FAMILY DISPUTE.

Press, Volume LX, Issue 18229, 13 November 1924, Page 9

FAMILY DISPUTE.

MORGAN—WRIGHT

CASE.

RESERVED JUDGMENT.

The reserved judgment of liis Honour Mr Justice Reed xvas delivered yesterday in the case of Florence Jenny Myra Morgan, wife of William Arthur Morgan, and Florence Barbara Morgan and Elarry Wright Morgan, infant children of William Arthur Morgan and Florence Jenny Myra Morgan by their guardian, ad litem, Percy Norman' Quartermain, plaintiffs, and Douglas George Wright, Harriet Myra Wright, and William Nosworthy, defendants. The hearing was conducted on. October 6th, 7th, Bth, and 9th. Mr H. D. Acland and Mr L. W. Gee appeared for Florence Jenny livra Morgan, Mr A. T. Donnelly for the guardian ad litem, and Mr M. J. Gresson and Mr H. J. Upham for the defendants. Edward George Wright died on August 12th, 1902, and by his will he divided his estate into eight parts, bequeathing one part to his widow, two to his son, Harry Herbert, one each to two other sons, Edward Fondi and the defendant, Douglas George, and a life interest in the three remaining parts to his three daughters with remainder to their children. Florence Jenny Myra Morgan was one of such daughters. -The executors named in the will were the widow and the son, Harry Herbert. The defendant, Douglas George, was added as an executor by the testator. On February 10th, 1905, Douglas George purchased the undivided interests in the estate of j Harry Herbert and Edward Fpndi, and later that of the widow. Those transactions were not attacked. On the sale of his interest, Harry Herbert retired from the trusteeship, and the defendant, William Nosworthy, who had married one of the daughters, was appointed in his place. The will contained the usual powers of sale and conversion, with the following proviso: "Provided always that my said trustees shall not sell my freehold estate in the County of Ashburton or any part thereof until the same shall have been offered by my wife, if she shall then be living, and if dead by my son, Edward Fondi Wright, in writing to my son, Harry Herbert Wright, at a valuation to be made by tvro valuers named by my wife or Edward Fondi Wright, as the ease may be, or if such valuers shall disagree, then to be made by a third valuer to be named by the other two* before they shall enter upon the valuation as their umpire, nor until my son Harry Herbert Wright shall have refused or omitted to notify in writing to my wife or son Edward Fondi Wright as the ease may be, his acceptance of the offer within three months after the making thereof, but no purchaser under my will shall be obliged to take notice of this direction, and I empower my trustees to suspend for a period not exceeding seven years,, if they shall judge expedient, the sale, conversion, etc." By a codicil the testator directed that the name of Douglas George Wright should be substituted for Edward Fondi Wright where it appeared in the proviso. In the agreement for sale and purchase between Harry Herbert and Douglas George, part of which was purported to be sold and purchased, .was: "The right to purchase the testator's freehold estate in the County of Ashburton at a valuation conferred upon Harry Herbert Wright by the will.'' Purporting to act in pursuance of the right so acquired, Douglas George Wright purchased from the trustees the properties mentioned at a valuation made by valuers appointed in terms of the will by his' : mother, the widow of the testator. The valuation was not seriously challenged. The properties consisted of two farms known as Surrey Hills and Windermere. The agreement .for sale and purchase of the former was dated March 26th, _ 1907, when Douglas George Wright was still a trustee. He retired from that position in the following month. There oould be no doubt that the fact of the sales and the., prices paid was well known to all the trust, including the plaintiff, Mrs Morgan, and no question was ever raised or the proceedings challenged until quite recently, when litigation "between Mra Morgan and Douglas George caused br.d feeling between the parties, and the proceedings were the result. The proceedings attacked the sales of both properties and sought to have them set aside. It was also claimed that the trustees had been euiltv of breaches of trust, and it was sought to have them-removed frcm office. Broadly speaking the breaches of trust were allegations of too favourable treatment of JD. &. Wright m t e matter of financial assistance to him to the peril of the trust funds. T e first question was whether the preemptive right conferred by the will upon Harry Herbert was assignable, ine short time that had elapsed from his retirement from the trusteeship would render it difficult to support thetransr 1 action. It had been contended tnat Harry Herbert was a favourite son, and that the intention of the testator was to confer a personal benefit upon him bv giving him the option. It was contended that if that were the case such a benefit could not be assigned. It was contended that as the option to purchase was at the full value as ascertained by valuers there was, in reality, no value in the option, and therefore it did not constitute property. He could not accede to this proposition. It was dear that the testatCT desired to confer a benefit upon the son to whom he had given twice as much as any other child. There was nothing in the will to indicate that the option was tied up by any condition which wouid require H. H. Wright tc< do any act personal to himself apart from the acceptance of the option and payment or the purchase money ascerfained by a valuation. Clearly there was nothing in the will to ppevent him taking a short cut by assigning the option. Surely if the desire to confer a benefit on the son wais the predominating motive cf the gift it was immaterial in what form that benefit was received. He considered that the right of purchase was assignable. . The next question was, whether, tlie right being assignable, D. G. Wright, having acquired it, was legally entitled ■ to exercise the right cf purchase under it. The evidence showed that the trustees, having made up their minds to sell Surrey Hills. Mrs Wright placed j it under offer in. writing to D. »• Wright as assignee of H. H. Wright 3 option at & valuation, and that Wright accepted, in writing. Mr >osworthv had sworn that the contract for sale and purchase was made before the valuers entered upon their duties, the contract being afterwards carried out at- the price arrir-ed at by the two valuers. The same procedure was adopted in the case of Windermere when, later, the trustees decided to sell that property It was submitted, on behalf of plaintiff, ihat the donee of. a power of purchase must comply strictly with the terms, of the option The terms required tlie land to be firat valued and then submitted at the valuation arrived at, and not, as m the procedure adopted, i.e., first offeffred and then on

acceptance, valued. The more serious question was whether D. G. Wright was legally entitled to purchase under the option. But for the rights he had acquired under the option it was perfectly clear that ho could not have lawfully purchased Surrey Hills, and probably not Windermere. He was entitled to purchase tho option from his cotrus'tee, who was also liis cestui-que-trust, H. H. Wright. This transaction was not attacked, therefore D. G. Wright, at the time of the purchase of Surrey Hills, was a trustee for sale with a right, as far as H. H. Wright was concerned, to purchase for himself part cf the trust property. The point was: was it a lawful right as against his ces-tui-que trust? Had that right been 'assigned to a person not a trustee such a person could have exercised it.' The fact that the Assignee was a trustee did not alter the position. I}. G. Wright was legally entitled to purlias© both Surrey Hills and Windermere. The next point was whether he was entitled to purchase the stock depasturing in these properties. The testaetor did not mention stock m , j l ® Jp !? of the, option. His Honour held that, the stock were not included in the option. As regarded Surrey Hills J>. G. Wright was a trustee when he purchased. The transaction, therefore, oould not stand, and the sale or stock in "Windermere could not stand. The sub-trust of £21,000 that had been established represented the daughter's share of the testator s estate. Any undervalue in respect of the stock would affect the amount of that share; consequently the infant children were financially interested. His Honour could not decide the matter on the broad ground that .the children, not being sui juris, could not be held either to have confirmed, condoned, or acquiesced in the sale. The plaintiffs! were therefore entitled to an order ior enquiry and accounts in respect of the sale of the stock, both dead and alive, on Surrey Hills and Windermere. This, appeared to be the only. account to which they were entitled as regarded the main trust, and tlie establishment of the sub-trust: D. G. Wright was entitled to the baJanoe _ of the money and property in the main trust. The sub-trust was established on the sale of Windermere in 1808. There was no sum of £24,000 set. aside in cash as constituting tlie capital of the trust, but the amount was represented as follows Debentures £2l cG, mortgages £2OOO, deposit with estate trustees £3006 7s 3d, balance due from estate trustees £9843 12s 9d, total £24,CCO. The position of the trust as at August, 1924,.was a3 follows: Debentures £4.50, loans on mortgage £]7,550, balance.due from estate trustees on realisation of assets £6000; total £24,000. Regarding one or more of the mortgages, it was alleged that the security for the advance was insufficient and that the loans were made in the interests of D. G. Wright. The £OOOO was owing by D. G. Wright to the trustees. Plaintiffs were entitled to nil enquiry as to the present value of the security consisting of part of Windermere which the trustees held in their own names which represented a face value of £10,145. This, if justified, was ample security for the £(XXX) The trustees had D. G. Wright himself to fix the rate of interest he should pay on trust moneys being used by him. If the rate was below the current rate then the .trustees were responsible. The plaintiff, Mrs Morgan, was entitled to an enquiry and accounts as regards the rate paid and the current rate as from 1906. Regarding the .application for removiU of the trustees, his Honour was satisfied that neither Mrs Wright, on account of her age, nor Mr Nosworthy, on account of his many duties, which entailed long absences from the district, were „in a position to look alter the trust estate as it should be looked after. Counsel had stated that there was no desire on the part of the trustees to continue to act, but they objected to an order of removal with the necessary implication of ssrious breaches of trust on their part. Tlie facts did not warrant placing such a stigma on the trustees. Nothing in the course of the proceedings had conveyed to his Honour's mind the faintest impression of fraud on tlie part of the trustees. The most that could be said against them was that they had permitted the real management of the trust estate to pass out of their bands and be carried on by D. G. Wright for some 16 years to the knowledge of all the beneficiaries and without objection from them. It would appear that the trustees had permitted the trust funds to be dealt with by D. G. Wright in a manner that could not be justified, But as far as at present appeared there had been no loss of capital in the trust fund. On the. ' assumption that the difficulties men-

tioned would continue as regarded the personal attention of the trustees to the management of the estate, they should at once take steps to be discharged from the trusteeship, and the trust estate be transferred to the Public Trustee. But at the present time'his Honour would mate no order in connexion therewith. _ _ . There would be an. interim order lhat enquiries should be made and accounts taken by the registrar, and an accountant to be* appointed by the registrar: (1) As to the price paid for the, live and dead 6ftock, the property of tlie trust estate, purchased by D. G. Wright from the trustees; whether the price so paid was fair and reasonable, and if not by how much it was underpaid; (2) as to the rate ofi interest paid by 3>. G. Wrigbjt in respect of trust moneys from time to time owing by him to the trust or subtrust from and including the year 1908 : to and iricluding the year 1924, and as to the current rate of interest payable in respect of loans of a similar, nature' during the same period, and as to whether, and if 4 so to what amount interest was Underpaid during such period; (3) <is to the securities now held by the trustees in respect of tho sub-trust and as to n liether the same were in order, and as to whether they were good and sufficient securities with a margin not less than that required by the Trustees Act, 1908. and if not, which securities were inadequate and to what extent. The plaintiff to have the conduct of the enquiry and the case will be adjourned for further consideration and with liberty to either party to apply.