 for 180 days. This account was in the names of Ivy, Fred and Stephen. The amount invested was
$297,000. Stephen believed he was made a joint account holder of all the ANZ accounts but enquires made of ANZ to date do not support that. Instead the ANZ records the power of attorney for Stephen being loaded on 16 January 2014.
[23] The Westpac accounts were initially in the names of Ivy and Fred. However, on 17 January 2014 Stephen was added to the Westpac accounts. Stephen says his parents went to a branch of the Westpac Bank with him and completed the necessary papers.
[24] There were numerous withdrawals from the Westpac and ANZ accounts between January 2014 and April 2015. Some of the withdrawals from the ANZ bank were then deposited into the Westpac accounts.
[25] On 24 January 2014, the sale of the Forrest Hill property settled. After all the expenses were paid, the proceeds of sale came to $646,507.28. Those funds were paid into a Westpac account held jointly by Ivy, her husband Fred, and Stephen. Ivy died on 6 April 2015, and there were further withdrawals after her death.
[26] Concerned about the circumstances in which Ivy’s will was executed, the Forrest Hill property was sold, and the funds in Ivy’s bank accounts were applied, Raymond applied to the High Court for an order appointing him administrator of Ivy’s estate. Toogood J was satisfied that there were matters Raymond was entitled to pursue further, and that the most effective vehicle for him to do so was to appoint him administrator under s 19 of the Administration Act 1969.2
2 Jackson v Jackson [2016] NZHC 1723.
[27] Raymond then issued these proceedings in January 2017, and applied for summary judgment.
Service difficulties
[28] Raymond experienced difficulties serving the other proceedings he brought against Stephen under the Administration Act. Finally, he resorted to and was granted an order for substituted service. When it came to this proceeding Raymond first attempted to serve it himself on Stephen by going to Australia. His attempts to locate Stephen failed. He then applied for and was granted an order for substituted service by publishing notice of the proceedings in certain Queensland newspapers. At the summary judgment hearing Bell AJ found that Stephen and Linda “had gone to Queensland” and there was “persuasive evidence [they] were trying to avoid service”.3 Once summary judgment was entered against Stephen, Raymond took steps to enforce the judgment. On this occasion process servers were engaged and they were able to locate Stephen.
[29] Stephen and Linda deny they have actively sought to avoid service of the proceeding. The evidence shows they have resided in Australia since 1987. All Stephen’s interactions with his parents occurred in the course of him visiting New Zealand. Accordingly, no adverse inferences can be drawn from Stephen and Linda being in Australia. Stephen and Linda say they have moved addresses in Queensland which in turn led to them having to obtain a new email address as their ISP did not operate in their new location. They say they are registered in Queensland as property owners and on the electoral rolls. Accordingly they maintain they could be traced by anyone wanting to do so.
Family dynamics
[30] Raymond is the eldest child, followed by Andrea and then Stephen. Neither party has filed fulsome evidence on the family dynamics, which makes it more difficult for the Court to assess the evidence which is available. What evidence there is on this topic is mostly to be found in affidavits filed in the Family Protection Act
3 See Jackson v Jackson [2017] NZHC 860 at [12].
proceedings that have been included in the bundle of documents for this proceeding. Looked at objectively the reliance of Ivy and Fred on Stephen and his wife Linda to the exclusion of their other children seems hard to understand.
[31] Stephen and Linda live in Australia and seemingly have done so for some time. Raymond lives in New Zealand, as did the late Andrea. Yet the evidence available to me shows that Ivy and Fred chose to rely on Stephen and Linda in preference to their New Zealand based children. This suggests an estrangement with the other children, which may in turn explain why Ivy and Fred were content for Stephen to use their money in the way he now asserts was done with their approval. On the other hand, as Raymond now contends, Stephen has been taking advantage of this parents’ reliance on him for his own benefit.
[32] The outcome of Stephen’s actions has at the least contributed to Raymond and the children of Andrea being excluded from Ivy’s estate (and indirectly Fred’s as well if he left everything he had to Ivy). However, given the seeming absence of Raymond and Andrea from Ivy and Fred’s lives this outcome may simply reflect the parents’ wishes, and Stephen doing what he can to fulfil those wishes.
[33] From the sparse evidence on family dynamics that has been available to me I note the following. Stephen’s evidence is that Raymond did not attend Fred’s funeral. Raymond has not denied this. Stephen’s evidence is that Raymond attended Ivy’s funeral. Raymond says nothing about this. From what Stephen says there was little interaction between the brothers on this occasion.
[34] Raymond has said in evidence that his contact with Ivy and Fred was intermittent and his relationship with them was distant. He describes them as having left him alone in New Zealand when he was 16 years old and they returned to live in Canada. On their return to New Zealand when Raymond was 22 years old they stayed with him initially before they bought their own property. After that there seems to have been little if any contact between parents and son. Raymond also says his parents ceased supporting him after they departed for Canada leaving him in New Zealand at the age of 16 years. Stephen’s evidence partly confirms Raymond’s account. Stephen
describes Raymond’s relationship with Ivy and Fred as very distant and hostile for at least 30 years.
[35] Raymond says nothing about what he knew of his parents’ move to the rest home in January 2014, or about when he learned of the move as well as the sale of the Forrest Hill property. He gives no evidence as to whether he voiced his concerns about the sale price of the Forrest Hill property and the circumstances of its sale to Stephen at the time or at any time before Ivy and Fred’s death. What evidence there is shows that Stephen handled the shift from the Forrest Hill property to the rest home and the management of the remainder of his parents’ affairs entirely on his own (or with help from Linda). Further, Stephen’s evidence (again in another proceeding but with copies filed in this proceeding’s bundle of documents) is that Raymond had no contact with Ivy when she had her first stroke, nor when Fred had a hip replacement. There also seems to have been no contact with Ivy or Fred when they were in the rest home.
[36] As the evidence presently stands it suggests an estrangement of long standing between Raymond and his parents.
[37] Raymond says in evidence that three years after his parents returned to Canada they sent Stephen out to New Zealand to live with Raymond for two years. Raymond says little else about his contact with Stephen other than to describe it as minimal.
[38] Stephen has not fully addressed his relationship with Raymond in his evidence. Nor has he commented on Raymond’s relationship with his parents. Stephen has not refuted Raymond’s evidence that there was no consultation with Raymond over the sale of the Forrest Hill property, or how Ivy and Fred’s bank accounts were managed. In evidence given in other proceedings but available in this proceeding Stephen says more about contact with Raymond when they were younger in the late seventies, but after that contact stopped.
[39] I am left with the impression that for some time there has been little, if any, contact between Raymond and Stephen, which suggests an estrangement between the brothers that has existed from before the parents’ deaths.
[40] Then there is the question of Andrea. One of Ivy’s earlier wills refers to Andrea living in Whangaparoa. If Andrea remained in New Zealand until her death, it is odd that Ivy did not rely on Andrea to some degree. Yet in the three wills of Ivy’s that are in evidence Andrea, like Raymond, had no role as an executor or trustee. Raymond says nothing in his evidence about his knowledge of Andrea’s level of engagement with Ivy and Fred. Nor does Stephen for that matter.
[41] In the 2012 will Ivy appointed her friends Kiri and Tony Price as executors and trustees and in the 2013 and 2014 wills she appointed Stephen and Linda to this role (provided that Fred pre-deceased her). Andrea’s children (to whom Raymond refers in his evidence) are not mentioned in any of the wills made from 2012 onwards, despite being Ivy’s grandchildren. What evidence there is relating to Andrea suggests that she also had minimal contact with her parents.
[42] Stephen says nothing about his contact with Andrea. She was alive when her parents moved to the rest home. Unless Andrea was unwell at that time, it is difficult to see why she was not involved in any way with the sale of the Forrest Hill property and helping her parents afterwards. If she was still living in New Zealand at the time and able to help it would have made more sense for her to be involved, at least in part, in their care and handling their finances than it would for Stephen to do this with Linda from Australia.
[43] Apart from Ivy’s continued provision in the wills of 2012, 2013 and 2014 for the Forrest Hill property to be divided between her three children, the other available evidence suggests that Ivy and Fred treated Stephen as if he was their only child, despite him being the one who was the most physically removed from them. Why this is so is not explained in the evidence. However, for a Court to reach a view of why Stephen and Linda have acted as they have done these gaps in the evidence need to be filled.
Associate Judge Bell’s decision
[44] Neither Stephen nor Linda appeared at the hearing of the summary judgment application before Bell AJ. Overall, Bell AJ was satisfied that Raymond had shown that Stephen and Linda had no defence to the causes of action against them, and
entered judgment in favour of Raymond in the sums of $836,725.16 plus interest and
$258,255.75 plus interest and costs.
Breach of fiduciary duty
[45] After setting out the background facts, Bell AJ began by noting that the donee of a power of attorney owes fiduciary duties to the donor. In this case, Bell AJ found that Stephen was required to use the funds in the bank accounts, including the proceeds of sale of the Forrest Hill property, only for the benefit of Ivy. It was a breach of fiduciary duty for Stephen to use the funds in those accounts for his own purposes. Bell AJ was satisfied that Stephen had withdrawn a total of $756,721.06 from the Westpac account and the ANZ account up to Ivy’s death using the power of attorney.
[46] Bell AJ also found there was a breach of fiduciary duty in relation to the hasty sale of the Forrest Hill property. The evidence showed that it was subsequently on- sold for $795,000 and later for $913,000.
[47] Bell AJ concluded that the damages recoverable under the cause of action for fiduciary duty came to $836,725.16.
[48] He then dealt with a potential objection by Linda and Stephen, namely that they are the executors and sole beneficiaries under Ivy’s will of 15 January 2014, so any assets of Ivy’s estate passed to them on Ivy’s death and therefore there is nothing for Raymond to recover for the estate. In other words, the argument would be that the funds belonged to them as the sole beneficiaries of the estate: there was no-one else with any claim on the estate. In answer to that argument, Bell AJ noted that there were statutory obligations on the personal representatives of the deceased not to distribute the estate for a period of six months after the grant of administration in the deceased’s estate, allowing time for others to notify the representatives of their intention to make a claim on the estate.4 Accordingly, it was not open to Stephen and Linda to say they took the estate assets as beneficiaries under the will: the conditions under ss 47 and 48 of the Administration Act had not been satisfied.
4 Referring to ss 47(4) and 48 of the Administration Act 1969.
Claim against Stephen and Linda as executors
[49] Raymond’s evidence showed that Stephen and Linda withdrew a total of
$258,255.75 from the ANZ and Westpac accounts after Ivy’s death. Bell AJ held that they were not entitled to appropriate those funds for themselves until the conditions in s 47(4) of the Administration Act had been satisfied. They were therefore answerable for those funds.
Should the summary judgment be set aside?
[50] Stephen and Linda now apply to set aside summary judgment in reliance on r
12.14 of the High Court Rules:
12.14 Setting aside judgment
A judgment given against a party who does not appear at the hearing of an application for judgment under rule 12.2 or 12.3 may be set aside or varied by the court on any terms it thinks just if it appears to the court that there has been or may have been a miscarriage of justice.
[51] The parties are in agreement as to the relevant principles for setting aside a summary judgment under this rule. They are found in Russell v Cox, where the Court of Appeal commented that although the Court is not limited in the considerations to which it may have regard in deciding whether to set aside summary judgment, three have long been considered of dominant importance:5
(a) That the delay is reasonably explained;
(b) That the defendant has a substantial ground of defence; and
(c) That the plaintiff will not suffer irreparable injury if the judgment is set aside.
[52] The Court of Appeal was careful to add that it was not establishing a general rule that an application to set aside summary judgment must satisfy these conditions as a necessary prerequisite to the exercise of the discretion; rather, they are factors
5 Russell v Cox [1983] NZLR 654 (CA) at 659.
which will generally be relevant to an inquiry as to where the justice of the case lies. The relative importance of the various factors will vary from case to case. In the present case I consider another factor relevant to the consideration is whether Stephen and Linda actively sought to avoid service of the proceedings.
Was service avoided?
[53] Bell AJ considered that Stephen and Linda had gone to Queensland and there was “persuasive evidence” they had attempted to avoid service. At the time he made this finding, Bell AJ did not have the benefit of all the evidence I have seen. It is now clear that Stephen has lived in Australia since 1987 and that he regularly visited his parents in New Zealand, including the time when he and Linda helped them to move to the rest home. There is no question that Queensland is their home.
[54] It is not for me to re-visit the circumstances that led Toogood J to grant substituted service in the Administration Act proceedings, which is something that Bell AJ knew. Whilst what happened in those proceedings can throw some light on whether substituted service was required in these proceedings, it is not determinative.
[55] Raymond submits that Stephen and Linda’s conduct regarding service can be taken into account in deciding whether to set aside the summary judgment. However, Raymond has provided no explanation for why he attempted to serve Linda and Stephen with the proceedings whereas professional process servers were used to serve the judgment on them. Once an Australian professional service provider was engaged he had no difficulty in finding and serving Stephen and Linda. The difficulties Raymond had experienced in serving Stephen and Linda in Queensland may owe more to Raymond’s lack of expertise as a layperson who is resident in New Zealand than active avoidance on the part of Stephen and Linda.
[56] Stephen and Linda have provided an explanation for why Raymond could not find them at what is now known to be their former address and why their email address had changed. They have identified possible sources of how they might have been located. They were seemingly not prepared to have their solicitor in Auckland accept service of these proceedings, which suggests they were not prepared to be helpful. However, given the nature of the relationship between Stephen and Raymond that is
perhaps understandable. I acknowledge that Stephen was not co-operative. However, the evidence that I have seen reveals he was always the person on whom Ivy and Fred relied, despite that fact he lived in another country. Given the distance and seeming hostility between Raymond and his parents, Stephen may now harbour strong adverse feelings about Raymond’s attempt to obtain a benefit from Ivy’s estate. If he does, this might explain why he has been unhelpful when it comes to progressing the claim.
[57] Now I have an explanation from Stephen and Linda, this, coupled with: (a) the ability of the professional process server to find them and serve them; and (b) Raymond’s apparent lack of expertise in finding persons in Australia for service of legal documents, suggests to me that the situation regarding service is not as clear cut as Bell AJ thought.
[58] There is now a dispute on the affidavit evidence between Raymond on the one hand and Stephen and Linda on the other regarding the question of service. I am in no position to determine that dispute on the papers. Accordingly, I consider this is a neutral factor when it comes to assessing the present application.
Delay
[59] Linda and Stephen were both served in Queensland with a copy of Bell AJ’s judgment on 20 June 2017. Both have given evidence that before this, they had no knowledge whatsoever of these proceedings.
[60] After becoming aware of the summary judgment, Linda and Stephen instructed Australian solicitors to act for them and counsel attempted to obtain a copy of the pleadings in late June 2017. The courier parcel containing the pleadings did not arrive until after 7 July 2017. The application to set aside summary judgment was filed on 31 July 2017. Stephen and Linda submit that any delay was minimal and reasonable.
[61] Stephen and Linda were served with the enforcement of the summary judgment. The material then served on them did not include the summary judgment application and evidence in support. I am in no position to reject their evidence on the papers that they knew nothing about the summary judgment proceeding until served with the judgment for enforcement. Until they received a copy of the summary
judgment application, statement of claim and affidavit evidence in support they could take no practical steps to apply to set the judgment aside.
[62] They say they did not receive this material until after 7 July 2017 and I am in no position to reject their evidence on the papers. It is plausible, and I cannot make findings against credibility when faced with plausible affidavit evidence. The application to set aside was then filed on 31 July 2017. Given they were in a different jurisdiction and their solicitors in Australia had to engage New Zealand solicitors I am satisfied they have acted within a reasonable time and therefore the application to set aside has been brought without delay.
Substantial ground of defence
[63] Stephen denies the sale of the Forrest Hill property amounts to a breach of fiduciary duty.
[64] Stephen contends that the withdrawals from the ANZ and Westpac accounts were not in breach of fiduciary duty. He also contends that his use of the Westpac accounts was as an account holder and not through the power of attorney that he held.
[65] In his evidence Stephen goes through the transactions listed in Raymond’s affidavit and provides explanations for each one. He says that certain transactions were mere transfers from one account to the other, not withdrawals for Stephen’s personal benefit. Other withdrawals were applied to the payment of rest home expenses for Ivy, and in one instance Fred and Ivy gifted Stephen $160,000 from the joint Westpac account for his birthday. On another occasion, he says he accepted a gift of $150,000 from his mother. In respect of other withdrawals, Stephen denies altogether that he was the one who withdrew the funds, contending that there is no evidence to indicate the withdrawals were made by him and that they could have been made by his parents. He also says that he used some of the funds to pay his father’s funeral expenses. Stephen explained one significant withdrawal of funds as him acting on his father’s instructions to make a gift to the Masonic Lodge of which Fred was a member.
[66] Stephen also contends that transactions in relation to the Westpac account after Ivy’s death were not in breach of fiduciary duty as the funds were held in a joint account and therefore on Ivy’s death, the funds became Stephen’s property by survivorship.
[67] Stephen and Linda argue that their duties as administrators did not affect how Stephen dealt with the funds in the Westpac account after Ivy’s death.
[68] On the other hand, Raymond argues that there is little evidence to support Stephen’s contentions. Raymond submits that as a fiduciary, Stephen was prohibited from profiting from his position. This meant he was not entitled to receive gifts from Ivy and Fred while they were alive. Nor were he and Linda permitted to simply “help themselves” to Ivy’s funds after her death, as they were executors of Ivy’s estate and therefore subject to certain obligations, including the obligation to maintain the estate in case claims were made on it by others. Raymond also contends the Forrest Hill property was sold at under-value in breach of fiduciary duty.
[69] Raymond argues that Stephen’s evidence has changed over time with some explanations coming later and being at odds with earlier accounts. Further, that Stephen’s explanations regarding his parents’ gifts to him relate more to Fred being responsible for this rather than Ivy. Raymond also argues that it is “at odds with common sense and what we know about Ivy and Fred”.
Sale of Forrest Hill property
[70] Regarding the sale of the Forrest Hill property I do not consider the fact the property was later on-sold at higher values is the complete answer to whether Stephen sold it under value or not. There is no evidence that Stephen had any wide appreciation of Auckland property values. He was in New Zealand for a short period of time. He was faced with the task of moving both his parents to a rest home in which they would be happy. He had to do all this plus sell the Forrest Hill property within the time available for him to remain in New Zealand. The evidence suggests he was in no position to sit and wait until the best price possible became available. Because he did not live in New Zealand and his New Zealand based siblings seemingly had no contact with him or their parents the need for a relatively quick sale is likely to have been
uppermost in his mind. Handling the marketing and sale of the property from Australia would have been difficult. Leaving the property unattended while it sat on the market would also have been difficult; once Stephen returned to Australia there would have been no-one to keep an eye on it or ensure a tidy appearance was maintained. Whilst Stephen’s siblings may in theory have been able to attend to those tasks there is no evidence either Fred or Ivy made any contact with them or sought their help. In such circumstances it becomes easier to see why Stephen would have sold the Forrest Hill property as he did.
[71] Furthermore, Ivy and Fred had owned the property since December 1969. There is no evidence regarding its state of maintenance and repair at the time Ivy and Fred vacated it. The fact the property on-sold at higher prices later in 2014 is not enough to suggest the price Stephen accepted was too low at the time he sold the property. Minor improvements may have been made to the property to increase its attractiveness to buyers. Until more is known about the state of the property when it was subsequently on-sold it is difficult to assess how those increased sale prices reflect poorly on the price for which Stephen sold the property. Nor is the valuation evidence on which Raymond relies upon determinative of this question. To conclude Stephen sold under value is to overlook the exigencies of the circumstances with which Stephen was faced. Many adult children faced with ailing elderly parents may reasonably conclude that the sale of a property the parents will never use again is best concluded promptly.
[72] In short, the persuasive value of the evidence relied on by Bell AJ to conclude there was a breach of fiduciary duty through the sale being under-value is reduced once viewed against the evidence that is available to me. In addition, even if the Forrest Hill property was sold under value that may arguably not be a breach of fiduciary duty. There is no suggestion Stephen or Linda benefitted from such action. At most it would suggest Stephen acted negligently or carelessly which is arguably different and separate from a breach of fiduciary duty.6 Accordingly, I consider Stephen and Linda have an arguable defence to this allegation.
Management of bank accounts
[73] Regarding the use of the bank accounts, the parties’ respective arguments raise an issue regarding the scope of the fiduciary duty Stephen owed to Ivy and Fred as the holder of their enduring powers of attorney relating to property. Stephen’s arguments are essentially that because he was a joint account holder of the Westpac account along with Ivy and Fred any steps he took in relation to the management of that account was as an account holder and not through use of the enduring power of attorney.
[74] Stephen says the funds from the ANZ account were transferred to the Westpac account at his parents’ direction. As they were account holders of both the ANZ and Westpac accounts, if his evidence about acting under their direction is truthful it cannot be criticised. I am in no position to doubt his credibility. The same applies to Stephen’s explanations that some of the spending from the accounts was carried out by his parents. In relation to his evidence regarding Fred’s direction that a large sum of money be paid to the Masonic Order, the circumstances of this payment are unusual. However, it may not have been until Fred reached that stage of his life that he realised he could afford to make such a gift. In such circumstances, Fred may well have trusted Stephen to make the gift on Fred’s behalf, rather than make provision for it in his will. Once again this is an issue that is best resolved at trial.
[75] There is the question of the parents’ large gifts of money to Stephen, which is how Stephen explains the funds he withdrew from the Westpac account. Once again, I cannot determine Stephen’s credibility. However, given the family dynamics the explanation may be plausible. Without seeing and hearing Stephen or Raymond give evidence I cannot say. Ivy and Fred’s sole focus on Stephen in terms of their exclusive reliance on him for help and their generosity towards him is unusual, given they had other children and grandchildren. However, in the context of the dynamics of this family, Stephen’s explanation may well be true. I have already observed that Ivy and Fred acted as if Stephen were their only child. If Stephen had been their only child his dealings with his parents and his management of the joint Westpac account would not attract criticism. In such circumstances, elderly parents at the closing stages of their lives, who believe they have more than sufficient funds to see them through to the end of their lives, may well choose to lavish their generosity on their only child
during their lifetime. Why Ivy and Fred might have acted like this is (if indeed they did) is something that can only be determined at a trial where the disputed evidence from all concerned can be properly tested by the opposing party and assessed by the Court.
[76] Whilst Raymond argues that it is inherently implausible that Ivy and Fred would make generous gifts to Stephen and Linda and that such conduct is contrary to “what we know about Ivy and Fred” the short point is that Raymond has provided little evidence to suggest Ivy and Fred would want to treat their children in a more even- handed manner than has occurred. What evidence there is supports their apparent sole preference for Stephen.
[77] Regarding Raymond’s arguments that to some extent Stephen has attributed the gifts coming from Fred rather than from Ivy, the short point is that until Fred died in October 2014 the bank accounts were the joint property of Ivy and Fred. He had the same freedom to use the accounts as Ivy did. Raymond’s claim focusses on Ivy presumably because Fred left his entire estate to her and he died before her.7 However, while they were both alive Fred’s actions in relation to the joint accounts are as relevant as Ivy’s.
[78] There is the separate question as to whether it was legally permissible for Stephen to receive gifts from his parents given his appointment under their enduring powers of attorney. Stephen’s answer is that his parents knew their own minds, wanted to make the gifts and when he withdrew the money from the joint accounts at their direction, he did not use the power of attorney. This raises the legal questions of when the holder of an enduring power of attorney can receive gifts from the donor and whether any prohibition against him doing so will operate to prevent gifts given without resort to using the power of attorney.
[79] Vernon v Public Trust recognises that in addition to the statutory duties the Protection of Personal and Property Rights Act 1988 imposes on holders of enduring
powers of attorney those persons owe fiduciary duties in equity to the donors of those powers.8 Fiduciaries are generally constrained from accepting gifts or otherwise personally benefitting from those to whom the duties are owed. However, in the context of enduring powers of attorney Parliament has given limited recognition to the fact there will be occasions where the donor wants to give benefits to the holder of the power of attorney. This recognition is expressly given when the donor is mentally incapable of acting.9 In Vernon v Public Trust the appellant argued that benefits given to the holder of the power of attorney while the donor was of sound mind were not a breach of fiduciary duty, and that the constraints equity typically applied in those circumstances did not apply there. The Court of Appeal rejected this view finding instead that equitable fiduciary obligations still applied. However, this was in the context where the Court of Appeal found that the holder of the power of attorney owed the donor “fiduciary duties whenever he exercised his powers under the [enduring power of attorney].”10 This finding leaves open the question of whether the holder of a power of attorney can also be a joint owner of a bank account with the donors of that power, and if so whether in exercising the powers of joint ownership of property he would still owe the donor fiduciary duties despite them arising from the power of attorney. In this regard, I also note that under the law of property joint owners do not owe each other fiduciary duties when it comes to the handling and management of their property.11 There need to be additional factors present before the Court will conclude that joint owners owe fiduciary duties to each other, establishing this requirement’s evidence.12 Resolution of the legal questions that I have identified will be informed by the proven facts of the case; I am in no proper position to do so.
Management of Ivy’s estate
[80] Regarding the management of Ivy’s estate after her death Stephen contends that as the estate was essentially contained in the Westpac bank account it passed to him under the law of survivorship, thus those funds formed no part of Ivy’s estate. If
8 Vernon v Public Trust [2016] NZCA 388, [2016] NZFLR 578.
9 See s 107 of the Protection of Personal and Property Rights Act 1988.
10 At [42].
survivorship does operate here, this is a complete legal answer to the conclusions reached by Bell AJ regarding the application of ss 47 and 48 of the Administration Act 1969.
[81] However, survivorship will only apply if Stephen was the legal and beneficial joint owner of the Westpac account. If he was the legal owner but held beneficial ownership on behalf of Ivy (and earlier of Fred as well) Stephen would then be liable to account to Ivy’s estate on her death. The answer to this question will turn on what a Court makes of the evidence regarding how Stephen was made a joint account holder. This will require the Court to determine the intention of Ivy and Fred as to the nature of Stephen’s ownership of the account at the time they included Stephen as a joint account holder. This is a question that I cannot determine without the benefit of oral testimony and the usual trial process.
Conclusion on arguable defences
[82] Looked at overall, I am satisfied that there are arguable defences that Stephen and Linda can raise to Raymond’s claims. In some areas, the defences may seem weaker than in others but I see nothing to be gained in attempting a minute analysis which would see Bell AJ’s decisions on some dealings upheld but on others set aside. There is enough evidence here to present another tenable perspective from that advanced by Raymond. To accept his view of events requires viewing Stephen and Linda in a bad light. I am not persuaded this view is more probable than not. Accordingly, I consider Stephen and Linda should have the opportunity to present their evidence and legal arguments by way of defence at a trial.
[83] The evidence each opposing party relies upon is hotly disputed by the other. Whose evidence is to be preferred rests on reliability and credibility assessments of the evidence. What is plausible and what is not in the context of this family’s dynamics is impossible to gauge from their affidavit evidence. A trial is required.
Irreparable harm
[84] Stephen and Linda submit that, subject to the determination of Raymond’s other causes of action against the third and fourth defendants and his Family Protection
Act claim, only Stephen and Linda will benefit under Ivy’s will. Thus even if funds are returned to Ivy’s estate ultimately by another route they will return to Stephen and Linda. Accordingly they submit there is no prejudice to Raymond if the summary judgment is set aside, or that any such prejudice is minimal.
[85] On the other hand, Raymond contends that if the judgment were to be set aside it would prejudice him. He argues that he would be obliged to proceed to trial and incur further costs in doing so. He says that to date Stephen and Linda have ignored existing costs orders.
[86] Raymond further submits that Stephen and Linda’s status as beneficiaries under Ivy’s will is not relevant to the present application, as they breached strict fiduciary duties and were therefore obliged to account to the estate. He argues that it is not possible to determine the extent of any distributions that would be made to Stephen and Linda until the estate is replenished by Stephen and Linda repaying their debts to it. Moreover, others have potential claims on the estate: Raymond has made a claim under the Family Protection Act, for example. There are also Andrea’s grandchildren who can bring a claim under that legislation.
[87] I am satisfied that Raymond will not suffer irreparable harm if the summary judgment is set aside. If he is successful in his litigation against Stephen and Linda the subject funds will then flow back into Ivy’s estate, which will be sufficient to cover the additional costs Raymond will have incurred. Stephen and Linda have assets. New Zealand judgments are readily enforceable in Australia. The attempts Raymond made to enforce the summary judgment show this to be so. Accordingly, if he is successful at trial the additional costs he will have incurred will be readily covered by an appropriate costs order.
[88] Moreover, Raymond is currently involved in opposed litigation against the solicitors who prepared Ivy’s will and the real estate agent who sold the Forrest Hill property. The setting aside of the summary judgment against Stephen and Linda will place Raymond in the position where he will be pursuing opposed claims against all relevant parties. To some degree there is an overlap between the complaints he makes
about Stephen and Linda’s engagement with Ivy and management of her property and the conduct of the solicitors and real estate agents.
[89] In short, if the judgment is set aside and Raymond ultimately succeeds in his claims any harm he suffers from the setting aside can be adequately compensated by an order for costs. On the other hand, if the summary judgment stands Stephen and Linda will suffer irreparable injury through the loss of their ability to defend themselves against Raymond’s claims. I am satisfied they have arguable defences and their failure to take steps to oppose the summary judgment is properly explained. Further they have acted expeditiously in bringing the application to set judgment aside. In such circumstances to allow the summary judgment to stand would be a miscarriage of justice.
Result
[90] The application to set aside the summary judgment made by Bell AJ is granted. That judgment is set aside.
[91] If the parties are unable to agree costs leave is reserved to them to file memoranda on costs.
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URL: http://www.nzlii.org/nz/cases/NZHC/2018/985.html