COURT OF APPEAL.

Otago Daily Times, Issue 19465, 28 April 1925, Page 4

COURT OF APPEAL.

A FAMILY QUARREL. (Per United Press Association.) WELLINGTON’, April 2T. In the case Morgan versus Wright the hearing was adjourned till the June sitting to allow' consideration of certain points arising out of Mr Justice Reed's judgment, relating to the taking of accounts.

The facts of tho case before the Appeal Court are that Edward George Wright died on August 12, 1002, and by a will divided his estate into eight parts, bequeathing one to his wife, two to his son Harry Herbert, one to each of his other sons Edward and Douglas George, and a life interest in the remaining three parts to his three daughters, with the remainder to their children. The. plaintiff. Florence Jenny Myra Morgan, is one of the daughters. The executors named in tho will were the widow and the son Harry Herbert, and by a codicil the testator added as an executor Douglas George. Selling his interest Harry Herbert retired from his trusteeship, and the respondent, William Nosworthy, who married one of the daughters, was "appointed in his place. ■Subsequently by agreement of sale and purchase Douglas George bought the right to purchase the freehold of the estate of the testator at tho valuation conferred on Harry Herbert by will. The properties consisted of two farms known as Surrey Hills and Windermere.

The Court found that the fact of the sales and prices paid was well known to ail the beneficiaries, including Mrs Morgan, and no question was ever raised or the proceedings challenged until recently when litigation between her and Douglas George caused bad feeling between the various parties. The proceedings in the court below attacked the sales of both properties, and sought to have them set aside. It was claimed that the trustees had been guilty of a breach of trust, and it. was sought to have them removed from office. In general the. breadies of trust complained of were allegations that the trustees had treated Douglas George too favourably in the matter of financial assistance, and to the peril of the trust funds.

The first question considered by the court was whether the pre-emptive right conferred by the will was assignable. It was held that it was clear the testator desired to confer a benefit upon the sou to whom he had. given twice as much as any other of his children. The predominating motive of the gift was to confer a benefit upon Hurry Herbert, and the opinion of the court was that the right of purchase was assignable. The second and more serious question was whether Douglas George entitled to purchase any option. It was held that the fact that the assignee was a trustee did not alter the legal position for the reason that in exercising his right to purchase any option his position as trustee gave him no unfair advantage over ihc beneficiaries. The price he had to pay was ascertained by proper valuation, uni the court field that Douglas George was legally entitled to purchase both Surrey Hills and W*idermere. The stock on the Surrey Hills estate, however, was not mentioned in the gift of option, and Mr Justice Reed decided that had the testator intended it io be included he would have so stated. The purchase of stock by Douglas George was a transaction, therefore, that could not stand. In the case of Windermere the following circumstances were found:— (1) Douglas George, after retirement us a trustee, continued to hold an option over Windermere, and there was no evidence that he dill not all along Intend to exercise his option, which he eventually did. (2) He never ceased to manage tho two estates, which were worked in conjunction, the stock being transferred from time to time from out; to the other.

(3) There was an irresistible inference unrebutted by evidence (hat his retirement ffom the trusteeship was in view of possible technical difficulties in the purchase of the trust properties. (-1) He had knowledge of the value of the stock at Windermere superior to that possessed by either of the trustees or other beneficiaries.

(5) The evidence as to who the valuers were and the amount of valuation of the stock was unsatisfactory. For these reasons the sale of the stock on Windermere could not stand.

The present appeal is lodged against the whole of the judgment except such part as declares (a) that the defendant, Douglas George Wright, was not entitled to purchase the stock on Surrey Hills and Windermere; (b) that the purchase of stock of the said estates had not been condoned by the beneficiaries nor had they acquiesced in the sale; and (.c) excepting such part of the judgment as orders that inquiries should be made and accounts taken before the registrar and the accountant whether the rate of interest payable between 1908 and 1924 by Douglas George to the trustees was a proper rate of interest, and (d) whether the securities now held by the trustees are in order, and whether they are good and ■ sufficient securities as required by the Trustees Act, 1908. Sir John Findlay, K.C. (for the respondent, the Hon. W. Nosworthy), said there were certain preliminary questions he wished to discuss before the appellants began. Mr Donnelly had treated the observations in the judgment of Mr Justice Reed as final. He submitted there was no final decision on the question of the removal of the trustees. No mention was made in the notice of appeal of the removal of the trustees. He was surprised to learn that appellants’ counsel were relying on those observations.

Sir Robert Stout; What do tho appellants want ?

Sir John Findlay: The removal of (.wo trustees —Harriet Myra Wright and William Nosworthy. Wo want these preliminary questions (as to inquiries being made and accounts taken before a registrar) determined, because (hey bear greatly on the question of the removal. When accounts have been taken and inquiries made and it is found, as I think it will be found, that' there has been no loss of capital and no mala tides or fraud on the, part of the trustees. Mr Nosworthy Is prepared to retire. lam sure the other trustee, beine an elderly woman, will follow his example. Mr Nosworthy naturally wishes to remain a trustee until such inquiries have been made and accounts taken. Why haven’t these things been done? Are the appellants afraid of them? Wo are entitled to have these inquiries made before the appeal proceeds because Mr Nosworthy’s honour is involved. Our defence depends on it. r lTiia whole litigation is based on bad feeling, all on one side. It has been brought about by certain litigation in the lower court concerning a judgment for £24,000. Mr Justice Reed in Ids judgment expressly said the case was to he, adjourned for further consideration. His observations, therefore, cannot be treated as a final judgment for a refusal to remove the trustees.

Mr Wilding, K.C.; No imputation has been made on tho personal reputation of (he trustees.

Mr Donnelly (in reply to Sir John Findlay): Sir John Findlay has said that tho trustees will resign at once when inquiries have been made and accounts taken. This undertaking eliminates (be question of the removal of the trustees. Nevertheless I submit that breaches of trust have been committed. The learned judge found that (he trustees had given the real management of the estate to Mr D. G. Wright for 16 years, and that he had handled the trust funds'. I am willing- to defer the hearing of the appeal until the next sitting of the court, inquiries to be made in the meanwhile. One question is left and that concerns the assignability of the option, to purchase. I submit that the option was not assignable. If it wore assignable it could not be assigned to Mr D. G. Wright. Sir Robert Stout: This is a family quarrel and I cannot understand why it was brought into court. Mr Gresson: The interests of the infants under the assignment are vitallv concerned, which makes a settlement all the more difficult, because it is a family quarrel. Sir John Findlay: If the appellants ha<] accepted the judgment of the lower court the trustees would have retired. They went to the Court of Appeal expressly to remove the trustees. If they are removed bv this court before inquiries have been made ami accounts taken in conformance with Mr Justice Reed's judgment, there will be a stigma upon them. With regard to the quest-ion of assignabilitv of the option there i;; no reason why it. should not be determined now, and tho question of inquiries allowed to stand over. Mr 'Gresson : There is nothing- appealable on the question of the removal of the trustees in view of Sir John Findlav's undertaking that they will retire. The question as to the removal will never come before this court now. The only question is the assignability of the option. I am prepared to go on to-day as my clients are deeply concerned. JT r Justice Sim : Would you be prejudiced by an adjournment. There are two monihs to wait. Mr Gresson: .ill the counsel are here todav from Christchurch. It would be a hardship on the parties to adjourn tho matter because at orosent I am unable to deal with the estate. Mr Justice Sim: But. you are prelected. There was a caveat lodged a year ago and you .hawe already waited that long. Two