TOLLEY & ORS v HONA [2021] NZHC 2481

TOLLEY & ORS v HONA [2021] NZHC 2481 [21 September 2021]IN THE HIGH COURT OF NEW ZEALANDROTORUA REGISTRYI TE KŌTI MATUA O AOTEAROATE ROTORUA-NUI-A-KAHUMATAMOMOE ROHECIV-2020-463-000055CIV-2020-463-000056[2021] NZHC 2481IN THE MATTER OFANDthe Property Law Act 2007IN THE MATTER OF the Protection of Personal and PropertyRights Act 1988BETWEEN NGAHUIA ROBERTA TOLLEYDOUGLAS-DAVIS JULIAN HONAMADELEINE NGAROMA WILLIAMSNGAIRE IRIHAPETI KHANPlaintiffsAND MARGARET HAANA DENYS HONADefendantHearing: 23 July 2021Appearances: P Birks for the PlaintiffsNo appearance for the DefendantJudgment: 21 September 2021INTERIM JUDGMENT OF WALKER JThis judgment was delivered by me on 21 September 2021 at 3 pmPursuant to Rule 11.5 High Court RulesRegistrar/Deputy Registrar[1] The plaintiffs and the defendant are siblings. They, along with the estate oftheir late mother and late sister, are registered owners of the former family home at4 Knight Place, Rotorua (the Property). The parties have fallen out after the death oftheir mother, Emma Atamira Hona, aged 80 years, on 24 June 2017. The defendant isliving in the Property, refuses to engage with other family members and has not paidrent or outgoings. She has excluded the plaintiffs from the Property.[2] There are two proceedings before the Court. The first is an application unders 339 of the Property Law Act 2007 (the Act) for the sale of the property to the thirdnamed plaintiff and associated orders. In the second proceeding the plaintiffs seek torecover funds belonging to their mother which they allege the defendant misappliedin breach of fiduciary duty when she was purporting to look after their mother'sproperty affairs.[3] The defendant has not filed a statement of defence or taken any steps in theproceedings. The plaintiffs proceed by way of formal proof. There is proof of serviceon the defendant. Mr Birks has confirmed that all non-parties who may have aninterest in the proceedings have been served, including the Public Trust in Rotorua.Background[4] As some of the parties share a common surname, I shall refer to thoseindividuals by their first names to distinguish them.[5] The title to the Property produced in evidence to the Court records theregistered proprietors as Emma as to a one half share and Ngahuia Roberta Tolley,Madeleine Ngaroma Williams, Douglas-Davis Julian Hona, Denys Haana Hona,Ivonne Kristina Hona and Ngaire Irihapeti Hona as to a one half share. The Propertyis described as an estate in fee simple of 819 square metres or less (Lot 151, DP SouthAuckland 5621). There is no mortgage registered. There is a statutory land chargeagainst the share or interest of Douglas pursuant to s 32 of the Legal Services Act 2000registered against the title on 4 October 2010. There is no current registered valuationfor reasons which are explained below. The September 2020 rateable valuereassessment on the One Roof website is recorded as $390,000. The plaintiffsanticipate that the market value significantly exceeds this.[6] Ngaire Khan (formerly Ngaire Hona) has taken the lead on behalf of theplaintiffs. Ngaire was appointed by the Family Court at Rotorua on 18 May 2010 aswelfare manager for her mother pursuant to s 12 of the Protection of Personal andProperty Rights Act 1988.1 Each of the other plaintiffs has provided an affidavitconfirming that Ms Khan is authorised to give evidence on behalf of the plaintiffs toset out the background. Ms Tolley and Douglas Hona live in Brisbane. MadeleineWilliams lives in Christchurch. Ivonne is deceased and survived by her two children.Ivonne's estate is administered by the Public Trust in Rotorua. Ivonne's estate has notjoined in the proceeding. It is curious that the Public Trust has not taken any steps inthe proceedings, a point to which I will return.[7] Ngaire's affidavit sets out the background. She deposes that her mothersuffered from dementia for many years before her death. She was diagnosed withearly stage dementia in about 2000. At that time, Madeleine and Douglas moved intothe family home to care for her. Douglas was originally appointed welfare guardianunder an enduring power of attorney. Madeleine was appointed property manager.[8] By 2009, Emma's health had deteriorated to such an extent she was unable tocare for herself. The enduring powers of attorney were invoked. Proceedings werecommenced in the Family Court under the Protection of Personal and Property RightsAct. The Family Court made an order appointing the Public Trust as temporaryproperty manager. At a judicial settlement conference an agreement was reached byfamily members that the defendant be appointed as property manager of their mother'saffairs. The defendant was at that time completing a commerce degree at the WaiarikiPolytechnic. Family members considered that she was more financially literate thanother members of the family.[9] I pause to interpolate that little documentation relating to the Family Courtprocess has been made available to the Court save for exhibits to the affidavit ofMs Khan sworn on 9 June 2020. Mr Birks sought a direction that this Court order the1 The appointment provided that this may be reviewed at Ngaire's request.Registrars of the Family Court and District Court at Rotorua to make the relevant courtfiles available. I doubted that I had jurisdiction to make those orders or that it shouldbe necessary. As parties to the Family Court proceeding, the plaintiffs ought to havebeen able to request to search the Court file. As it happens, that material is not essentialto the determination of the issues before the Court at this stage.[10] When the order appointing the defendant property manager was made on18 May 2010, the existing interim order in favour of the Public Trust came to an end.The order applied to all the property of their mother and provided that the defendantas appointed manager had all the powers specified in schedule 1(a)–(e) of theProtection of Personal and Property Rights Act. The order stipulated that the managermust apply for a review of the order no later than 18 May 2013.[11] The defendant thereafter took control of their mother's bank accounts but didnot immediately take over the care of their mother as she was still completing hertertiary education. Ngaire moved into the Property with her children to provide theday-to-day welfare care for their mother. When that became difficult for Ngaire (whohad two young children) arrangements were made for their mother to stay with anotherfamily member in Christchurch until the defendant had completed her degree.[12] As I understand it, the only income that Emma was receiving in this period wassuperannuation, paid regularly into her bank account which the defendant managed.[13] The defendant moved into the Property with her own family, including herpartner.[14] On 10 December 2010, Emma returned from Christchurch to live once againat the Property, now with the defendant and her family. Emma died on 24 June 2017.The death certificate records that she died at the Cantabria Rest Home in Rotorua. Itis not apparent how long Emma was at the Rest Home before her death but given thereference to advanced dementia, I surmise that it was for quite some time.[15] Emma's will was dated 29 June 2004. She appointed the Public Trust to be theexecutor and trustee to deal with the residuary estate as follows:4. Gift of ResidueI GIVE –My residuary estate to be divided equally among my childrenNGAHUIA ROBERTA TOLLEY and MADELEINE NGAROMAWILLIAMS and DOUGLAS JULIAN HONA and DENYSHAANA MARGARET HONA-PAKU and IVONNE KRISTNAHONA and NGAIRE IRIHAPETI HONA living at my death.However if this gift to any such beneficiary does not take effectTHEN any benefit to which that beneficiary would have been entitledis to be taken equally by those of his or her children who are living atmy death.[16] The effect of the will is that each of the siblings (and Ivonne's estate and/orchildren) are ultimately entitled to a one-sixth share of the Property made up of theirshare of the residue of their mother's estate and their shared ownership of one half ofthe Property.[17] At around the time that the Public Trust was appointed administrator, thefamily asked for financial records that the defendant was obliged to retain during theperiod she had been appointed to look after her mother's affairs. The defendant didnot respond. Initially, she evaded the questions. Ultimately she became obstructive.The family became concerned about the lack of co-operation from the defendant.They set about making their own enquiries. They discovered that the defendant hadcaused their mother's bank account with the Credit Union to be closed and a new bankaccount opened with Westpac Bank. This information was included in a documententitled "Statement of Property" and described as the manager's statement of propertyrequired by s 45(2)(a) of the Protection of Personal and Property Rights Act filed inthe Family Court at Rotorua. The account was opened in the name of Emma AtamiraWitariana. The name Witariana was a given name of her former husband, RobertArapeta Witariana Hona, who died before Emma.[18] When the family obtained copies of the Westpac bank statements they becamesuspicious about some of the transactions evidenced in the statements. Anotherconcern was that the defendant had not fulfilled her responsibilities during the periodin which she was property manager because she failed to advise the Family Court ofchanges or provide other required information. They then discovered that the propertymanagement order had expired on 18 May 2013 and never been extended. Theirregularities in the Westpac bank statements and failure to keep financial records ledthem to make a formal complaint to Police on 14 July 2018.[19] As a result of the Police inquiries, the defendant was charged with theft by aperson in a special relationship. The defendant pleaded guilty. The Police summaryof charges to which the guilty plea was entered referred to the role and obligations ofa person appointed manager, the circumstances in which the defendant opened a newbank account into which her mother's superannuation payments were received andthat the defendant had spent a total of $130,818.25 of those funds without legalauthority. According to the summary of facts, a significant portion ($85,401.10) wasspent at gambling establishments.[20] The defendant was sentenced to community work and ordered to payreparation of $8,305.62 to the Public Trust as administrators of Emma's estate.Enquiries made of the Public Trust office indicates that only $872 has been paid asreparation as of 19 July 2021.[21] The plaintiffs acknowledge that some of their mother's money spent by thedefendant was legitimately for the benefit of their mother and that some of the claimsfor reimbursement made by the defendant are also legitimate. The defendant wasapparently entitled to claim $5,000 per year under the property management order.Ngaire sets out in her affidavit those payments which the plaintiffs maintain were notlegitimate and for which the defendant has never accounted.[22] The defendant has lived in the Property for many years. She has not paid rent.She paid the rates directly from her mother's account between 2015 and 2017. It isunclear from the evidence whether there are rates arrears. She has more recently failedto pay fire insurance. One of the plaintiffs has paid the fire insurance from November2017 at the request of the Public Trust.[23] In July 2017, the defendant served trespass notices on family members. Thesewere renewed in December 2019. The circumstances of the trespass notices are alsounclear since at law property owned by tenants in common means that each ownerowns a specified share of all of the property; each owner is equally entitled to enjoyall of the property and may not exclude the other co-owners. Ngaire deposes that thereare two large, aggressive dogs on the Property and a three-strand barbed wire fencehas been added to the top of the existing fence which she describes as fortificationrather than fencing.The issues[24] In the proceedings relating to the Property (CIV-2020-463-000055) theplaintiffs seek orders under s 339(1) and s 339(4) of the Act as follows:(a) A registered valuer be entitled to enter the Property to complete aformal valuation in order to fix the value.(b) For sale of the property to the third-named plaintiff MadeleineNgaroma Williams at a price to be fixed by the Court.(c) The shares in the Property owned by Ngahuia Tolley, Douglas Honaand Ngaire Khan be gifted to Madeleine Ngaroma Williams subject toany outstanding moneys owed to the Public Trust and the LegalServices Agency.(d) Directions as to how the proceeds of sale are to be applied or dividedincluding directions that:(i) Any moneys owed by the defendant to the Fines Registrar of theDistrict Court at Rotorua be paid from the proceeds of sale;(ii) Moneys owed by Douglas Hona due to be paid to the LegalServices Agency be paid to the agency;(iii) Moneys owed to the estate of Ivonne Kristina Hona be paid tothe Public Trust Office as Administrator of her Estate;(e) For eviction of the defendant on completion of sale.(f) The costs of this proceeding on an increased basis.(g) Such other orders the Court considers just.[25] In essence, the plaintiffs wish to keep the Property as a family home by sale ofthe Property to Madeleine Williams with the respective shares of all the plaintiffs beingset off against the purchase price. Thus, Ms Williams will arrange payment of theshares of the estate of Ivonne and the defendant, with the other plaintiffs being contentto gift their share of the home to Madeleine. In short, Ms Williams will need to payconsideration equal to two-sixths of the value of the Property.[26] In the proceedings seeking recovery of allegedly misappropriated funds(CIV-2020-463-56) the plaintiffs plead that the defendant owed a fiduciary duty to theplaintiffs and breached such duty by:(a) refusing or neglecting to properly look after her mother's financialaffairs and faithfully execute the trust imposed on her;(b) exploiting and taking advantage of their mother to her detriment andthat of the plaintiffs;(c) misappropriating moneys she was entrusted to look after by virtue ofthe property order;(d) failing to faithfully comply with the property manager's order by notmaking an application to renew the original order on expiry to theirmother's detriment and to their detriment;(e) concealing and refusing to provide to the plaintiffs any information orexplanation as to the true state of the administration of her office;(f) obtaining unlawful financial benefits in breach of her obligations asproperty manager under the trust imposed on her by the plaintiffs whohad agreed to her appointment; and(g) failing to take appropriate care and to protect their mother's interests asrequired by the trust imposed on her as representative of the plaintiffs.[27] The prayer for relief claims the sum of $130,818.26 and costs. This is basedon the amount recorded in the Police summary of facts. However, in writtensubmissions filed on behalf of the plaintiffs, Mr Birks refers to amounts likely spentto benefit Emma and other appropriate set-offs so that the claim appears to be reducedto $118,234.31.Property issues[28] The Act provides:339 Court may order division of property(1) A court may make, in respect of property owned by co-owners, anorder—(a) for the sale of the property and the division of the proceedsamong the co-owners; or(b) for the division of the property in kind among the co-owners;or(c) requiring 1 or more co-owners to purchase the share in theproperty of 1 or more other co-owners at a fair and reasonableprice.(2) An order under subsection (1) (and any related order under subsection(4)) may be made—(a) despite anything to the contrary in the Land Transfer Act2017; but(b) only if it does not contravene section 340(1); and(c) only on an application made and served in the mannerrequired by or under section 341; and(d) only after having regard to the matters specified in section342.(3) Before determining whether to make an order under this section, thecourt may order the property to be valued and may direct how the costof the valuation is to be borne.(4) A court making an order under subsection (1) may, in addition, makea further order specified in section 343.(5) Unless the court orders otherwise, every co-owner of the property(whether a party to the proceeding or not) is bound by an order undersubsection (1) (and by any related order under subsection (4)).(6) An order under subsection (1)(b) (and any related order undersubsection (4)) may be registered as an instrument under—(a) the Land Transfer Act 2017; or(b) the Deeds Registration Act 1908; or(c) the Crown Minerals Act 1991.[29] Orders may be sought under s 341. The mandatory criteria which the Courtmust consider in the exercise of its discretion to make orders under s 339(1) are setout in s 342. Section 343 provides a broad discretion, subject to the parameters ofss 339 and 343.2[30] The Court of Appeal has said of this provision:3Under this new broad discretionary regime it is appropriate for a judge to standback from the submissions and proposals of the parties, and consider what, onan overview, taking into account the relevant considerations, is the most justand practical way through the impasse before the court, even if the answermay not reflect the orders sought by the parties. By definition the cases thatcome before the court arise where parties are locked into an ownershipposition which they cannot resolve because of the positions they have taken,and where a way out may be by a path neither has to that point contemplated.[31] The relevant criteria under s 342 clearly favour orders being made under theAct because the plaintiffs own two thirds of the property; they are in an intolerableposition and unable to take any benefit from the property while the defendant remainsuncooperative and reaping the benefit of living in the Property without financialcontribution; there is no evidence of improvements or maintenance by the defendantof any significant amount; the conduct of the defendant and her abuse of trust inparticular has disadvantaged the plaintiffs and there is nothing unique about theproperty save the family ties to it. There is no evidence of hardship faced by thedefendant given that she has chosen not to defend this proceeding.2 Bayly v Hix [2012] NZCA 589, [2013] 2 NZLR 401 (CA) at [33].3 At [32]. See also Yozin v New Zealand Guardian Trust Co Ltd [2019] NZCA 202, (2019) 20NZCPR 426.[32] At the hearing, I proposed to Mr Birks that it is preferable for orders to bestaged. The first stage, as accepted by Mr Birks, is that the property needs to be valued.This has not proved possible to date because of the defendant's refusal to permit avaluer to attend the property. In fact, some security concerns have been signalled byMr Birks. One reason for approaching the issue in a staged manner is that an evictionorder ought to be straightforward once the transfer of property has been effected.[33] I record that no claim is currently pleaded for occupation rent under s 343(f)of the Act in addition to an order under s 339(1). It is not inconceivable that rent owedfor the period of occupation to date would exceed the defendant's ultimate share in theProperty, subject to offsetting rates payments or other legitimate set-off amounts.[34] I grant leave to the plaintiffs to amend the statement of claim to include a claimfor occupation rent. Any amended statement of claim would need to be served on thedefendant.[35] I make the following orders/directions:(a) The defendant is ordered to allow access to the property at 4 KnightPlace to a registered valuer selected by the plaintiffs (and securitypersonnel if required) for the purpose of conducting a valuationinspection to establish the sale and rental value, at a time and on a datenominated by the plaintiffs.(b) The defendant is to ensure that (a) the registered valuer is not impededin his or her task and (b) may safely undertake the task and must ensurethat any dogs on the Property are restrained.(c) A copy of the written property and rental valuation report is to be servedon the defendant and provided to the Court within 14 days of theinspection taking place.(d) The Property is to be sold to Madeleine Ngaroma Williams, with thepurchase price to be determined by the Court, following receipt of thevaluation.(e) The purchase price to be paid by Madeleine Ngaroma Williams, oncedetermined by the Court, will be paid into a nominated solicitor's trustaccount to be retained pending further directions and orders of theCourt subject to sub-paragraph (g) below.(f) The plaintiff, Ngaire Irihapeti Khan, is authorised to sign anydocuments on behalf of the plaintiffs and defendant necessary totransfer ownership to Madeleine Ngaroma Williams.(g) The nominated solicitor may deduct and pay any amounts legallyrequired to be paid in connection with the sale of the Property includingthe conveyancing costs, costs of the registered valuer (and securitypersonnel if required) together with the amount required to clear thestatutory land charge under the Legal Services Act 2000 of no morethan $6,000.(h) Leave to the plaintiffs to apply for further directions/orders as requiredand to amend the statement of claim.(i) Further directions are to be made to determine distribution of the saleproceeds if no agreement can be reached between the parties.(j) The plaintiffs are entitled to costs of these proceedings, the quantum ofwhich is to be fixed once directions are made as to distribution of thesale proceeds.(k) There will be a case management conference by telephone allocated bythe Registrar on filing of the report of the registered valuer.(l) This judgment and the sealed interim orders are to be served on thedefendant along with a memorandum setting out in clear andstraightforward language the consequences of any failure to complywith an order of the Court.Reparation claim[36] The second proceeding is a claim for reparations relying on an asserted breachof fiduciary duty. The fundamental issue with this claim is that the primary duty, andpossibly the only duty, was owed to Emma rather than other family members.Mr Birks was not able to refer the Court to any case in which it was held that afiduciary obligation was owed to family members who stood to benefit from the willof a testator to whom fiduciary obligations were owed.[37] Yet there is clear evidence of misappropriation of funds, subject to potentiallimitation period issues and the question of the appropriate claimant. It is thereforecurious that the Public Trust, as administrator of Emma's estate, has not seen fit to takeany step in the proceeding. The Court would benefit from participation by the PublicTrust.[38] In all the circumstances and given the staged approach to the Property issuesrepresented by these interim orders, I adjourn proceeding CIV-2020-463-55. I grantleave for joinder of the estate of Emma should the Public Trust determine it wishes totake a step after consideration of this interim judgment and in the knowledge that thereare to be funds held by solicitors and ostensibly owed to the defendant for her shareof the Property, less any set-off determined. I direct that a copy of this judgment beprovided to the Public Trust accordingly.[39] This judgment is in all respects an interim judgment. The plaintiffs are to filea memorandum within 10 working days of receipt of the valuation report so thatfurther directions may be made.............................................................Walker J