Fraser v Carey [2018] NZHC 13 (11 October 2018)

Last Updated: 15 November 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-2193 [2018] NZHC 13

UNDER	Sections 52 and 66 of the Trustee Act 1956 and the inherent jurisdiction of the Court
IN THE MATTER	of an application for Vesting Order in respect of the property situated at 455 Whangaparaoa Road, Whangaparaoa held in Certificate of Title NZ33B/405 and for directions in relation to the administration of a Trust
BETWEEN	PENELOPE ANNE FRASER and DEANNE CAROL TAYLOR as Trustees of the Nan Carey Family Trust Applicants
AND	NANCY OLGA CAREY Respondent

Hearing:	On the papers
Counsel:	ME Cole for applicants
Judgment:	11 October 2018

_{JUDGMENT OF FITZGERALD J}

This judgment was delivered by me on 11 October 2018 at 11 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date...............

_{Solicitors: Taylor & Co Lawyers, Auckland}

FRASER v Carey [2018] NZHC 13 [11 October 2018]

[1] The applicants are the trustees of the Nan Carey Family Trust (the Trust). They apply without notice for leave that the current proceeding be commenced by way of originating application and for directions as to service. The applicants further apply without notice for a vesting order under s 52 of the Trustee Act 1956 (Act) and for directions in relation to the administration of the Trust.

Background

[2] The respondent is the settlor, sole appointer and one of the original trustees of the Trust. The Trust was settled by way of deed dated 4 October 2000 and subsequently varied on 14 January 2009.

[3] The respondent suffered a stroke in July 2017 and her ability to communicate was severely affected as a consequence. At that time, the other trustee of the Trust was Hibiscus Independent Trustees 2008 Ltd (Hibiscus).

[4] By August 2018, the respondent’s health situation had sadly deteriorated. On

3 August 2018, her medical practitioner issued a certificate pursuant to ss 97(5) and

99D of the Protection of Personal and Property Rights Act 1988 certifying the respondent mentally incapable because she is not wholly competent to manage her own affairs in relation to her property.

[5] Given those matters, steps were taken by Hibiscus to remove the respondent as trustee and to appoint new trustees. Hibiscus appointed the applicants as new trustees pursuant to s 43(1)(j) of the Act. Hibiscus then retired as a trustee.

[6] The first-named applicant, Ms Fraser, is the respondent’s daughter. The second-named applicant is the respondent’s solicitor and an independent trustee of the Trust. Having reviewed the papers, I am satisfied that the respondent was lawfully removed as a trustee of the Trust and the applicants appointed in her place.

[7] The Trust’s only asset at present is a property situated in Whangaparaoa (the Property). The Property is currently registered in the names of the respondent and Hibiscus. Given this, an order is sought vesting the Property in the names of the new trustees.

[8] Ms Fraser states in her affidavit in support of the applications that the Property is currently vacant and in the interim the respondent’s saving reserves are decreasing. The applicants accordingly seek an order vesting the Property in the current trustees to be able to manage it and to provide for the respondent’s ongoing needs as a beneficiary of the Trust.

The orders sought

[9] As well as seeking leave to commence these proceedings by way of originating application, the applicants seek directions: dispensing with service on the respondent; that a litigation guardian need not be appointed to represent her in these proceedings; and dispensing with service on any other parties.

[10] In terms of a litigation guardian, and by reference to various authorities where this issue has been considered in similar circumstances, the applicants say that because of the respondent’s current mental incapacity, no purpose would be served in appointing a litigation guardian.

[11] In terms of service on parties potentially affected by the orders sought,

Ms Cole, counsel for the applicants, notes in her helpful and comprehensive memorandum filed in support of the applications that other than the respondent and the first-named applicant, the only other beneficiaries under the Trust are the respondent’s son (who passed away some years ago without children) and her three grandchildren. The three grandchildren have all been contacted in relation to these proceedings and have provided formal consent to the orders being made. Ms Cole accordingly submits there are no other parties upon whom service need to be effected.

[12] In addition to the vesting order, the applicants also seek a direction that a proposed Deed of Variation of Trust may be executed by the applicants as trustees. This concerns a “no variation” clause in the Trust Deed, which permits the trustees to vary the Trust Deed but only after first obtaining the prior written consent of the respondent. Plainly that now causes difficulties, given the respondent’s mental capacity.

Analysis

Leave to commence proceedings by originating application

[13] I am satisfied that the circumstances of this case mean the applications are appropriately brought by way of originating application. Applications for orders such as those sought are routinely requested to be dealt with by way of originating applications and are routinely granted by the High Court. In my view, the expediency envisaged under the originating application procedure is entirely suited to a case of this type.

Directions as to service and a litigation guardian

[14] In applications such as this, directions are often made for service on discretionary beneficiaries or other parties connected with the trust. That is addressed on a case-by-case basis and may be dispensed with in cases where, for example, an independent professional trustee is appointed as a replacement trustee.

[15] In this case, I am satisfied that orders dispensing with service on the respondent or on any other party are appropriate. Given the respondent’s current mental health situation, service on her would serve no useful purpose. For the same reason, and consistent with other High Court authorities, I also am satisfied that no useful purpose would be served in appointing a litigation guardian to represent the respondent in these proceedings.¹

[16] The only other potentially affected parties are the first-named applicant herself and the respondent’s three grandchildren. The grandchildren are already aware of these proceedings and have each provided their written consent to the orders being made. Again, no useful purpose would be served by ordering service on them.

Vesting order/amendment of Trust Deed

[17] Section 52 of the Act relevantly provides as follows:

52 Vesting orders of land

(1) Subject to the provisions of subsections (2) and (3), in any of the following cases, namely—

...

(b) where a trustee entitled to or possessed of any land or interest therein, whether by way of mortgage or otherwise, or entitled to a contingent right therein, either solely or jointly with any other person—

(i) is under disability; or

...

the court may make an order (in this Act called a vesting order) vesting the land or interest therein in any such person in any such manner and for any such estate or interest as the court may direct, or releasing or disposing of the contingent right to such person as the court may direct.

...

(3) Where any such order relates to a trustee entitled or formerly entitled jointly with another person, and that trustee is under disability or out of the jurisdiction of the court or cannot be found, or (being a corporation) has ceased to carry on business or is in liquidation or has been dissolved, the land, interest, or right shall be vested in the other person who remains entitled, either alone or with any other person that the court may appoint.

[18] There is plainly jurisdiction for the Court to make the vesting orders sought and the Court has made such orders in similar circumstances in other cases.²

[19] Given I am satisfied that the respondent has been lawfully removed as a trustee and the applicants appointed in her place, the vesting appropriately follows.

[20] These events also make it appropriate in my view to make the directions sought in relation to the amendment of the “no variation” clause in the Trust Deed. I accept

Ms Cole’s submission that the text of that clause adequately protects beneficiaries of the Trust in relation to any future variations of the Trust Deed, despite the removal of the requirement for the respondent’s prior written consent.

Result

[21] Taking into account the above, I am satisfied that orders may be made on the papers in accordance with the interlocutory applications as filed.

[22] There are accordingly orders in terms of paragraphs 1(a) to (d) of the interlocutory application without notice for permission that proceedings be commenced by way of originating application and for directions as to service, dated

8 October 2018.

[23] There are also orders in terms of paragraphs 1(a) to (d) of the originating application without notice for a vesting order and directions in relation to the administration of a trust, also dated 8 October 2018

Fitzgerald J