IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY

I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE	
CIV-2019-454-38
[2021] NZHC 1042	

UNDER	the Administration Act 1969	
IN THE MATTER	of the Estate of Veronica Kathleen Smith	
BETWEEN	THOMAS MICHAEL SMITH
Plaintiff	
AND	PAUL KENNETH SMITH
Defendant	

Hearing:	22 April 2021	
Appearances:	D P O’Neill for plaintiff Defendant in person	
Judgment:	11 May 2021	

INTERIM JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]	The late Mrs Veronica  Smith died on 7 August 2017 leaving a will  dated    26 February 2016. Mrs Smith had four children, the defendant, Paul Smith, the plaintiff, Thomas Smith, and two daughters who do not feature in this litigation.

[2]	Mrs Smith’s will was a straightforward document. It appointed Paul as the executor and trustee of her estate. It provided that, having paid any debts that she might have had at the time of her death and her funeral and estate administration expenses, Paul was to distribute the residue equally between himself and Thomas. Mrs Smith explained why she was excluding her daughters. Finally, she recorded the powers she was intending to confer on Paul as her executor and trustee. These entitled Paul to retain the assets without any express temporal limitation.

SMITH v SMITH [2021] NZHC 1042 [11 May 2021]

[3]	Although this point was not raised during the course of the hearing, it might be thought that there is some inconsistency in the will in the sense that Paul, as the executor and trustee, was entitled to retain the assets, but at the same time obliged to divide them between himself and his brother. The answer to that point is, I think, clear. The powers conferred on Paul as the executor and trustee apply only during the currency of his executorship and trusteeship, and cannot override the fundamental obligation of every executor to gather in and distribute the estate in accordance with the terms of the will.

[4]	This Court granted probate to Paul in relation to the administration of the estate on 23 September 2017.

[5]	It is common ground that the most significant asset in the estate is Mrs Smith’s former home in Levin. Neither party asserts that whatever other assets may exist are of great (economic) value.

[6]	The administration of the estate was not completed as at the date of the commencement of this  proceeding  on  24  June  2019,  nearly  two  years  after  Mrs Smith’s death. Nor did it appear to be any closer to completion as at the date of the hearing, another two years on.

[7]	Thomas applies for an order removing Paul as executor and trustee of the estate, and the appointment of an independent executor and trustee. Initially, Thomas proposed the Public Trust. However, apparently, the Public Trust, when approached about the matter, required that a substantial amount of money be deposited with it before it was prepared to accept appointment. Thomas was not in a position to fund that.  Accordingly, he has, through his solicitors, approached a Levin solicitor  —  Mr Douglas Rowan of Cullinane Steele and Co. I am told that Mr Rowan is prepared to accept appointment in the event of the Court determining to appoint him.

[8]	Thomas originally commenced this proceeding as an ordinary action, by notice of proceeding and statement of claim. It was not until 16 September 2020 that he filed and served an application for summary judgment. Thomas therefore needed, but did not seek, leave to make that application after the commencement of the proceeding.

[9]	The leave point was addressed at the outset of the hearing before me.

[10]	Having heard from both Mr O’Neill for Thomas and Paul in response, I granted Thomas leave to make this application. It is an application that could have been made at the commencement of the proceeding. I accept that between the commencement of the proceeding and the date on which the application was made Thomas was entitled to conclude that the basis for such an application became stronger, by reason of the effluxion of time. In his submissions in relation to leave, Paul did not suggest that he could point to any prejudice resulting from the delay. In the circumstances, it appeared to me that, in the interests of justice, Thomas should be entitled to make his application.

[11]	Part 12 of the High Court Rules provide for summary judgment.

[12]	An applicant for summary judgment must demonstrate that the party against whom such judgment is sought does not have a reasonably arguable claim or defence as the case may be.

[13]	The leading authority is Krukziener v Hanover Finance Ltd where the Court of Appeal outlined the principles involved in these terms:1

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is not consistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).

Under r 141A the defendant need not file a statement of defence. The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an issue worthy of trial.

1	Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26]–[27].

[14]	Thus, the essential question for determination in this case is whether Thomas can establish that Paul has no defence to his application to remove him as an executor and trustee.

[15]	As is invariably the case when appointments are made in wills, Paul has been appointed as both the executor and trustee of the estate. Some of the cases go so far as to say that, technically at least, that means that there are two applications, one to remove an incumbent as executor and the other to remove him, her or it as trustee. This is because the roles of executor and trustee are distinct.

[16]	Thomas’ primary application in this case is against Paul in his capacity as executor, because he says that Paul has not discharged his primary responsibilities as such.

[17]	Applications for removal of executors are made pursuant to s 21(1) of the Administration Act 1969 and applications to remove trustees are made either at common law or pursuant to s 51 of the Trustee Act 1956.2

[18]	Section 21(1) of the Administration Act provides:

21	Discharge or removal of administrator

(1) Where an administrator is absent from New Zealand for 12 months without leaving a lawful attorney, or desires to be discharged from the office of administrator, or becomes incapable of acting as administrator or unfit to so act, or where it becomes expedient to discharge or remove an administrator, the court may discharge or remove that administrator, and may if it thinks fit appoint any person to be administrator in his or her place, on such terms and conditions in all respects as the court thinks fit.

[19]	Section 51 of the Trustee Act 1956 provides:

51	Power of court to appoint new trustees

(1)	The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order appointing a

2	Although the Trustee Act 1956 has been repealed by the Trustee Act 2019, s 18 of the Interpretation Act 1999 applies, meaning Thomas’ claim against Paul would need to be continued under the repealed Act because the cause of action arose before the 2019 legislation came into effect on 1 January 2021.

new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.

(2)	In particular and without prejudice to the generality of the foregoing provision, the court may make an order appointing a new trustee in substitution for a trustee who—

(a)	has been held by the court to have misconducted himself in the administration of the trust; or

(b)	is convicted of a crime involving dishonesty as defined by section 2 of the Crimes Act 1961; or

(c)	is a mentally disordered person within the meaning of the Mental Health (Compulsory Assessment and Treatment) Act 1992, or whose estate or any part thereof is subject to a property order made under the Protection of Personal and Property Rights Act 1988; or

(d)	is a bankrupt; or

(e)	is a corporation which has ceased to carry on business, or is in liquidation, or has been dissolved.

(3)	An order under this section, and any consequential vesting order or conveyance, shall not operate further or otherwise as a discharge to any former or continuing trustee than an appointment of new trustees under any power for that purpose contained in any instrument would have operated.

(4)	Nothing in this section shall give power to appoint an executor or administrator.

(5)	Every trustee appointed by the court shall, as well before as after the trust property becomes by law, or by assurance, or otherwise, vested in him, have the same powers, authorities, and discretions, and may in all respects act as if he had been originally appointed a trustee by the instrument, if any, creating the trust.

[20]	Two provisions are similar, and both require an assessment of whether it is expedient to remove executors or trustees.

[21]	Expediency is a very general concept. A course of action may be expedient for a range of reasons; at one end of the spectrum because a respondent is unable to devote adequate time and attention to the job, and at the other end because he, she or it has acted fraudulently. From the cases it is clear that the issue of expediency is assessed from the perspective of the beneficiaries of the estate or trust as the case may be, whose

interests are invariably at the forefront of the Court’s concerns. In Crick v McIlraith,
Associate Judge Osborne (as he then was) put it this way:3

The term "expedient" imports considerations of suitability, practicality and efficiency. In the context of estate administration the use of the term "expedient" therefore demands an overarching question - will removal of the administrator be a suitable, practical and efficient means of advancing the interests of the estate and of its beneficiaries?

[22]	Accordingly, and quite rightly, Mr O’Neill put at the forefront of his submissions the need for expediency in the administration of this estate.

[23]	His submissions in support of Thomas’ application were nothing if not succinct.

[24]	He focused on three key points.

[25]	First, the fact that Paul is an undischarged bankrupt. At least under s 21 of the Administration Act Paul’s bankruptcy does not automatically preclude him from assuming appointment as an administrator of an estate. However, as Mr O’Neill argued, the fact that someone is an undischarged bankrupt at least raises an issue about his or her suitability to deal with the administration of an estate and handle finances for and on behalf of other parties. Furthermore, under s 51 of the Trustee Act the Court’s powers to remove trustees expressly contemplate the Court doing so where a trustee is a bankrupt.

[26]	In relation to this point Paul in his various memoranda and in the course of the hearing sought to explain that he was entitled to an annulment of his bankruptcy because — he contended — the judgment upon which the bankruptcy was based was overturned in the Court of Appeal. As far as I can ascertain from a review of the papers that is not correct. I do not say that Paul has set out to be untruthful. Rather I suspect he may not have a complete understanding of the position himself. It would seem that there were two proceedings commenced against him, a civil claim in respect of unpaid taxes and a criminal proceeding. As far as I can see the civil judgment was

3	Crick v McIlraith [2012] NZHC 1290 at [18].

entered against Paul and has not been successfully challenged.4 It is the criminal conviction that was overturned in the Court of Appeal.5

[27]	Those things said, the fact that Paul is an undischarged bankrupt, whilst it is certainly a cause for concern, does not necessarily mean that an order for his removal should be made.

[28]	The second argument advanced on Thomas’ behalf by Mr O’Neill concerns the level of hostility that exists between the brothers.

[29]	Reviewing the evidence — or, rather, Thomas’ evidence and Paul’s memoranda
—	it could not be clearer that they have very different views as to what the ultimate outcome of the administration of their mother’s estate should be. Each of them makes allegations of dishonesty or underhand dealing against the other. It is not obvious to me whether and how those matters can be resolved in the context of this application, and I am not prepared to reach conclusions as to the relative merits of their positions. Nor is it necessary to do so.

[30]	The fact that there is this level of hostility and the nature of these allegations is itself a factor to be taken into account. Mere hostility between an administrator and a beneficiary or beneficiaries of an estate is not, in and of itself, a sufficient foundation for the Court to remove the former.6 However, obviously, the existence of such hostility is relevant to the issue of whether it is expedient to make any order sought.

[31]	The final point advanced by Mr O’Neill seems to me to be the most powerful. He invites the Court to stand back and consider where things have reached in the administration of this estate bearing in mind that the passage of time since Mrs Smith’s death.

4	Commissioner of Inland Revenue v Smith [2012] NZHC 756. Mr Smith unsuccessfully applied for an extension of time to appeal the 2012 bankruptcy decision in 2019. See Smith v Commissioner of Inland Revenue [2019] NZCA 521.
5	Smith v R [2013] NZCA 184.
6	See for example Crick v McIlraith [2012] NZHC 1290 at [16](d). Although hostility will assume relevance if it prejudices the interests of the beneficiaries.

[32]	The irreducible fact is that in nearly four years virtually nothing has been achieved. To focus on one point, during the course of the hearing I asked Paul whether he had produced a set of estate accounts. I am not sure that Paul quite understood what I was asking him because he referred me to a document before the Court as an attachment to one of his many memoranda. This turned out to be a list of expenditure by him on behalf of the estate. This was quite enough to satisfy me that the expediency principle demands that a new administrator be appointed, and that Paul has no arguable defence to Thomas’ claim.

[33]	The Court must of course respect the wishes of Mrs Smith for Paul to be the executor and trustee of her estate. Her selection should not be lightly set aside.7 But, ultimately, nearly four years has passed since Mrs Smith died, and nothing has been achieved in terms of the distribution of the estate. That cannot be in the interests of the beneficiaries.

[34]	I have reached the view that Thomas is entitled to summary judgment for an order removing Paul as executor and trustee of this estate and appointing an alternative
—	and completely independent — administrator to replace him.

[35]	As already said, Mr Thomas Smith proposes Mr Rowan. I am informed that Mr Rowan is willing to accept appointment and is an experienced estate administrator.

[36]	The difficulty is that the  Court  does  not  have  a  written  statement  from Mr Rowan of his willingness to accept appointment or the terms upon which he would be prepared to do so, and nor does the Court have any information (from the evidence as it stands) as to Mr Rowan’s experience.

[37]	In the circumstances, it appears to me that the pragmatic course is to issue this interim judgment directing Mr Thomas Smith  to  arrange  for  Mr  Rowan,  within 15 working days of the date hereof, to file formal notification of:

(a)	his preparedness to accept appointment;

7	Crick v McIlraith, above n 6, at [20] referring to Monty Financial Services Ltd v Delma [1996] 1
V.R. 65 at 75.

(b)	the terms upon which he proposes he should be appointed;

(c)	comprehensive information as to his background and relevant experience.

[38]	On receipt of that material, and assuming that it is satisfactory, a final judgment will follow, removing Mr Paul Smith as the executor and trustee of the estate of the late Mrs Veronica Smith and appointing Mr Douglas Rowan to replace him.

[39]	This judgment is not to be sealed until such time as that material is to hand and a minute has been issued directing the Registrar to permit sealing.

[40]	Costs are reserved. If the parties are unable to resolve costs issues themselves they may revert to the Court by memoranda in the usual way.

Associate Judge Johnston

Solicitors:
Todd Whitehouse Solicitors, Levin for plaintiff