Hoeberechts (nee Sprott) v Sprott [2019] NZHC 1236 (27 May 2019)

Last Updated: 4 June 2019

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-960 [2019] NZHC 1236

UNDER	the Administration Act 1969 section 21
IN THE MATTER OF	the estate of THOMAS JAMES SPROTT, the estate of ETHEL MARION SPROTT, the SPROTT FAMILY TRUST and the RODLEIGH FAMILY TRUST
BETWEEN	LINDSAY ANNE HOEBERECHTS (nee SPROTT) Plaintiff
AND	ADRIAN JAMES SPROTT Defendant

Hearing:	27 May 2019
Appearances:	V Bruton QC for the Plaintiff T J Allan for the Defendant
Judgment:	27 May 2019

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL

Solicitors:

Priscilla Brown, Auckland, for the Plaintiff

Grove Darlow (T J Allan), Auckland, for the Defendant

Counsel:

Vanessa Bruton QC, Auckland, for the Plaintiff

HOEBERECHTS (nee SPROTT) v SPROTT [2019] NZHC 1236 [27 May 2019]

[1] The defendant applies to strike out parts of the plaintiff’s statement of claim. The defendant originally applied to strike out parts of the plaintiff’s second amended statement of claim. The plaintiff has, in response, filed a third amended statement of claim and the defendant has in turn filed an amended application to strike out. The third amended statement of claim makes some minor amendments to the second amended statement of claim. It addresses one of the points raised by the defendant. The defendant originally pursued three points, but there are only two matters left for my decision.

[2] The plaintiff, Lindsay Hoeberechts, and the defendant, Adrian Sprott, are two of the children of the late Jim Sprott, a well-known industrial chemist. There is another daughter, Alison. This case concerns the administration of Jim’s estate and the estate of Marion, his wife, who died before Jim. The main asset of the estates is a residential property in Combes Road, Remuera, Auckland.

[3] Adrian is one of the executors of his father’s estate. He lives in Auckland, as does Alison. Lindsay lives in Vancouver, British Columbia, Canada.

[4] She contends that the executors have delayed in selling the Combes Road property. Lindsay’s claims cover several matters, but importantly she seeks:

(a) Full accounting of all income and expenditure for assets and liabilities of the estate.

(b) An order that Adrian account for any executor’s fees that he ought not to have paid himself.

(c) What she calls an order (but it is more a declaration) that the defendant and his co-executor ought to have obtained legal, valuation and marketing advice and listed Combes Road for sale within a reasonable time, being no later than 8 July 2015 or the spring of 2016, and Adrian remained in breach of trust by failing to sell the property.
(d) An order removing Adrian as executor and trustee of the estate.

(e) Damages which have still to be quantified.

[5] Jim died on 15 April 2014. Probate of his will and a codicil was granted on 8 July 2014. Marion died in 2008, but probate of her will was not granted until 8 July 2014. For present purposes it is not necessary to go into her will in any detail, except to say that she left her estate to Jim as he survived her for more than 14 days.

[6] In his will Jim forgave any debts owing to him by any of his children at the date of death. He gave all his real estate “to my trustees upon trust to sell all such real estate, and to divide the proceeds of sale equally among my children as shall survive me”. He gave the residue of his estate to his children in equal shares.

[7] The executors under the will were originally Adrian and a Richard Nowacki. Mr Nowacki has since resigned, and has been replaced by Mr Barry Stafford, an experienced Auckland solicitor.

[8] Lindsay’s case is that the executors ought to have put the Combes Road property on the market within 1 year of the grant of probate. That is within the “executor’s year”. As a fall-back position Lindsay says that there was arguably an agreement that the property would not be put on the market until the spring of 2016. If that is shown, she contends that the property ought to have been listed for sale in the spring of 2016, which would mostly likely have resulted in a sale in about December 2016. She says that because the executors did not sell the property in a timely way she was not able to go ahead with an agreement she and her husband had made to buy a property in Vancouver. Although that purchase fell through, she contends that the value of the Vancouver property has risen markedly, and she contends that Adrian should answer for the loss on the abandoned purchase of the Vancouver property. If that relief is not available, she says that if she had received her share of the proceeds of sale of Combes Road in time she would have been able to discharge the mortgage against her home, and she claims the mortgage interest she has had to pay in the meantime.
[9] Adrian applies to strike out parts of the third amended statement of claim: paragraph (11)(c):

The defendant’s duties include:

...

(c) The duty to faithfully execute the testamentary documents and to realise and distribute Jim and Marion’s estates in accordance with the directions in their testamentary documents, including the duty to sell Combes Road such that:

(i) within the executor’s year, that is, by 8 July 2015, Combes Road should have been placed on the market for sale, and sold within 1 to 3 months, that is by 8 October 2015 or thereabouts...;

(ii) to the extent that there was agreement reached in March 2016 to see Combes Road in the spring of 2016, Combes Road should have been placed on the market on 1 September 2016 and sold within 1 to 3 months, that is, by 1 December 2016 or thereabouts...

Paragraph 29(c), (d) and (f):

As a result of the defendant’s breaches, the plaintiff has suffered the following losses:

...

(c) Loss of opportunity to utilise her inheritance for her own purposes and investment from 8 July 2015 (or alternatively from such other date as the Court determines was a reasonable date for sale of the estate property, being not later than the spring of 2016).

(d) Interest paid on the plaintiff’s line of credit from 8 July 2015 (or alternatively from such other date as the Court determines was a reasonable date for the sale of the estate property, being no later than the spring of 2016) to date.

...

(f) Loss of capital due to the defendant’s failure to market the property following the grant of probate and sell the estate property within a reasonable time, that date being no later than 8 July 2015, or the spring of 2016, and then every date thereafter.

Paragraph C of the prayer for relief:

An order that the defendant and his co-executor ought to have obtained legal, valuation, and marketing advice and listed Combes Road for sale within a reasonable time, being not later than 8 July 2015, or the spring of 2016, and

thereafter the defendant remained in breach of trust by failing to sell the property.

The grounds for striking out these parts of the statement of claim all have a common basis.

[10] In addition, Adrian applies to strike out paragraph 24(c):

Had she received her inheritance in a timely fashion, the plaintiff and her husband would have purchased 635 Newdale Road, West Vancouver, in 2015 or 2016 for $1.8 million, which property is now estimated to be worth over

$2.8 million, and which they entered into a conditional verbal agreement to purchase on 26 May 2015.

Particulars

(c) The contract was conditional on finance only, there being no express agreed date for satisfaction of the finance condition, such that finance would have had to be obtained within a reasonable time.

[11] Initially Adrian had also attacked paragraph 18 of the amended statement of claim, but that has been addressed in the third amended statement of claim. That is no longer in issue.

[12] Before considering these, I note that there have been earlier interlocutory decisions. Lindsay made an interlocutory application for Adrian and Richard Nowacki to be removed as executors. That led to Mr Nowacki resigning and being replaced by Mr Stafford. Otherwise the application was dismissed.¹ The plaintiff has not sought to have Mr Stafford added as a defendant. While she was not successful in her interlocutory application, she still seeks the removal of Adrian as executor as part of the substantive relief in this proceeding.

[13] Adrian applied for Lindsay to give further particulars of her statement of claim. Associate Judge Smith ordered some further particulars.² In this application Adrian contends that Lindsay has not fully complied with Associate Judge Smith’s directions. The Judge directed Lindsay to provide particulars of the date on which she alleges that Adrian’s failure to sell the property first constituted a breach of trust. He also directed Lindsay to provide particulars of the date by which the finance condition for the

¹ Woodhouse J’s decision was given on 14 August 2017: Hoeberechts v Sprott [2017] NZHC 1928.

² Hoeberechts v Sprott [2018] NZHC 2818.

purchase of Newdale Road was to be satisfied.³ Associate Judge Smith recorded well- established principles on requirements for particulars in pleadings. It is not necessary to repeat those here.

[14] I also make it clear that in dealing with this application, I am concerned only to establish whether the plaintiff has adequately articulated her case to enable the defendant to prepare his case for trial. I am not required to consider the merits of each side’s case. I am well aware that the merits are strongly contested. For example, Lindsay is claiming as special damages the loss of the benefit of the purchase of the property in Vancouver. That will be contested. I note from the statements of defence that liability is strongly contested. At trial Adrian will put before the court evidence to explain why the Combes Road property has not yet sold. I note his explanation that the property could be enhanced by the removal of a tree, and that became possible under amendments to the planning rules for Auckland City. The value was further enhanced when the Auckland Unitary Plan came into force and it became possible to subdivide the property. He refers to steps taken to obtain advice on subdivision and he has explained attempts to market the property and sell it.

[15] The matter comes down to two broad questions: the way that Lindsay has pleaded the time when Adrian is alleged to have been in breach of his duty to sell the property, and the pleading of the time for complying with a finance condition on the purchase of the property in Vancouver.

[16] On the first point I refer to Associate Judge Smith’s decision:


[60] In his post-hearing memorandum Mr Allan submitted that "[Lindsay] plainly contemplates a cascading series of dates falling after 8 July 2015 which she will urge the Court to find is the date by which [the property] should have been sold". He submitted that Adrian is entitled to know what Lindsay asserts or will assert that date or those dates are — he should not be required to guess the date, which is fundamental to Lindsay's allegations and to any alleged increase or diminution in the value of the estate.


[61] I agree with Mr Allan's submission that the words "such other date as the Court considers reasonable" in Ms Bruton's formulation of the particulars, effectively ensure that Adrian is told nothing of Lindsay's case on the question

³ Hoeberechts v Sprott [2018] NZHC 2818 at [50].

of when delay in selling the property is said to have become a breach of trust. (On Ms Bruton's formulation Lindsay could contend at trial for a date either before or after 8 July 2015.) And just as in the case of a negligence claim based on an alleged omission the defendant would normally be entitled to be told what he or she has allegedly omitted to do (i.e. what he or she should have done), so here I think Adrian is entitled to be told when the alleged delays in selling the property are said to have first constituted a breach of trust.

[62] That said, I do not think this is a case where Adrian will be unfairly confronted with a cascading series of dates by which it is contended he should have sold the property. It seems to me that a proper pleading would be that Adrian was "required to sell the property within a reasonable time, being not later than [date]. Thereafter Adrian remained in breach of trust by failing to sell the property ...". The reality of the claim here is that it is one of alleged ongoing breach of trust, and in those circumstances I think the most Adrian can be entitled to is particulars of the date on which it is said the ongoing breach started.


[63] Taking those considerations into account, I direct that Lindsay is to provide particulars of the date on which it is alleged that failure by Adrian to sell the property first constituted a breach of trust on his part. That direction will require an actual date — it will not be a sufficient answer to say "such date as the Court may consider reasonable" (or words to similar effect). Those particulars are to be provided by 28 November 2018.

[17] Mr Allan submits that the way that Lindsay has pleaded this in paragraphs 11 and 29, and the prayer for relief, does not meet what Associate Judge Smith had in mind. He says that the defendant is placed in a position of embarrassment because he is alleged to have been liable for not selling the property over a period of up to 420 days, and the defendant will be required to defend the case on the basis that on any of those days he could have been required to sell. It is in effect a repeat of the “cascading series of dates” submission made to Associate Judge Smith.

[18] It is important, in my judgment, to consider what is in issue here. The executors were under a duty to sell the property. That is plain from the will itself. The plaintiff’s case is that ordinarily an executor has a year in which to complete the administration of an estate. That tends to be more of a rule of practice than a rigid rule of law. Nevertheless, Lindsay contends that once the executor’s year was up and no steps had been taken to sell the property, then Adrian was in breach of his duty to sell. The plaintiff’s case is that while she cannot allege any breach of duty to sell during the executor’s year, Adrian breached the duty from the end of the year.
[19] As Associate Judge Smith noted, this case alleges an ongoing breach of trust, (or rather, breach of duty as executor) and therefore it is not possible or sensible to require the plaintiff to specify any one date within that period as being the date of breach of trust on which she relies. For her case she can rely on ongoing breaches by the defendant from the time when he is first regarded as being in breach of duty. The plaintiff has pleaded this by specifying a date range from July 2015 through to the spring of 2016. The defendant is arguably in ongoing breach if he has still not managed to sell the property, even though that is outside the date range specified by Lindsay.

[20] The defendant says that it will not be possible to prepare evidence adequately to address this question of ongoing breach. With respect, any such difficulties are inherent in the nature of the case. Obviously both sides will need to instruct valuers to prepare evidence as to the value of the property during the period which Lindsay has put in issue. But it is not unusual for valuers to be asked to specify values of a property, not only at a given date but also as to changes in the value of the property over a period. I would expect valuers to use their usual methodologies to obtain the market value of the property throughout the period from July 2015 to the spring of 2016. In short, I regard the current pleading as meeting what Associate Judge Smith had in mind. It might have been better if the plaintiff had adopted what Associate Judge Smith proposed in para [62] of his decision, but the plaintiff is trying to cover two bases: one, to take the start date for breach as the end of the executor’s year; and the second, to meet a potential objection that the plaintiff agreed to a deferred sale, and it would not be open to her to complain about a failure to sell earlier. To meet that possible objection she contends for a sale date of around spring 2016. Her pleading is adequate to address those possibilities.

[21] Her pleading is also adequate to meet any objection that says that while the end of the executor’s year was not appropriate, some intermediate point in time was appropriate. In short, the defendant must deal with a case alleging a date range when the property should have been sold, and in my view he is not unduly embarrassed by having to prepare on that basis. Conversely, there is the risk of an injustice to the plaintiff in requiring her to specify particular dates within that date range when the property should have been sold. That would require too much particularity. It risks
causing a miscarriage of justice if the evidence establishes that there is some alternative date which she had not specified in her pleading. She is entitled to take a date range rather than specify particular dates. Accordingly, I dismiss the application insofar as it refers to the pleadings that Adrian was in breach of the duty to sell.

[22] The other point relates to the finance clause. Associate Judge Smith directed Lindsay to provide particulars of the date by which the finance clause was required to be met. Lindsay has pleaded that there was not an express date for satisfaction of the finance condition, and that meant that finance would have to be obtained within a reasonable time.

[23] Mr Allan objected to that, but as I understand his submissions, his objections were directed more at the merits of the case. He pointed to the fact that if time had not been given to fix a date for the finance date to be met, the agreement for sale and purchase was still in effect, and therefore Lindsay had not suffered any loss under that agreement. Alternatively, if there was no finance date fixed, then possibly there was no agreement on the point and the agreement itself was not certain. I understand his case is this was a purely oral agreement and therefore may not be enforceable under the law of British Columbia.

[24] I observe that in New Zealand if a contract does not specify a date by which a condition must be satisfied, it must be satisfied within a reasonable time, and if a party wishes to bring some certainty to the matter it is necessary to give notice fixing a time for satisfaction of the condition.⁴ I bear in mind that the contract was governed by the law of British Columbia, and if the law of British Columbia is pleaded then it may be possible to show that that law is different. Failing that, a New Zealand court will apply New Zealand law in the absence of proof to the contrary.

[25] In short, there is an adequate pleading as to the time for satisfaction of the finance condition. The pleading is adequate to allow the defendant to prepare a defence in response to it. It is not necessary to require any further orders there.

⁴ See for example Hunt v Wilson [1978] 2 NZLR 261 (CA).

[26] Accordingly, on the two points I have been required to decide, I find against the defendant. The application is accordingly dismissed.

Costs

[27] The plaintiff is to have costs, which are on a Category 2 basis. I encourage counsel to confer. I am not making any adjustments one way or the other on costs, despite the submissions of counsel. I do not see this as a case requiring indemnity costs. The defendant may say that he has been in part vindicated because he was able to elicit particulars in respect of para [18] of the second amended statement of claim, but conversely the plaintiff’s counsel wrote to Mr Allan earlier in the year setting out the terms of a draft statement of claim, which became the third amended statement of claim which would have addressed all outstanding matters. This hearing could have been saved if Mr Allan had acceded to that. Those two matters in my view balance out. The plaintiff has prevailed overall. Just as the defendant required the plaintiff to pay costs ordered by Associate Judge Smith, similarly the defendant will be required to pay costs to the plaintiff once those costs are fixed. Counsel have confirmed that they agree that the time bands for fixing costs should be Band B. That should be sufficient for counsel to be able to agree on the appropriate steps and to calculate costs without further direction from the Court.

.................................

Associate Judge R M Bell