Tozer v Tozer [2014] NZHC 1759 (28 July 2014)

Last Updated: 14 August 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-4087 [2014] NZHC 1759

BETWEEN	BRETT GREGORY TOZER, CRAIG KEITH TOZER, LYN BEVERLEY FERGUSON Plaintiffs
AND	BRYCE ROBERT TOZER First Defendant
AND	IAN HENDRICK BODE Second Defendant

Hearing:	25 July 2014
Appearances:	G O'Brien D D Martin for Plaintiffs No appearance by or on behalf of Defendants
Judgment:	28 July 2014

_{JUDGMENT OF KEANE J}

This judgment was delivered by me on 28 July 2014 at 4pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Garth O’Brien & Associates, Auckland

TOZER & ORS v BRYCE TOZER [2014] NZHC 1759 [28 July 2014]

[1] In issue in this claim is whether the present trustees of the McKay Trust, Bryce Tozer, who is also a beneficiary, and Ian Bode, a retired solicitor, have administered the Trust inconsistently with their duty as trustees. The plaintiffs, who are the remaining beneficiaries of the Trust, contend that they are answerable for serial breaches of the Trust.

[2] The plaintiffs contend, in the most general sense, that the trustees have failed to preserve the single asset of the Trust, a house property at Bucklands Beach. In three causes of action, they contend that the trustees have failed to preserve Trust capital, have failed to act impartially between beneficiaries, and have failed to act with due diligence and prudence in the best interests of all the beneficiaries.

[3] They also contend, as against Bryce Tozer alone, in three further causes of action, that in breach of trust he profited from his trusteeship, that he did so in breach of his fiduciary duty to them, and that he misappropriated property. In a seventh cause of action they contend that Ian Bode dishonestly assisted him and is distinctly liable on that account.

[4] The plaintiffs are content to obtain judgment on the first three causes of action only, which in an intersecting way encompass all the breaches of trust alleged in the remaining causes of action against the trustees individually. For this purpose, they say, it is enough to establish those breaches. There need not be any finding of dishonesty. I proceed on that basis.

Judgment on formal proof

[5] The claim was filed on 2 September 2013. On 10 September 2013 Bryce Tozer was served at his Auckland home with the notice of proceeding, the statement of claim, the affidavit of Brett Tozer, dated 16 July 2013, initial discovery and an application for directions. Mr Bode was served with these papers at Taupo on 4

October 2013. Neither has filed a statement of defence.

[6] In a letter, dated 24 April 2014, the Registrar was asked to set the claim down for formal proof. An endorsed copy of that letter, together with a covering letter, was

served on Bryce Tozer on 1 May 2014 and on Mr Bode on 9 May 2014. Neither has responded to that letter either.

[7] On that basis, I am satisfied, that this claim may proceed by way of formal proof under HCR 15.9 on the papers as they are. A second affidavit from Brett Tozer was also filed on 24 April 2014, as was an affidavit from an accountant, Stuart Roper, as to the quantum of claim.

Relevant transactions

[8] On 14 October 2003 Lois Durante, the mother of the beneficiaries, who had remarried after their father’s death, settled the McKay Trust. She and City Law Trustees Limited were the original trustees. She was also a beneficiary and her children, all of whom are involved in this claim, were the remaining beneficiaries.

[9] On the date Mrs Durante settled that Trust, 14 October 2003, she sold to the Trust her family home, 13 Gillard Place, Bucklands Beach, in which she continued to live until she died on 5 July 2010. On the date of sale the purchase price,

$775,000, was not paid to her. The Trust assumed that debt to her.

[10] Mrs Durante and Bryce Tozer were also directors of the family company, Modern Movers Limited, and on 28 November 2005 it borrowed from Mortgage Holding Trust Company Limited, a subsidiary of Sovereign Assurance, $500,000 at a fixed rate of 7.65%, and $100,000 at a floating rate of 9.15%. The term of the loan was 25 years.

[11] To obtain that facility MHTCL required the Trust to give a first mortgage over the Bucklands Beach property and it required the then trustees to guarantee Modern Movers’ liability. They did so on 16 November 2005, supported by a trust certificate. On 16 November 2005 also Bryce Tozer and Modern Movers Limited, as borrowers, gave a deed of indemnity in favour of the trustees, undertaking to meet any loss the trustees incurred if MHTCL called on their guarantee.

[12] On 13 January 2006 Modern Movers drew down $597,720, less fees, and used $474,849.54 to repay an earlier Marac advance. On 29 November 2005 it drew

down the balance, $122,870, and paid that sum into its bank account. Then on 7

February 2008 Modern Movers obtained a second loan facility from MHTCL, this time $150,000 for a 30 year term at an interest rate of 8.75%.

[13] On the following day Modern Movers drew down that loan and deposited it in the trust account of City Law, the firm of solicitors whose corporate trustee, City Law Trustees Limited, was then still a trustee. This deposit was in favour of Brylee Investments Limited, whose directors and shareholders were Bryce Tozer and his wife. On 8 February 2008 Brylee Investments used that sum to purchase 24C Andromeda Crescent, East Tamaki, Auckland.

[14] During the 2010 year Brylee Investments leased the Andromeda Crescent property to Modern Movers at a rent of $61,897, and in the following year for

$70,524, in all $132,421. Brylee sold that property on 16 April 2012 for $359,000.

[15] When Mrs Durante died on 5 July 2010 Bryce Tozer and Mr Bode became the trustees of the McKay Trust and on 11 February 2011 sold the Trust’s only asset, the Bucklands Beach property, for $880,000. Out of those proceeds they repaid MHTCL its loans and paid a balance to the solicitors engaged in the administration of Mrs Durante’s estate. On the figures I have, the payment to MHTCL was

$725,337.58 and that to the estate $120,196.50. They exceed the proceeds of sale, but that does not affect the essential analysis.

[16] Bryce Tozer and Modern Movers, despite demand, have never indemnified the Trust for the proceeds of sale of the Bucklands Beach property. Nor has Bryce Tozer or Mr Bode ever accounted to the Trust for the $180,000 loan to Brylee Investments Limited; a loan in reality to Bryce Tozer and his wife.

Three breaches of duty

[17] In the first cause of action the plaintiffs contend that the present trustees failed to preserve Trust property when they sold the Bucklands Beach property and repaid the two loan facilities, and made no attempt to have Modern Movers or Bryce Tozer indemnify the Trust under the deed.

[18] In the second cause of action they contend that the trustees failed in their duty to act impartially as between the beneficiaries. Bryce Tozer and his interests were preferred to the prejudice of other beneficiaries. The Andromeda Crescent deposit is first in point; then the repayment of the MHTCL loans out of the sale proceeds of the Trust’s only asset, the Bucklands Beach property.

[19] In their third cause of action they contend that the trustees are in breach of a duty to act with due diligence and prudence when they allowed the sale proceeds of Bucklands Beach to be applied as they were, and did not attempt to recoup to the Trust the proceeds of sale, principally by enforcing the deed of indemnity.

[20] As to these causes of action, I need only say, I am satisfied on the evidence that the two trustees are answerable as alleged. There is no evidence before the Court on which either trustee could begin to be excused their liability under s 73 of the Trustee Act 1956.

Compensation claimed

[21] The plaintiffs seek a global figure by way of compensation, $200,000, on the following bases:

(a) The $150,000 second advance to Brylee Investments Limited for the Andromeda Crescent purchase was plainly for the personal benefit of Bryce Tozer and his family.

(b) The sum of $30,000, deployed in the Andromeda Crescent purchase, beyond the $150,000 second advance, was Trust property.

(c) The rent charged by Brylee Investments to Modern Movers in the years 2010 – 2011 amounted to $132,421.

[22] On that basis, I am satisfied, a payment of $200,000 is justified in equity to the beneficiaries whose claim this is to restore them to the position in which they would have been had the breaches not occurred, as a matter of practical justice.

Conclusions

[23] In the result, on formal proof, I give judgment against each of the trustees for

$200,000, in favour of the beneficiaries whose claim this is; a judgment in respect of which each trustee has full individual liability. I also award the plaintiffs costs at

_{scale 2B, and disbursements as fixed by the Registrar.}

P.J. Keane J