Newland v Robertson [2017] NZHC 2878

Newland v Robertson [2017] NZHC 2878 [22 November 2017]IN THE HIGH COURT OF NEW ZEALANDNEW PLYMOUTH REGISTRYI TE KŌTI MATUA O AOTEAROANGĀMOTU ROHECIV-2014-443-000017[2017] NZHC 2878BETWEEN JOHN SCOTT NEWLAND ANDJANICE MAREE FORSYTH ASEXECUTORS IN THE ESTATE OFGILLIAN ROBERTSONApplicantsAND DUNCAN STEWART ROBERTSON BYHIS ATTORNEYS JAMES ARTHURCOLEMAN AND AARON BLAIRROBERTSONFirst RespondentsAND AARON BLAIR ROBERTSONSecond RespondentHearing: 11-14 July 2016Appearances: S W Hughes QC for the ApplicantsR J B Fowler QC for the First RespondentH B Rennie QC for the Second RespondentA R Gilchrist for seven residual beneficiaries of the estates ofthe applicant and the first respondenJudgment: 22 November 2017JUDGMENT OF PALMER JThis judgment is delivered by me on 22 November 2017 at 4 pmpursuant to r 11.5 of the High Court Rules......................................................Registrar / Deputy RegistrarCounsel: Solicitors:S W Hughes QC, New Plymouth Nicholsons, New PlymouthR Fowler QC, Wellington Bullock & Associates, WhanganuiH Rennie QC, Wellington Horsley Christie, WhanganuiA R Gilchrist, Barrister, Auckland Atmore & Co, AucklandSummary[1] By the latter half of 2012, Ms Gillian Robertson could communicate only withher eyes and her thumbs. She, her husband Mr Duncan Robertson and his cousin MrAaron Robertson signed a Deed purporting to waive her relationship property share inGlenview farm to allow the farm to be given to Aaron on Duncan's death. Herlitigation guardian, a residuary beneficiary, brought proceedings challenging the Deed.Gillian and Duncan have both since died. At the parties' request I adjourned thehearing in July 2016 to allow them to explore settlement. A settlement proposal wasjointly made by the parties, involving half of the value of the relationship propertygoing to each estate, with the farm being gifted by Duncan to Aaron. Seven residuarybeneficiaries raised concerns about the proposal. I have determined the settlementproposal honours the spirit of the wishes of both Gillian and Duncan. I make orderseffecting it.What happened?The Parties[2] Gillian and Duncan owned Glenview, a farm in Waverley, South Taranaki.From 2007, Duncan's cousin, Aaron, managed Glenview for them. In 2008 Gillianand Duncan made wills leaving their estate to each other and then to their nieces andnephews. In 2010 they signed codicils giving Aaron first right of refusal overGlenview on sale after their deaths. Gillian developed supra nuclear palsy and, inDecember 2010, she entered Te Mahana Rest Home. Duncan acted as her attorneythough, in December 2011, she appointed her nephew, Mr John Hunter, as successorattorney. Duncan appointed Aaron as his attorney.The Deed[3] By the latter half of 2012 Ms Gillian Robertson could communicate only withher eyes and her thumbs. Meanwhile, discussions between Aaron and Duncan hadprogressed about the farm. On 19 November 2012, the Robertsons' solicitor, Mr JamesColeman, drafted a Deed of Arrangement between Aaron, Duncan and Gillian,purporting to gift Glenview to Aaron on Duncan's death if Aaron was still farmmanager. It purported to waive Gillian's half share of Glenview under the Property(Relationships) Act 1976 (the Act). Another solicitor, Mr Roger Lawrence attendedon Gillian on 19 November 2012 to discuss the Deed. Some amendments were madeand Gillian marked it on 29 November 2012. On 10 December 2012 Mr Colemanattended on Duncan who signed the Deed. On 21 December 2012 Mr Colemanattended on Duncan who signed a new will, gifting the farm to Aaron. In January 2013Duncan, too, was admitted to Te Mahana.Commencement and hearing of the proceeding[4] In January 2014 Mr John Hunter, Gillian's attorney and nephew, who was apotential beneficiary under her will, interviewed Gillian. These proceedingschallenging the Deed were brought by Mr Hunter as litigation guardian in her name inMarch 2014. Gillian died on 2 January 2015. The proceeding was continued by theexecutors of her estate.[5] From Monday 11 July to Thursday 14 July 2016 I heard opening submissionsand the evidence in New Plymouth:(a) On behalf of Gillian's estate, I heard opening submissions from MsSusan Hughes QC and evidence from:(i) Mr John Hunter, the Robertsons' nephew and Gillian's attorney;(ii) Mrs Judith Herbert, manager of Mrs Robertson's rest home;(iii) Mr Wayne Chapman, a commercial law and conveyancingexpert; and(iv) Mr Shaun Gifford, a family law and conveyancing expert.(b) On behalf of Duncan's attorneys I heard an opening statement from MrRoger Fowler QC and evidence from:(i) Mr James Coleman, the Robertsons' solicitor who prepared theDeed;(ii) Mr Roger Lawrence, the solicitor who advised Gillian on theDeed; and(iii) Mr John Strahl, an expert conveyancing lawyer.(c) On behalf of Mr Aaron Robertson I heard an opening statement fromMr Hugh Rennie QC and evidence from:(i) Mr Aaron Robertson;(ii) Ms Elizabeth Somerset, a niece of the Robertsons (a brief fromwhom was admitted by consent);(iii) Ms Ylva Robertson, Aaron's wife; and(iv) Mr Murray Armstrong, a friend of the Robertsons.[6] Ms Hughes' case was the Deed is null and void on the ground of Gillian wasmistaken about it (non est factum) as well as non-compliance with the Act. Mr Rennie,for Aaron, submitted the doctrine of non est factum does not apply here on the factsand there is a problem with the High Court's jurisdiction under the Act. He appearedunder protest to jurisdiction but agreed the issue of jurisdiction should be confrontedin the course of judgment.[7] Mr Duncan Robertson lacks capacity and was a party to the proceedingsthrough his attorneys, Mr James Coleman and Aaron. Mr Coleman and Aaron wereboth witnesses in the proceeding. Mr Coleman took the initial steps to set up thetransaction under challenge and Aaron is a beneficiary of it and a party. Given thepotential conflicts of interest, they both asked solicitors and counsel, Mr Fowler QC,to act in the proceeding as they thought best in their discretion to properly protectDuncan's interests. Mr Fowler took no formal position on the validity of the gift fromGillian to Aaron under the Deed. He acknowledged Glenview was relationshipproperty. He did take a position in relation to jurisdiction over the relationshipproperty claim, submitting it must be heard and determined in the Family Court.Settlement discussions and proposal[8] On 14 July 2016, just before closing submissions were due, counsel for eachof the three parties requested a two-week adjournment to allow settlement discussionsto occur. I granted the adjournment.[9] In response, in a joint memorandum, all counsel stated the objective ofachieving an overall settlement of all matters affecting the parties was "to be achievedconsistently with the rights of all persons who are not parties but entitled to benefits(vested, discretionary, or contingent) from the estates of the Applicant and/or the FirstRespondent".1 The parties agreed to pursue a settlement that would involve:(a) equal division of relationship property, involving Duncan ending upwith Glenview;(b) mirror wills by both Gillian and Duncan, with the same 14 residualbeneficiaries; and(c) conditional gifting of Glenview by Duncan to Aaron.[10] Counsel stated, jointly:2The effect of that gift is to reduce the size of [Duncan's] residuary estate bythe value of that [conditional] gift. Each of the fourteen nephews and nieceswill receive less. Counsel are agreed that on the evidence, that is what Duncanintended to happen, albeit with a contribution from Gillian. But – again as aresult of the circularity [between the two estates having the samebeneficiaries] the aggregate outcome for the residuary beneficiaries is thesame as if that contribution, and the gift, had been made.[11] All parties agreed I had jurisdiction to determine the question of jurisdictionwhich had been put in issue during the hearing. The implication, and the express termsof the joint memorandum, is that I had jurisdiction to make orders in the managementof the proceedings. I agreed that was so.1 Memorandum of Counsel (undated) attached to Minute No 2 of 2 August 2016 at 2.2 At 7.[12] In my Minute No 2 of 2 August 2016 I stated:3[7] The settlement proposal in the joint memorandum proceeds on thebasis that Ms Gillian Robertson and Mr Duncan Robertson have mirror willsthat leave their estate to the same beneficiaries. This means that, as long asproperty is part of either estate, the beneficiaries have the same ultimateentitlement. It also means that it is only the conditional future gift of theGlenview Farm (Glenview) to the second respondent that reduces the totalamount distributed to the beneficiaries, if the gift becomes unconditional.[8] The settlement proposal is based on the following propositions:(a) It was Mr Duncan Robertson's intention to gift his interest inGlenview to Mr Aaron Robertson.(b) The issue in the proceeding is whether Ms Gillian Robertson intendedto waive her claim to half of Glenview.(c) Mr Duncan Robertson's testamentary capacity is agreed not to be inissue, up to and in December 2012 when he signed his last will.(d) Mr Duncan Robertson no longer has testamentary capacity and cannotmake another will himself. The settlement would remove any basisfor his attorneys to apply for a new will to be made.(e) The parties will agree the Deed is not in effect and no application tochallenge that under s 21H of the Act would be made.(f) The assets and value of Ms Gillian Robertson's estate would be as ifthe Deed had not been executed.(g) The assets and value of Mr Duncan Robertson's estate will be reducedby the conditional future gift of his interest in Glenview, under hisDecember 2012 will, to Mr Aaron Robertson (and, thereby, also to hiswife Ms Ylva Robertson).(h) The other clauses of Mr Duncan Robertson's will regarding Mr AaronRobertson (and, thereby, Ms Ylva Robertson) having options topurchase livestock, plant and chattels remain unchanged.(i) Mr Aaron Robertson's position as farm manager is confirmed and thefirst respondent will undertake to complete an employment agreementeffecting that, until Mr Duncan Robertson's death.(j) The respondents will take steps to arrange Mr Aaron and Ms YlvaRobertson acquiring from Mr John Hunter and his sister theircontingent interest in Mr Duncan Robertson's estate if the gift in MrDuncan Robertson's will were to fail.(k) The applicants expect to make a partial distribution of Ms GillianRobertson's estate.(l) There are some other minor practical matters to be provided for.3 Minute No 2 of 2 August 2016 at [7]–[8].[9] I have reviewed the settlement proposal as set out above. Prima facie,I consider that approach is one that the parties should be able to pursue if theywish. It can be said to honour the spirit of the wishes of both Ms GillianRobertson and Mr Duncan Robertson.[13] I directed the first respondents, if they wished to proceed with the settlementproposal, to commence Family Court proceedings as all counsel proposed.Further developments[14] The Family Court proceedings were commenced accordingly and transferredto the High Court on 9 November 2016 under s 38A of the Act. On 1 December 2016,I consolidated them with the extant High Court proceeding.4[15] On 7 February 2017 counsel jointly explained there had been a delay inobtaining the valuation report required for settlement. The report was delivered on 15February 2017.[16] Mr Duncan Robertson died on 14 February 2017. Counsel advised that mayhave some impact on implementation of the settlement. Probate of his will wasgranted on 3 April 2017.Settlement Proposal II[17] On 13 June 2017, on the basis of a joint memorandum of counsel of 2 June2017, I recorded the parties' agreement on resolution of all matters, in light ofDuncan's death, and the orders they sought to implement that agreement.5 That wouldinvolve:(a) a relationship property order determining Glenview is Duncan's soleproperty on payment of $1.25 million from his estate to Gillian's estate;(b) directions to Duncan's executors and trustees to account for and payhalf of the funds they have or will receive for stock, plant, equipmentand vehicles;4 Minute No 3 of 1 December 2016 at [3].5 Minute No 4 of 13 June 2017 at [5].(c) the original High Court proceeding being recorded as discontinuedpursuant to settlement or struck out or judgment entered for therespondents as appears to me correct;(d) the evidence not to be searched without prior leave of a judge;(e) the applicant's and first respondent's actual and reasonable costs beingpaid from the respective estates; and(f) reserving leave to apply further in the event any further issue arises.Concerns raised by seven other beneficiaries[18] On 30 June 2017, at the request of seven of the 14 beneficiaries of Gillian'sand Duncan's estates, I adjourned my consideration of the parties' request for ordersimplementing their settlement until 3 August 2017.6 I noted that, if there was noresolution by the end of that period, the seven beneficiaries may seek to intervene orto launch separate proceedings. I indicated I would schedule a further teleconferenceafter that on application of any of the parties.[19] On 3 August 2017 Mr Gilchrist filed and served a memorandum of counsel forthe seven beneficiaries advising:3 Whilst there has been no resolution of issues, and the non-seeking (andobtaining) of a Vesting Order has resulted in the residual beneficiaries ofboth Estates being $1,250,000.00 worse off, the residual beneficiaries donot wish to pursue a challenge to the proposed settlement, do not seek tointervene, and do not wish to be further heard on the matter.4 The seven beneficiaries leave the issue as to whether the proposedsettlement is approved entirely to the Court, and the other parties, and donot wish to be heard further on this matter.5 Counsel would attend a Telephone Conference if such was held anddirected by the Court, but records that no current Telephone Conferencehas been set, and Counsel does not need to be involved in any furtherTelephone Conference addressing or advancing settlement issues.6 Minute No 5 of 30 June 2017 at [10].Settlement Proposal II Again[20] On 9 August 2017, the three Queen's Counsel representing the parties filed amemorandum of counsel:(a) explaining Ms Hughes and Mr Fowler had discussed with Mr Gilchristthe proceedings and how the settlement proposal came about;(b) advising the position remains exactly the same as it was on 2 June 2017when counsel jointly sought orders that would settle the proceeding;(c) advising there is no additional information or updating of the 2 June2017 memorandum required;(d) confirming to me that:(a) As set out in the 2 June 2017 memorandum, supportingdocuments, and the prior documents and court record, all relevantinformation is before Your Honour;(b) Each counsel has separately considered the interests of theirrespective clients, and the position in law of each of the estatesand Mr Aaron Robertson (including consideration of the impactof the orders on residuary beneficiaries) and confirms to YourHonour that the orders proposed are orders which may properlybe made as proposed;(d) Counsel do not seek either a teleconference with Your Honour ora further in court appearance before Your Honour but will attendeither should Your Honour seek any further information,submissions, or other action by any party.and(e) seeking the orders set out in their memorandum of 2 June 2017.Invitation for final submissions[21] On 17 August 2017, I indicated to the parties I was satisfied the proposedsettlement is appropriate in all respects other than, potentially, its effect on the residualbeneficiaries of both estates. On that issue I had an open mind, I was conscious of thetime that has elapsed already in this proceeding but I was concerned to ensure that theCourt's orders are consistent with the interests of justice. I expressed myunderstanding as follows:7(a) Gillian's will expresses her testamentary intention to convert herproperty into money on trust for Duncan and, on his death, for herresiduary beneficiaries.(b) The transfer of the farm to Aaron would have no effect on Gillian'sresidual estate since transfer of her half of the farm is effectivelycompensated by the payment from Duncan's estate.(c) Duncan's will expresses his testamentary intention to leave (his shareof) the farm to Aaron.(d) The arrangement to transfer the farm to Aaron diminishes Duncan'sresidual estate, to the detriment of the residual beneficiaries, by thevalue of his estate's $1.25 million payment to Gillian's estate. Inreturn, Duncan's estate receives full ownership of the farm which isthen transferred to Aaron.[22] I invited separate submissions on the questions of whether the effects of theorders sought on the residual beneficiaries are consistent with the testamentary wishesof both Gillian and Duncan, equally weighed, and whether the effects are consistentwith the principles of the relationship property regime and, in particular, regarding:8(a) the tests required to be satisfied for me to make the orders proposed;(b) the effect of the proposed settlement on the interests of the residualbeneficiaries;(c) whether and to what extent, given that effect, the proposed settlementhonours the spirit of the wishes of both Mrs Gillian Robertson and MrDuncan Robertson and the principles of the relationship propertyregime;(d) whether any alternative arrangement could be said to better honourthe wishes of Mr and Mrs Robertson;(e) identifying, if I approve the settlement, the procedural means bywhich the residual beneficiaries can pursue the matter if they wish;and(f) whether any party wishes me to hear them on this issue, given that mydecision will need to be reflected in a judgment.7 Minute No 6 of 17 August 2017 at [10].8 At [12].[23] I invited, but did not require, Mr Gilchrist to file such submissions as well, bythe same date, on behalf of the seven concerned beneficiaries.Final submissionsGillian's estate's submissions[24] Ms Hughes submits the settlement involves Duncan and Gillian each receivingone-half of the relationship property to which they were entitled. The settlementreflects Duncan's willingness to transfer cash to Gillian in return for her interest in thefarm, so he could give it to Aaron. The residuary beneficiaries of Gillian's estate willreceive one-half of the relationship property. The residuary beneficiaries of Duncan'sestate will receive considerably less than that because he has gifted the farm to Aaron.But that reflects Duncan's "stated and unwavering intention". The gift was notchallenged. There is no family protection claim available to the residuary beneficiariesand no testamentary promise claim. And the beneficiaries of each estate are the sameso the division of property has no effect on the benefit received.[25] Ms Hughes submits Mr Gilchrist's suggestion of an order vesting half of thefarm in Gillian's estate would have gone beyond what Gillian was entitled to (whichis half the relationship property not half of a particular asset). She also submits that,if Aaron had not been able to afford to purchase Gillian's interest then Glenview wouldhave had to have been partitioned, which was not consistent with Duncan's statedambition. She submits there is no better or, indeed, other possible resolution than thatnegotiated.Aaron's submissions[26] Mr Rennie, on behalf of Aaron, submits the proposed settlement is fullyconsistent with the rights of all parties and beneficiaries and those orders should nowbe made. He submits, on Duncan's death and probate of his will, Aaron's legacyvested, requiring transfer of Glenview to Aaron. Gillian's relationship property claimto half the value of Glenview (as the couple's home) is satisfied by the proposedsettlement. Mr Rennie submits the Court would not, and would not be able to, vesthalf of the farm in Gillian's estate. This is because Glenview was solely in Duncan'sname and he had disposed of it by legacy before any Court determination and noprudent executor would ever seek, and no court would vest, half an interest in anuneconomic farm unit. He submits the impact on the residuary beneficiaries is solelythe effect of Duncan's intended gift of the farm to Aaron. Mr Rennie submits thesettlement in is full accordance with the spirit of the wishes of both Gillian and Duncaneach of whom could give away or consume any or all of their assets before death.[27] Mr Rennie also notes, apart from the seven beneficiaries who have raisedconcerns but stated they do not intend to apply or participate further, the otherbeneficiaries are Mr Hunter and his sister, Mrs Somerset, who gave evidence forAaron, and four other Hunter beneficiaries who have informed Mrs Somerset theywish Duncan and Gillian's intentions to be given effect by the Court. He submits thereare no means by which residuary beneficiaries can pursue the matter because:Duncan's will has been probated; none of the residuary beneficiaries can bring a claimunder the Family Protection Act 1955; none have claimed a testamentary promise; andnone could claim against the executors of either will.Submissions on behalf of Duncan[28] Mr Fowler, on behalf of Duncan's interests, observes that Duncan's intentionto give the farm to Aaron had a long and well-documented gestation. Given that, hesubmits the executors of his estate were never going to agree to Mr Gilchrist'ssuggestion to transfer half of Glenview to Gillian's estate. That would promote theinterests of the residuary beneficiaries of Duncan's estate over the interests of thespecific legatee and would be in breach of their fiduciary obligations.Seven beneficiaries' submissions[29] Mr Gilchrist, on behalf of the seven beneficiaries, restated their concern that ifhalf the value of the farm was in each of Gillian's and Duncan's estates, they wouldbe better off by $1,250,000. Mr Gilchrist submits the proposed settlement does nothonour the spirit of Gillian's wishes and the vesting of half the farm in Gillian's estatewould do so better. He said the seven beneficiaries' sense of unfairness has beenexacerbated by a lack of information and they are concerned about the continuation oflitigation from the time of Gillian's death, at a cost they effectively bear. They leaveit to the Court as to whether to approve the settlement. They submit their own legalcosts should be met from the estate as part of any settlement and that the order that theevidence not be searched without prior leave of the Court should not apply to them.They make comments on their rights against the executors of Gillian's estate whichare not before me. Mr Gilchrist attached a memorandum written by the sevenbeneficiaries amplifying their concerns, which I have read carefully. Ms Hughesresponded to Mr Gilchrist's memorandum.[30] No one sought to be heard.Decision[31] I have considered the submissions by each party and the seven concernedbeneficiaries, in light of the evidence at trial and the law. I confirm my initial viewthat the proposed settlement honours the spirit of the wishes of both Gillian andDuncan:(a) Gillian's estate receives half of the relationship property.(b) Duncan's wish to give Glenview farm to Aaron is honoured.[32] It is true the effect of the settlement impacts adversely on the residuarybeneficiaries. But that derives from Duncan's wish to give the Glenview farm toAaron. A residuary beneficiary is only entitled to what is left in an estate on death andafter specific bequests. Duncan intended the farm to go to Aaron rather than for itsvalue to be left to be distributed amongst the residuary beneficiaries. Gillian intendedfor her residuary beneficiaries to share in her estate, which includes half of therelationship property. Both intentions are honoured by the proposed settlement.[33] Accordingly, I am satisfied the orders required to effect the proposedsettlement comply with the applicable law, are consistent with the facts as ascertainedat trial, are within the scope of determination of the consolidated proceedings and areconsistent with the proper rights and interests of the beneficiaries who are not parties.[34] I am sympathetic to the request of the seven concerned beneficiaries to be ableto access the court file. But I do not know the positions of the parties, other than theapplicants, on that question. So I make the order sought by the parties and leave it tothe beneficiaries to request access to the court file, with reasons, if they wish, uponwhich I would seek the responses of the parties.[35] I have allowed the seven concerned beneficiaries to express their concerns,have carefully considered them and have made a decision about their concerns whenstrictly, perhaps, I was not required to do so. They are not parties to the proceeding.Their request for legal costs must be directed to the relevant executors who mustconsider it in accordance with their fiduciary duties.Result[36] I make the following orders:(a) I determine and declare the land and buildings of Glenview Farm at 694Karahaki Road, RD 1, Waverley, comprised of TN151/39, TN262/30,WN495/115 and WNE3/1150, are the sole property of DuncanRobertson on payment of $1,250,000 from his estate to GillianRobertson's estate.(b) I direct Duncan's executors and trustees to account for and pay half ofthe funds they have or will receive for stock, plant, equipment andvehicles.(c) I enter judgment in this proceeding for the respondents, as soughtjointly by the parties.(d) I order the evidence is not to be searched without prior leave of a judge.(e) The applicants' and first respondents' actual and reasonable costs willbe paid from the respective estates.(f) I reserve leave for any of the parties to seek the assistance of the courtin the event any further issue arises with this proceeding.Palmer J