COBURN AND ANOR V CROCKER HC CHCH CIV-2008-409-000953

COBURN AND ANOR V CROCKER HC CHCH CIV-2008-409-000953 29 May 2009IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY CIV-2008-409-000953IN THE MATTER OF of the estate of Thomas Hickling Scarlett BETWEEN PAULINE JOAN COBURN MAURICE FRANCIS NEEDHAM Plaintiffs AND LINDA ANN CROCKER Defendant Hearing: 13 & 14 May 2009 Appearances: B H Frampton for Plaintiffs J J McCall and Ms Kemp for Defendant Judgment: 29 May 2009RESERVED JUDGMENT OF HON. JUSTICE FRENCH[1] The plaintiffs claim a beneficial interest in property which the defendant says belongs to her absolutely. [2] The main issue is a factual dispute as to whether an estate was or was not distributed in 1975 and if it was not distributed whether the plaintiffs are now estopped from bringing their claim. [3] In this judgment because a significant number of the protagonists have the same surname, I refer to all parties by their first names.Factual background[4] The parties are all descendants of Thomas Hickling Scarlett (Thomas).[5] Thomas died on 10 January 1973, survived by 13 children. [6] Under his will, Thomas appointed three of his sons (Albert, Harold and Ivan) to be the executors and trustees. The whole of the estate was left to the 13 children in equal shares. [7] The principal asset in the estate was a residential property situated at 76 Ruskin Street, Christchurch. [8] Thomas had been living at Ruskin Street with Harold and Ivan. Both Harold and Ivan were bachelors. They continued to occupy the property after the death of their father. [9] By letter dated 12 April 1973, the solicitors administering the estate wrote to Harold and Ivan advising:Your co-trustee Mr. A.E. Scarlett has instructed us that he requires the house property at 76 Ruskin Street sold and the estate distributed. As no doubt you will wish to continue to reside in the property perhaps you could call to see the writer to discuss paying Mr. A.E. Scarlett out his share in the Estate.[10] A file note and another letter on the solicitors' file show that Albert was anxious to receive his share as soon as possible. [11] In order for all 13 children to be paid their share of the estate, it would have been necessary for the house to be sold. According to the evidence of the plaintiffs, the other 10 siblings were prepared to wait and allow their bachelor brothers to remain in occupation meantime. Apparently, Albert was unpopular with the rest of the family for taking a contrary view. [12] On 24 July 1973, the estate solicitors ("Papprills") wrote to Albert stating:The Writer has now seen your Co-Trustees, who advise that they have consulted the other ten members [of the family] and are all agreeable to them remaining in possession of the house property at 76 Ruskin Street, and to it not being sold at the present time. There would, therefore, only be yourself to pay out from the Estate, and to ascertain the amount that would be due to you our clients suggest that the property be valued as at the date of your Father's death, and your share ofthe Estate then calculated. The Trustees nominate Mr R.K. Baker of Baker Bros. Limited, Registered Valuer. If you are agreeable he could be appointed the sole Valuer for the purposes. We should be pleased for your written confirmation that you are agreeable to this. (the words "of the family" are hand-written)[13] Valuations of the Ruskin Street property were duly obtained. One obtained from WE Simes on 27 July 1973 valued the property at $10,500 the other from Baker Bros valued it at $8500. No copy of the Baker report remains so the exact date on which it was obtained is unknown but it must have been some time between 24 July 1973 and 1 August 1973. [14] Albert agreed to accept a valuation of $9500 and on that basis a 13th share of the estate was calculated at $643.09. [15] Albert was duly paid that sum and signed a deed of release in the following terms:I ALBERT EDWARD SCARLETT of Christchurch, Driver being one of the residuary beneficiaries under the Will of THOMAS HICKLING SCARLETT Deceased HEREBY (1) ACKNOWLEDGE that I have this day received by IVAN ERIC BRUCE SCARLETT and HAROLD JAMES SCARLETT and ALBERT EDWARD SCARLETT the Executors and Trustees thereof (by the hands of their Solicitors Messrs Papprill Frampton and Hadfield) the sum of SIX HUNDRED AND FORTY-THREE DOLLARS NINE CENTS ($643.09) by cheque in full and final satisfaction of my share in the estate of the Deceased; (2) AGREE at any time upon demand to execute such further and other release in the premises as the said Executors and Trustees may require; AND FOR THE CONSIDERATION aforesaid I HEREBY AGREE to keep indemnified the said Executors and Trustees against all debts and liabilities of the Testator and against all contingent debts and liabilities of the Testator and against any further claim for estate of gift duty arising out of or in respect of the Testator's estate.[16] As at the date of Thomas' death, the Ruskin Street property was subject to a mortgage. It appears Ivan discharged that mortgage in or about September 1973 bypayment of $576.13 comprising both principal and interest. In calculating Albert's 1/13 th share, this payment was taken into account as a debt owing by the estate. [17] In order to pay Albert out his share, Harold raised a loan for $650. It was secured by an unregistered mortgage over Ruskin Street. [18] There matters rested until 1975 when Ivan fell ill. Harold wanted to shift out of Ruskin Street and move to a house situated at Brockworth Place (Brockworth). Brockworth was closer to the hospital where Ivan was receiving treatment. [19] What happened next is in dispute. The plaintiffs say the other 10 siblings agreed to Ruskin Street being sold and the proceeds used to buy Brockworth for the occupation of Ivan and Harold free of rental or other payment to the beneficiaries but only on the basis that the other beneficiaries would ultimately receive their share of the estate from the property on any subsequent sale. There was evidence that one of Thomas' daughters canvassed all the siblings and got them to sign a piece of paper agreeing to this arrangement. Testimony to this effect was given by one of the siblings, the widow of one deceased sibling as well as two of Thomas' grandchildren who were adults at the time and who said they had a clear recollection of what happened and what was agreed. All were adamant no-one had ever given up their inheritance. [20] For her part, the defendant however says the other beneficiaries relinquished their share of Thomas' estate. [21] Land Registry records show registration of the following transactions taking place in relation to Ruskin Street on 22 January 1976: (i) transmission to Albert, Harold and Ivan as executors of Thomas' estate (ii) transfer to Ivan and Harold as joint tenants. The memorandum of transfer records a purchase price of $8500 and refers to a "verbal agreement."(iii)transfer from Ivan and Harold to a company called Fred Buck Builder Limited for the price of $12,000. [22] It is common ground that Ivan and Harold never paid the $8,500 recorded in the transfer. [23] It is also common ground that all of the net proceeds from the sale to Fred Buck were applied to the purchase of Brockworth. There was a shortfall between the amount realised from the sale of Ruskin ($12,000) and the money needed to buy Brockworth ($18,500). Harold borrowed the difference. The loan was secured by a registered mortgage over Brockworth . [24] Legal title to Brockworth was registered in Ivan and Harold's joint names as joint tenants. [25] Ivan died in 1977 and accordingly title to Brockworth then went into the sole name of Harold by dint of survivorship. [26] Harold remained in occupation of Brockworth for the next 29 years. There was no evidence of him effecting any major improvements. However, it is accepted that he paid all the outgoings and maintained the property. [27] In 2005, Harold decided to move into a rest home. He put Brockworth on the market and it was eventually sold in March 2006. The net sale proceeds amounted to $154,725.75. [28] Harold died on 4 February 2007. His estate consisted largely of the Brockworth sale proceeds. [29] The sole beneficiary under Harold's will was his niece the defendant Linda Crocker. Linda was also the sole executrix. [30] Over the years, Harold had become particularly close to Linda. Her mother (Harold's sister) had helped take care of Harold and when her health failed, Lindatook over the role. It is clear from the evidence that Linda was very good to her uncle and that he appreciated her kindness. [31] In December 2005, Harold executed powers of attorney appointing Linda his attorney. Linda was aware of the terms of Harold's will. [32] Harold's plans to sell Brockworth in 2005/2006 had been known to some but not all of the extended family. News of the imminent sale prompted Linda's cousins to arrange for one of their husbands (Tony Dowell) to speak to Linda about the situation. According to his evidence, the purpose of his speaking to her was to "re- endorse, re-elaborate" what the rest of the family claimed was a long standing family agreement and to assist her with working out the financial implications. Tony was a financial adviser. [33] That discussion between Linda and Tony Dowell took place in about December 2005. Linda says it was the first time she had ever heard of any such alleged family agreement and that she was shocked and surprised. Tony Dowell however says Linda was not surprised and that there had been the odd comment made to her on this same subject before although any earlier conversations consisted of "pretty loose comments" and were not in the same depth as the discussion that took place in December 2005. [34] According to Linda's evidence, following her discussion with Tony, she asked Harold about the alleged agreement. Linda testified that Harold told her it was "a load of bullshit" and the house belonged to him. Linda also claims at some stage to have checked with the solicitors who had administered Thomas' estate and was told they did not hold any agreement or deed of family arrangement. [35] It was common ground that Linda reported the result of her inquiries to Tony Dowell and that he in turn relayed them to her cousins. The evidence also established that Tony told Linda to be careful about doing anything with the money without first communicating with the rest of the family and getting it resolved. Otherwise, he warned, she would be "on thin ice" or "dangerous ground."[36] Another family member Marion Scarlett (a widow of one of Thomas' children) testified that she visited Linda in hospital in early 2006 and that Linda asked her about the alleged agreement. Marion says she confirmed the existence of the agreement to Linda and told her about the surrounding circumstances. These included being present when Marion's husband was asked to sign a blank piece of paper about the estate by his sister Daphne who was gathering family signatures. Daphne told Marion and her husband that signatures were needed so Harold and Ivan could have the use of the money from the sale of Ruskin to purchase a more suitable home and so that family members were protected under the terms of the will. In her evidence, Linda accepted there had been a discussion with Marion but claimed it took place much later in May 2007. [37] According to a letter from Papprills, another family member, a grandson of Thomas (Maurice) raised the matter with Linda at the time of the sale in March 2006. [38] There was also evidence from Mervyn Scarlett one of the only two children of Thomas still alive. (The other surviving child is no longer well enough to give evidence.) Mervyn testified that in September 2006 he raised the issue with his brother Harold, wanting to know when they would receive their share. By that time, Harold had sold Brockworth and was living in the rest home. Mervyn says Harold gave him to understand there was no need to worry and that it was all in hand. [39] After Brockworth was sold but before Harold died, the following money was paid to Linda out of the sale proceeds: 13 June 2006 $5000 (used by Linda for living expenses) 19 December 2006 $10,000 (used to pay a deposit on an apartment) 17 January 2007 $50,200 (used to enable Linda to take early possession of the apartment)[40] These payments were described as gifts. They were effected by Linda exercising her power of attorney. Linda testified that Harold had said she might as well have the money now rather than wait until his death. [41] On 16 December 2006, Linda had entered into a conditional agreement to buy an apartment for herself. She had separated from her husband in early 2005 and was looking to set herself up again. The agreement became unconditional on 12 January 2007 and she took early possession on 16 January 2007. [42] On 14 February 2007 (a few days after Harold's death) Maurice the grandson visited Papprills to raise his concerns regarding the sale. [43] Then ensued some correspondence in which Maurice was advised that Linda's instructions were to proceed with administration of the estate and that if he wished to pursue the matter further, he should take independent legal advice. [44] He did so and on 17 April 2007, a solicitors' letter giving formal notice of a claim was forwarded to Papprills. At the time of that letter, there was still the sum of $81,308.72 remaining in the Papprills' trust account from Harold's estate. [45] On 30 April 2007, a further payment of $50,000 was made to Linda from Harold's estate. She used the money to settle the purchase of the apartment. In evidence, Linda testified she would not have instructed the estate solicitors to pay out the money had she believed she had a viable alternative. [46] The next thing that happened was on 31 May 2007 when the plaintiffs lodged a caveat against the title of Linda's apartment. The apartment has a rateable valuation of $237,000 and is subject to a mortgage in favour of the BNZ. As at 31 March 2009, the amount secured by the mortgage is $160,000. [47] Linda applied to have the caveat removed but that application was dismissed by an Associate Judge in May 2008 on the grounds the plaintiffs had an arguable case and there was a serious issue to be tried. The decision was given on 5 May 2008 and the present proceedings were then filed on 8 May 2008.[48] By the time of the hearing before me, Papprills was not holding any estate monies. After meeting administration costs, all of the money had been paid out to Linda, on Linda's instructions. This included the sum of $12,000 paid to Linda on 30 October 2007 and used to buy drapes and purchase a spa which Linda had contracted to buy in March 2007. It also included money paid in November 2007 and January 2008 to fund medical expenses, legal costs and a holiday to Australia.Did the beneficiaries relinquish their share of Thomas' estate in 1975?[49] It was common ground that if the beneficiaries had not relinquished their share and the estate had not been distributed in 1975, then, subject to issues of estoppel and laches, the plaintiffs would have the right to trace their interest in the estate to Brockworth. [50] In support of Linda's argument that the estate was distributed in 1975 and the beneficiaries had relinquished their share, counsel Mr McCall pointed to the following evidence: (i) a handwritten note on the front cover of Papprill's file relating to Thomas' estate which says "to pay brother out and keep house" (ii) an undated file note on Papprills' file written by Mr Hadfield the solicitor administering Thomas' estate. It reads:Es T A Scarlett All other members of family do not want any share out of Estate. Draw Deed & post out Mrs D M Gilchrist 86 Aldershot St Chch 7 Brothers agree to valuation of $9500 & agree to arranging mtge of say $650 & pay AES out his 1/ 13 th share of $643.09 2 Brother will repay balance of present mtge.Send AES E statements for his approval & get release signed.(iii)the fact the transferees were named as Harold and Ivan, not the three executors as would have been the case had the estate been still undistributed. (iv) the absence of any written record evidencing the alleged agreement. It appears that the piece of paper which Daphne circulated (or what is left of it) comprises a list of names and addresses. (v) the fact that Harold treated Brockworth as his own and that various wills drafted for him over the years by the same solicitor who administered Thomas' estate were silent about any limited interest. (vi) the fact that Linda's mother never made mention to her of any such arrangement. Her estate was administered without any reference to her having retained an interest in Thomas' estate. [51] I have carefully considered all the evidence relied on by Mr McCall. However, much more would be required to persuade me that beneficiaries had given up their entitlements especially in circumstances where it was the trustees who were taking a personal benefit and where the only witnesses with personal knowledge of events in 1975 are all adamant as to the existence of the family agreement. [52] In my view, the weight of evidence clearly favours the conclusion that the estate was never distributed and the beneficiaries preserved their rights. In reaching that conclusion, I am influenced by the following: i) the evidence of witnesses with personal knowledge of events in 1973 and 1975. I found them credible.ii) the absence of any formal deed of family arrangement or consideration as would have been required. Mr McCall submits the deed may have been lost but that in my view is unlikely. iii) the fact it had been recognised a deed of release was necessary in the case of Albert and the payment carefully documented. iv) the handwritten note on the front cover of the solicitor's file (to pay brother out and keep house) is equally consistent with the plaintiffs' version of events. v) the undated file note is ambiguous and the circumstances in which it came into existence are completely unknown. It must have been written in 1973 which gives rise to the further point why a list of names and consents would have been necessary in 1975 if the file note means what Linda says it means and was actioned. vi) the letter written in July 1973 must carry more weight than an unexplained file note. vii) the absence of any explanation as to why the other family members should have been so generous to Ivan and Harold, especially given evidence that at least some of them were themselves of modest means. [53] I agree with the Associate Judge that to draw an inference that the beneficiaries relinquished their rights from the mere fact the transfer was not registered in Albert's name as well as the other two trustees is simply to draw too long a bow.[54] My finding the estate was not distributed in 1975 means the Brockworth sale proceeds were impressed with a trust in favour of the beneficiaries under Thomas' will and that I must now consider the issue of estoppel.Are the plaintiffs estopped from bringing their claim on the grounds of delay?[55] Mr McCall identified two periods of delay: (i) 1975 to 2005 (ii) 2005 to 17 April 2007. [56] He acknowledged that Linda had not suffered any prejudice during the first period and that therefore the focus needed to be on the second period. The concession was wisely made. Apart from anything else, under the terms of the family agreement, the plaintiffs' entitlement to payment only arose once Harold sold Brockworth. [57] As regards the second period, Mr McCall contended the plaintiffs had effectively slept on their rights and as a result Linda was clearly prejudiced. They had left it until April 2007 to give formal notice of their claim, despite knowing in 2006 of the sale and the gifts to Linda. By April 2007, a key witness Harold was dead and Linda had irrevocably committed herself to the purchase of her apartment. In evidence, Linda said that had she known a claim was going to be made, she would never have purchased the apartment. [58] In my view, no equity arises in Linda's favour. Even if she did not know anything of the family agreement prior to December 2005, she was certainly put on notice by the conversation with Tony Dowell and his later warning in 2006. There was also the discussion with Marion which I find also took place in 2006. I do not accept Linda was lulled into any false sense of security. She may well have believed the claim was unmeritorious but that is a different thing from saying she understood it had gone away.[59] As Mr Frampton pointed out, Linda made her decision to proceed despite never checking Thomas' will, never having seen any documentation indicating that the beneficiaries had waived their entitlements, and despite knowing that Harold's position was radically different from the understanding of the rest of the family. [60] As Mr Frampton also pointed out, Linda's protestations that she would have acted differently have a somewhat hollow ring when put alongside her actual actions. Even after formal notice was given, she continued to treat the money as her own. This despite the fact she could have had recourse to $80,000 owing to her by her daughter interest free. After these proceedings had been issued, Linda chose to put that money out of the reach of the plaintiffs by taking shares in her daughter's business. The business has apparently now failed and the shares transferred back to the daughter in April 2009. [61] In cross examination, when asked "can I suggest it [the $80,000] could have provided you with some funds for this claim so you wouldn't be disadvantaged by it", Linda tellingly responded "I would prefer to be disadvantaged than my [daughter]." [62] As for the prejudice arising from the death of Harold, I do not consider that is sufficient to generate an estoppel. As late as September 2006, Harold was giving assurances to his brother that he need not worry, it was all in hand. [63] I find that any delay by the plaintiffs in giving formal notice of this claim does not in the circumstances give rise to any estoppel or defence of laches. It would not be unconscionable to grant the plaintiffs relief. On the contrary, it would be unconscionable to deny it.Quantum[64] During closing submissions, the plaintiffs conceded that Harold's contribution of $6,500 to the cost of acquiring Brockworth should be taken into account in calculating quantum. That concession means the amount impressed witha trust is reduced from $154,725.75 (the net sale proceeds from the sale of Brockworth) to the sum of $100,362.64 ($154,725.75 x 12000 18500 ). [65] It was also accepted that the 1973 payment of Albert's share gave Ivan and Harold between them an additional thirteenth share in Thomas' estate, making a total of three shares that passed under Harold's will. Linda was the sole beneficiary under Harold's will and accordingly inherits those three shares as well as the share of her mother. [66] The plaintiffs' claim in money terms is therefore 9/13 of $100,362.64 ie $69,481.82. [67] These concessions left the only live issues on quantum as being: (i) whether the amount of Ivan's payment of the Ruskin Street mortgage should be deducted (ii) whether the three gifts made by Harold to Linda during his lifetime from the Brockworth sale proceeds should be deducted. [68] In my view, given the way Ivan's payment was treated at the time, it would be wrong to take it into account. [69] I am also not persuaded there is any rationale for deducting the amount of the three gifts. It was not money that was Harold's to give.Outcome of hearing[70] The plaintiffs are entitled to judgment in the sum of $69,481.82 together with interest thereon at the rate of 7.5% per annum from 17 April 2007 to 30 June 2008 and at the rate of 8.4% from 1 July 2008 to date of judgment.[71] As regards costs, my provisional view is that costs should follow the event and the defendant pay costs to the plaintiffs on a 2B basis. [72] That view is provisional because I have not heard submissions on costs. In the event the parties are unable to agree on costs and require me to make an award, then I direct that submissions of no more than five pages in length are to be filed and served within 20 working days. ____________________________