SADLER V PUBLIC TRUST CA CA550/2008

SADLER V PUBLIC TRUST CA CA550/2008 19 August 2009IN THE COURT OF APPEAL OF NEW ZEALAND CA550/2008 [2009] NZCA 364BETWEEN MARIA LOUISA SADLER Appellant AND PUBLIC TRUST Respondent Hearing: 4 June 2009 Court: Glazebrook, O'Regan and Baragwanath JJ Counsel: J Mather for Appellant J O Upton QC and R Da Vanzo for Respondent Judgment: 19 August 2009 at 11.30 amJUDGMENT OF THE COURT A The appeal is dismissed. B There will be no order as to costs.____________________________________________________________________REASONS OF THE COURT(Given by Glazebrook J)Table of ContentsPara NoIntroduction [1]Background [7]Venning J's judgment [14]The parties' submissions [24]Previous case law [26]Our assessment [36]Conclusion [41]Result [43]Introduction[1] Ms Sadler is the daughter of the late Mr Barry Boon, who died on 7 June 2002. By his will dated 4 March 2002, he appointed the Public Trust as executor and trustee and provided for his entire estate to pass to his partner, Ms Irene Curnow. Probate was granted on 23 July 2002 and the estate was distributed to her on 2 May 2003. The net value of Mr Boon's estate as at the date of his death was just over $250,000. [2] Ms Sadler, as the daughter of Mr Boon, was entitled to make a claim under the Family Protection Act 1955 (FPA) against Mr Boon's estate. Ms Sadler did not, however, learn of Mr Boon's death until July 2004 and by that time she was out of time to bring a claim under the FPA. The statutory time limit for Ms Sadler to bring a claim as of right under the FPA expired on 23 July 2003, being twelve months after the grant of administration in New Zealand: s 9(2) of the FPA. The Court has power, under s 9(1) of the FPA, to extend the time limit where an application is brought before the final distribution of an estate but, as noted above, the final distribution of Mr Boon's estate had occurred on 2 May 2003. [3] Ms Sadler brought proceedings against the Public Trust alleging a breach of the fiduciary duty of even-handedness because it had not informed her of Mr Boon's death. In a decision of 18 December 2006, Sadler v Public Trust (2006) 26 FRNZ 115 (HC), Venning J held that the Public Trust did not owe a duty to Ms Sadler, as a potential adult claimant under the FPA, to advise her of the death of Mr Boon. [4] He held that, even if he was wrong in that view on the facts of the present case, the Public Trust would be entitled to relief under s 73 of the Trustee Act 1956. If, however, there had been a duty to inform Ms Sadler of her father's death and s 73did not apply, Venning J found that the value of Ms Sadler's claim under the FPA would have been $62,500. [5] Ms Sadler appeals against Venning J's judgment. She contends that she was an actual potential claimant known to the Public Trust as someone the testator believed would claim. She therefore fell within a class of persons to whom the Public Trust owed a duty at least to attempt, if not positively to advise, of the death of Mr Boon. She also submits that the Public Trust should not be relieved of liability pursuant to s 73 of the Trustee Act. There is no cross-appeal by the Public Trust with regard to quantum should Ms Sadler's appeal succeed. [6] Before addressing Ms Sadler's contentions, we set out the background in more detail and summarise Venning J's judgment and the case law to date.Background[7] Ms Sadler left home in 1993 when she was aged about 20. She moved to Australia with her boyfriend in April 1994 and came back to New Zealand in 1995. By then her mother and father had separated but Ms Sadler maintained contact with both. In February 1999, Ms Sadler married and Mr Boon went to her wedding. After the marriage, she and her husband moved to Australia. [8] In late October 2000, Mr Boon contacted Ms Sadler and told her that her mother was seriously ill in hospital. She returned to New Zealand and saw her mother in hospital on 30 October 2000. She then went to Tauranga to stay with Mr Boon. Her mother died on 2 November 2000, while Ms Sadler was in Tauranga. [9] After her mother's death, Ms Sadler and Mr Boon fell out over the division of her mother's estate. Proceedings were issued. These were ultimately compromised on the basis that Mr Boon received $20,000 from his wife's estate, with Ms Sadler and her younger sister each receiving approximately $56,000 or assets to that value. Ms Sadler's contact with Mr Boon ceased in about August 2001 during the course of settling the proceedings regarding her mother's estate. Ms Sadler did, however,write to Mr Boon in March 2002 but did not receive a reply. Ms Sadler had returned permanently to live in New Zealand in April 2001. [10] At the trial before Venning J, Ms Curnow, Mr Boon's partner and sole beneficiary under the will, said that Mr Boon had repeatedly told her that he did not want Ms Sadler or her younger sister to know about his funeral or even the fact that he had died. Mr Boon gave as his reason for cutting ties with his daughters, the falling out with Ms Sadler and her sister over their mother's estate. [11] The Public Trust was also told that Mr Boon did not want his daughters informed of his death. Mr Boon had made it clear that he wanted to leave his entire estate to his partner and to leave Ms Sadler and her sister out of his will. The Public Trust required a note from Mr Boon as to his reasons for this. Mr Boon prepared such a note. In that note Mr Boon explained the circumstances of the falling out over the mother's estate. He ended the note by saying:They gave me nothing, not even respect and that in my will is my gift to them nothing.[12] When Mr Boon died no death notice was placed in the newspaper. The evidence was that the Public Trust does not, however, have a practice of advertising the death of testators for whom it holds a will. Indeed, it relies on the death notices in the paper to ascertain if a person for whom it holds a will has died. [13] The Public Trust did, however, advertise for creditors in accordance with s 35 of the Trustee Act, giving notice on 13 June 2002 in the New Zealand Herald in terms of that section. It received no notice of any claims in response.Venning J's judgment[14] After a detailed consideration of the case law, Venning J held that the duty of even-handedness between beneficiaries is extended to potential claimants who have notified their intention to claim to the executor. Once an executor has been given notice of a claim, the executor must recognise the claimants' statutory rights, provide them with information, not take any steps to thwart their claim and act even-handedly between the competing interests of the beneficiaries under the will and the parties who indicate they wish to claim under the FPA. Venning J said that the duty of even-handedness also requires an executor to be frank and open and not misleading if a potential claimant approaches the executor for information concerning the death of the deceased and for other relevant information, such as the date of probate. In essence, Venning J considered the duty as essentially reactive in nature, rather than positive. [15] Venning J considered that the case law did not support the proposition that the duty of even-handedness requires an executor to disclose the fact of death to potential claimants, who have not indicated their wish to bring a claim. In Venning J's view, the starting point must be that the executor's primary obligation is to see that the wishes of the testator as expressed in the will are carried out: Re Branson(1911) 31 NZLR 79 (SC). Venning J considered that there is an important distinction between a beneficiary under a will and a potential claimant. In the case of a claimant there was merely a right to claim (which may of course be rejected). [16] Venning J considered the test for ascertaining the existence of fiduciary relationship as outlined in Frame v Smith (1987) 42 DLR (4th ) 81 (SCC) and the "reasonable expectations" test in LAC Minerals Limited v International Corona Resources Limited (1989) 61 DLR (4th ) 14 (SCC), both of which have been applied in New Zealand. He concluded, at [61] and [63], that neither test was met in this case. [17] Venning J considered his conclusion to be backed up by practical considerations and the legislative scheme. He pointed out that, if there is a duty to notify potential claimants of death, it would have to extend to all potential claimants under the FPA, including spouses or civil union partners, de facto partners, all children, grandchildren, stepchildren (who are maintained) and, in some circumstances, the parents of the deceased. If that had been intended, Venning J considered that Parliament would have provided for it, just as it provided for the position of minors and parties under a disability under s 4(4) of the FPA. Further, Venning J considered that, if Parliament had intended that the fact of death was to benotified in a formal way, it would have provided for it by a similar provision to s 35 of the Trustee Act. [18] Venning J also noted that ss 47(4) and 48(2) of the Administration Act 1969 confirm that an executor is entitled to distribute an estate if there is no notice of claim. The competing interests are certainty in administration of an estate balanced against a reasonable time for parties to learn of death and take proceedings if they wish. Venning J accepted that the time limits are to a degree arbitrary but he considered that Parliament can be taken to have determined that the periods in ss 47(4) and 48(2) of the Administration Act and in s 9(1) of the FPA are sufficient to ensure an appropriate balance. Those provisions, in Venning J's view, further support the proposition that the executor is not under an obligation to bring the fact of death or the availability of a right to make a claim to the attention of all potential claimants. [19] In the event that he was wrong on the extent of duty, Venning J held that s 73 of the Trustee Act would properly apply to excuse the actions of the Public Trust in this case. Section 73 reads:73 Power to relieve trustee from personal liabilityIf it appears to the Court that a trustee, whether appointed by the Court or otherwise, is or may be personally liable for any breach of trust, whether the transaction alleged to be a breach of trust occurred before or after the commencement of this Act, but has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the directions of the Court in the matter in which he committed the breach, then the Court may relieve him either wholly or partly from personal liability for the same.[20] While s 73 refers to breaches of trust, Venning J considered that the breach of fiduciary duty alleged by Ms Sadler in the present case was effectively an allegation of breach of trust towards her as a person entitled to share in an estate otherwise held on trust. Taking a purposive approach to the interpretation of s 73, Venning J considered that it would apply to a person in Ms Sadler's position. [21] Venning J held that the Public Trust in this case acted on the basis of its long established practice and in accordance with what the evidence showed to be the practice not only of the Public Trust but also of experienced estate and trustpractitioners. In not advising Ms Sadler as a potential claimant of the death of Mr Boon, the Public Trust was doing no more than following a standard practice which it honestly and reasonably believed to be the accepted practice in New Zealand at the time. [22] Further, Venning J held that there was no evidence that the Public Trust acted or took steps to conceal the death of Mr Boon from Ms Sadler as a potential claimant. It simply followed its general practice. The Public Trust would have been guilty of concealment if Ms Sadler had rung and made an inquiry which was not answered fully or during the course of which Ms Sadler was not advised of Mr Boon's death. But nothing of that sort happened in this case. [23] What the defendant did not do was take any active steps to draw the fact of Mr Boon's death to the notice of Ms Sadler. That, however, did not amount to concealment in Venning J's judgment. Indeed, the Public Trust advertised under s 35 of the Trustee Act for creditors. While under s 35(8) of the Trustee Act this does not give a defence to claims under the FPA, in Venning J's view it was relevant as evidence of the Public Trust's good faith in the way it approached its obligations in respect of the administration of the estate and thus was a relevant factor to be taken into account when considering the relief sought under s 73 of the Trustee Act.The parties' submissions[24] Mr Mather, on behalf of Ms Sadler, submitted that while Ms Sadler had not notified an intention to claim, Mr Boon had advised the Public Trust of Ms Sadler's existence. Further, the testator had made it clear to the Public Trust that he wanted his death kept from Ms Sadler and, in Mr Mather's submission, the implication must be that Mr Boon feared a claim. After his death, Ms Lyn Bougen, an employee of the Public Trust, advised Ms Curnow that a claim by Ms Sadler could not be ruled out showing that the Public Trust was aware of a possible claim. This meant, in Mr Mather's submission, that the Public Trust owed a duty to Ms Sadler to advise her of Mr Boon's death. As to s 73 of the Trustee Act, Mr Mather submitted that a breach of a duty of this nature cannot be excused under that section.[25] Mr Upton QC, for the Public Trust, submitted that the testator did not advise the Public Trust that Ms Sadler would make a claim. It is accepted that Mr Boon made it clear to the Public Trust that he wanted the fact of his death kept from his daughter, but the suggested implication that the reason for doing so was because "the testator feared a claim" does not follow. A more simple explanation is equally open. Rightly or wrongly, the late Mr Boon wanted a complete break with his daughters and to cut his links with them. In the circumstances there was no obligation to advise Ms Sadler of her father's death. Mr Upton submitted that, given the state of the case law and the general practice of experienced practitioners, Venning J was also correct to hold that s 73 of the Trustee Act would have relieved the Public Trust of any liability.Previous case law[26] The general nature of the duty owed by an executor to potential claimants against an estate has been considered in New Zealand in a number of cases. [27] In Irvine v Public Trustee [1989] 1 NZLR 67 (CA) the issue before the Court focused largely on whether the personal representative of a deceased spouse could bring an action under the Matrimonial Property Act 1963 against a surviving spouse. In the course of the decision, however, Cooke P (for the Court) referred at 71 to a note in 17 Halsbury's Laws of England (4 ed) at [1193], expressing the view, "without citation or supporting authority", that the duty of even-handedness between all the beneficiaries "includes persons entitled or potentially entitled as statutory beneficiaries under the family provision legislation". [28] Cooke P commented that he thought that this must be the position in New Zealand insofar as it relates to persons of whose claims the personal representative is aware. The Court thus held that the Public Trustee's duty of even-handedness extended to the adult children of the testator, if the Public Trustee knew they intended to claim and wished the extent of the estate to be determined. [29] It was not necessary for the purposes of the case, however, to consider whether the duty of even-handedness also applied to persons of whose claims apersonal representative ought to have been aware, although Cooke P noted that, in the case of a person not of full age or mental capacity, this Court has recognised that there is a duty in a clear case to take action to safeguard that person's interests:Re Magson [1983] NZLR 592 at 599 (CA). It was also not necessary in Irvine to determine the exact extent of the duty of even-handedness with regard to potential claimants. [30] The next relevant development was the case of MacKenzie v MacKenzie(1998) 16 FRNZ 487 (HC). The plaintiffs in that case were the adult children of the deceased. At a meeting after the deceased's death, his executrix (the deceased's second wife and the sole beneficiary of the estate) falsely told the plaintiffs that there was no money in the estate. The plaintiffs subsequently discovered the true position and commenced an action. [31] It was held that the executrix had been guilty of deceit and that, in the circumstances of this case, she was in a fiduciary relationship with the plaintiffs. That fiduciary relationship was breached by her giving inaccurate and misleading information. Hammond J said that Irvine was authority for the proposition that the duty of even-handedness as between beneficiaries extends to statutory claims of which the personal representative was aware but he did not read Cooke P's judgment as going so far as to require the formal lodgement of a claim. In the case before Hammond J, the plaintiffs had made their concerns known, had clearly indicated that they wanted to know what the "true" position was and that they wanted some things from the estate. They were entirely deflected from more substantial claims by the defendant. [32] The most recent decision of this Court is that of Price v Smith [2004] NZFLR 329 (CA). This was a decision on appeal from the decision of Laurenson J inRe Stewart [2003] 1 NZLR 809 (HC). The executors in that case had followed instructions from the deceased not to place a death notice in the papers, not to notify her two children of her death and to have a private burial. [33] In Re Stewart, the High Court had held that an executor owes a positive duty to potential adult claimants against an estate not to conceal the fact of death.Laurenson J granted an extension of time to the children to make a claim under the FPA because he held that the beneficiaries of the will and the executors had concealed from the children the fact that their mother had died. There is some difficulty in ascertaining exactly what he contemplated by the duty not to conceal the fact of death, as noted by Venning J in his judgment in this case at [32] – [42]. Laurenson J seemed to reject the proposition that there was a positive duty to inform all claimants of the fact of death but at the same time appeared to contemplate that there could be concealment if the normal course of events, including the placing of death notices by family members, had not occurred and instructions actively to conceal the fact of death had been followed. [34] This Court in Price v Smith allowed the appeal from the decision of Laurenson J on the ground that there was no power to extend the statutory limitation period under the FPA once an estate has been distributed. The Court, however, left open whether a duty of even-handedness or some other duty of a fiduciary nature existed in the particular circumstances in favour of the sons and whether it was breached by the executors. It considered that it would be unwise to opine on this in the absence of full factual findings after a trial. [35] On the authorities as they currently stand, therefore: (a) A duty of even-handedness extends to potential claimants against an estate where an executor is aware that they wish to make a claim (Irvine); (b) The duty extends to ensuring that an executor does not actively and dishonestly conceal relevant material about the estate from potential claimants who seek information about the estate (MacKenzie); (c) The duty of even-handedness may extend to those of whose claim the executor ought to be aware, but the exact extent of any such duty has not been defined (Irvine); whether there is a general duty of even- handedness that extends to require executors to inform all potentialclaimants of the fact of death and when such a duty, if it exists, might arise was left open by this Court in Price v Smith.Our assessment[36] It is common ground that the requirements of the first category in Irvine (see at [35](a) above) are not met. Ms Sadler had not notified the Public Trust of a potential claim. Equally, we agree with Venning J that there is no question of concealment in this case and so this case does not come within [35](b). [37] We also do not consider that the case comes within the second category inIrvine (see at [35](c) above). The evidence may go so far as providing grounds for the Public Trust to have suspected that Ms Sadler might make a claim, but not that the Public Trust ought to have known that Ms Sadler would have made a claim if she had learned of Mr Boon's death, let alone that her claim might be a good claim. [38] The Public Trust knew that Ms Sadler was adult, estranged from her father and had benefited substantially from her mother's estate. Mr Boon's estate was small and the sole beneficiary was Mr Boon's partner. The Public Trust did not know of the specific matters relied on by Ms Sadler in the High Court to support her argument of a breach of moral duty and which must have influenced Venning J in setting the size of the award he would have made, outlined at [4] above. [39] This leaves the question left open in Price v Smith (see at [35](d) above) of whether there is a general duty to advise all potential claimants of the death of a deceased or a general duty to advertise for claimants. We agree with Venning J, for the reasons he gave, summarised at [15]-[18] above, that there is no such duty. We also refer to Public Trust v Public Trust HC AK CIV 2008-404-3717 13 March 2009. In that case, Priestley J agreed with Venning J's analysis in his judgment in this case and set out two further important policy considerations that weigh against any such general duty. We agree with his remarks. He said:[44] There is also an important policy consideration which lies behind what I perceive to be the current state of the law. As Venning J observed there are a number of classes of potential claimants. If a claim under the Actis filed then obviously those classes have to be cleared out. But to notify all such claimants would cause delay and expense, almost certainly unnecessarily, while such potential claimants are identified and their whereabouts ascertained. [45] Quite apart from that consideration, notification would have the ability to encourage claimants to mount claims which otherwise they might not be motivated or disposed to bring. Human nature being what it is, to notify a person that he or she has a right to claim might well result in that person deciding to have a crack at the estate, particularly if there is a perception the estate is large. That dynamic too would add to expense and delay in the estate's administration.[40] As it does not arise in this case, we leave open, as Cooke P did in Irvine, whether the duty of even-handedness arises in cases where an executor ought to know of a claim: see at [35](c) above. We would also leave open the exact content of any such duty and whether, and in what circumstances, it may extend to a duty to advise that potential claimant of the death of the testator.Conclusion[41] In summary, the position is: (a) A duty of even-handedness extends to potential claimants against an estate where an executor is aware that they wish to make a claim. (b) This duty extends to ensuring that an executor does not actively and dishonestly conceal relevant material about the estate from potential claimants who seek information about the estate. (c) We leave open the question of whether the duty of even-handedness may extend to those of whose claim the executor ought to be aware. We also leave open whether any duty of even-handedness to such potential claimants would extend to a duty to inform those potential claimants of the fact of death. (d) There is no general duty on an executor to advertise the fact of death or to inform all potential claimants of the fact of death. This applies even where there may be a suspicion (but not sufficient to bring thepotential claimant within category [41](c) above) that a particular potential claimant may wish to make a claim. This means that the question left open by this Court in Price v Smith (see at [35](c) above) has now been answered in the negative. [42] In this case, at its highest, there were only grounds for suspicion that Ms Sadler might make a claim. She thus does not come within the category of persons set out at [41](a) or (c). There was no concealment in terms of [41](b). The duty of even-handedness thus did not arise. We would in any event have upheld Venning J's conclusion on s 73 of the Trustee Act for the reasons he gives, outlined at [19] - [22] above. This means that Venning J was correct to hold that Ms Sadler's claim in this case must fail.Result[43] The appeal is dismissed. [44] As Ms Sadler is legally aided, there is no order for costs.Solicitors: Lawlor & Co, Auckland for Appellant Public Trust Legal Services, Wellington