HUNTER ESTATE

Dominion, Volume 31, Issue 242, 9 July 1938, Page 8

HUNTER ESTATE

Trustees’ Appeal Fails

INTERESTS CONFLICT

Judges Agree Upon

Removal

In a decision announced yesterday, the Court, of Appeal upheld the judgment of Mr. Justice Smith, which changed the trustees of the estate of the late Sir George Hunter. The judgments of the live judges <>f the court agreed in effect, but Mr. Justice Blair differed from the others in certain important respects. As a result of a hearing in the Supreme Court, in which a great dea. of argument and evidence were put forward on the management of the farm at Porangahau that is the chief asset of the estate, Mr. Justice Smith directed the removal of Cyril Paul Hunter, Akitio, and Thomas Percy Hunter. Porangahau, from the positions of trustees and the former from the office of executor of Sir George Hunter’s will. The New Zealand Insurance Company, Ltd., was appointed trustee and executor. Plaintiff in that case was Sir George Hunter's widow, Edith May Hunter. The trustees appealed from that decision, Lady Hunter being respondent. Case Viewed At Large.

The Chief Justice (Sir Michael Myers) said the case should be viewed maccroscopically, as Mr. Justice Smith had viewed it, and though it might appear that the charges of misconduct were not made out or were exaggerated, so that the trustees were justified in resisting them, the court might, if satisfied that their continuance in office would prevent the trusts being properly executed, remove them. It must always be borne in mind that the trustees existed for the benefit of those to whom the creator of the trust had given the trust estate.

It was quite possible that, on some of the grounds upon which the judge had found against appellants, his Honour or some other judge trying the case might have come to a different conclusion. But he himself did not consider it necessary to discuss all those different matters in detail, or some of them, at all. It was sufficient if the evidence showed that there was a conflict between Interest and duty, that the trustees had failed to recognise that conflict and to take steps to ensure that their interest should not prevail as against their duty, and had disregarded the interests of the infant beneficiary, and that a state of hostility existed between the trustees and the immediate possessor of the trust estate which was calculated to work against the true interests of the estate. In his Honour’s opinion that was the position in this case irrespective of any other grounds, although there were' other grounds found by the trial judge which made all the more necessary the removal of the trustees from their office. Interests of Child. There was a tendency on the part of counsel for appellants, to endeavour to have the case treated as litigation between appellants and respondent peisonally. Any suggestion, of that nature overlooked the fact that the testator’s infant daughter if she survived was the residuary legatee and that it was the bounden duty of the trustees to protect the interests of that child. In one particular instance at least her interests were entirely disregarded.

His Honour commented on the unwisdom ot the trustees’ attitude over the gift of £1166 by Sir George Hunter after a stroke which deprived him of testementary capacity. The appellants and their deceased father’s estate were the beneficiaries under the gift. Even laymen suould have realised the position and sought to have it clarified. “In my opinion the circumstances disclose a conflict between interest and duty, and a disregard of dutv,” said his Honour. “Apart from anything else, I consider that this is sufficient to justify removal.” Moreover, that was not the only matter in which conflict of interest arose.

Referring to the management of the estate’s property, his Honour agreed with the judge in the court below that there had been “slackness in manage.ment and unnecessary loss.” He was in entire agreement that the welfare of the beneficiaries and of the estate would bo best secured by replacing the trustees by an independent trustee or trustees. “In my view tho whole appeal should be dismissed, with costs to the respondent in this court on the highest scale," he concluded. “Respondent has been eomixilled to appear in tills court and defend the judgment in the interests of Hie estate, and, that being so, I think there should be an order that she should have her costs as between solicitor and client taxed by the Registrar of the Supreme Court at Wellington, and paid out of the testator’s estate, giving credit for the party and party costs which she recovers from appellants.” Trustees Honest. Mr. Justice Blair said there were two facts which were entitled to be placed in the forefront when embarking upon a consideration of the particulars of charges made over the management of the station. They were first that the trustees were, as found by the judge in the court below, honest trustees, and, secondly, that the result of their management of the Borangahau sheep station had been to convert it from what was almost a liability into a very valuable and income-earning His Honour dealt with the management of the station in detail and reviewed also the history of the £1166. In the latter matter the trustees were laymen badly advised and, Mr. Justice Smith having found they were honest trustees, it followed that they might, and no doubt did. consider their attitude justified. But it could not be gainsaid that a change in trustees was :>roper. “In the result, therefore, my view is that the order for removal of the trustees should stand but such order should be based solely upon their mistaken attitude as to the £1166 Item, and should not in any resfiect be deemed a reflection upon the trustees,’’ he said. "I do not think that any costs should have been awarded against the trustees, and as none of the complaints except as to the trustees’ attitude on the £1166 Item have iu my view lieen established I consider that the trustees should have been allowed their costs out of the es-

fate in respect of all the items upon which, in my view, the respondent has failed, and they should also get their costs of this appeal. I consider it an injustice to the trustees, whose administration of the estate has been marked with such success, that all they receive as acknowledgment .for their years of labour is ignominious dismissal together with the imposition upon them of substantial financial loss.”

Trustees Should Have Asked. Mr. Justice Kennedy said that at the very least, the trustees should have applied for directions as to the course to be adopted over the £1166. They therefore allowed or permitted their interests to conflict with their duty and took no action. ' That was inexcusable in the circumstances. “I think it is plain that the interests of the estate were not in these matters, paramount with them. If there be added to this the mutual hostility which the learned judge in my view rightly found to exist, grounded in part upon, although not originally arising from, the failure of the trustees to fulfil their duties, then I think their removal was inevitable. In the result, therefore, I think that the judgment appealed from must be affirmed and the appeal dismissed, with costs as proposed by the Chief Justice.” , Mr. Justice Callan concurred with the Chief Justice and Mr. Justice KenAgreeing that the subject of the £1166 was sufficient for the removal oi the trustees, Mr. Justice Northcroft added that their management of tne station was diligent and in most respects efficient. "Were this the- only phase of the case upon which their removal rested, I might have been disposed to consider the welfare ol the beneficiaries required their con 1 t . 1 “' 1 - ance in office,” he continued. The court, however, is not concerned with a vindication of the appellants, but with the welfare of those for whom the trust was created. Having regard to the conflict of interest and duty and to the hostility between the trustees and the respondent, the trial judge wa» entitled and indeed bound, to add to them those matters of mismanagement w’liich were proved, and to consider tlieir conjoint effect upon the question of removal " H<> agreed with the Chief Justice on costs. The appeal was dismissed with an or der for costs as in the Chief Justice’s judgment. At the hearing appellants were represented by Mr. C. H. Weston, K.C., who had with him Mr. D. R. Hoggard, and respondent was represented by Mr. J. D. Willis, who had with him Mr. R. L. A. Cresswell.