Application by Cottingham

[2020] NZHC 1094

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-677

[2020] NZHC 1094

IN THE MATTER OF

An Originating Application under Part 19 High Court Rules 2016 and sections 49, 51 and 52 of the Trustees Act 1956

AND IN THE MATTER OF

An application by PHILLIP NEIL

COTTINGHAM, JENNIFER MARGARET COTTINGHAM, GLENN JOSEPH

WILCOX and PAUL GARTH BUTLER
constituting the Trust Board of the PREMA CHARITABLE TRUST for orders

appointing trustees and for vesting orders Applicants

Hearing:	On the papers
Counsel:	M Phillipps for the Applicants
Judgment:	22 May 2020

JUDGMENT OF MUIR J

This judgment was delivered by me on Friday 22 May 2020 at 3.30 pm Pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date:…………………………

Solicitors:

Vicki Ammundsen Trust Law Limited, Auckland

Application by Cottingham to appoint trustees [2020] NZHC 1094 [22 May 2020]

Introduction

[1]    This is an originating application to appoint chartered accountants Messrs Gareth Russell Hoole, Clive Robert Bish and Jeffery Phillip Meltzer as trustees of the Prema Charitable Trust (the Trust), and to appoint Phillip Neil Cottingham, Jennifer Margaret Cottingham, Glenn Joseph Wilcox and Dr Paul Garth Butler as advisory trustees.

[2]    I have earlier made orders granting leave to commence the proceedings by way of originating application, dispensing with service on the Attorney-General and directing that the application proceed without notice.1

Background

[3]    The Trust was established in 1999 by Mr Cottingham. Its purpose is to link natural therapies with service to society. It operates (through the vehicle of Wellpark College of Natural Therapies Limited (Wellpark)), an educational establishment. It does so from a property owned by the Trust at 14 Mills Lane, Albany. This property includes a residential village of over 90 people, a yoga centre and a workshop and retreat centre.

[4]    The applicants were the most recent trustees of the Trust. However, each has exceeded the three year term of their respective appointments under cl 4.4 of the Trust Deed, and none have been formally re-appointed. There is no default power of appointment of trustees in the Trust Deed that can be called upon in the absence of current appointees. Likewise, s 43 of the Trustee Act 1956 (the Act) does not respond because there are no valid trustees. Moreover, although the Trust Deed contains a power for it to be altered, that is to be exercised by the Board of the Trust so cannot be used to correct the lacuna which has occurred.

[5]    These problems were brought to the Trust’s recent attention by professional advisers asked to assist with various acute administrative and operational challenges

1      Minute of Muir J, dated 19 May 2020, at [19] - [21].

faced by the Trust and Wellpark. The problems have been compounded by the recent Covid-19 pandemic. Urgent action is required.

[6]    As an essential prerequisite to any recovery plan, new trustees must be appointed. Messrs Bish, Hoole and Meltzer are proposed.

[7]    Upon appointment of the new trustees it is envisaged that they will in turn appoint new directors of Wellpark. Wellpark has urgent regulatory requirements which need to be met if it is to retain its accreditation, and this in turn requires proper and timely oversight.

[8]    Each of the applicants has a long history of association with the Trust and seeks appointment as advisory trustees to Messrs Bish, Hoole and Meltzer.

Jurisdiction

[9]Section 51(1) of the Trustee Act 1956 provides that:

51 Power of Court to appoint new trustees

(1)        The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.

[10]   A similar power of appointment exists within the Court’s inherent jurisdiction, but it is unnecessary to invoke this in circumstances specifically provided for by the Act.

[11]In its terms the s 51 jurisdiction requires the Court to identify:

(a)expedience in the appointment of new trustees; and

(b)inexpedience, difficulty or impracticality in attempting to do so without the assistance of the Court.

[12]   In Attorney-General v Ngati Karewa and Ngati Tahina Trust Randerson J summarised the principles relating to an application under s 51 and, in the context of the present application, noted in particular;2

[68] The Court must be satisfied not only that there are grounds for the exercise of the discretion but also that “it is inexpedient, difficult or impracticable so to do without the assistance of the Court…”. That condition may be fulfilled where, for example, there is no or inadequate provision in the trust instrument for the appointment of trustees…

[13]   Such is the case here. As a result of oversight in the re-appointment process there are no existing trustees of the Trust. Moreover, because cl 5.2 of the Trust Deed vests the power of appointment of the trustees that comprise the Trust Board, the position has now been reached where new trustees cannot be appointed without the assistance of the Court.

[14]I am satisfied therefore that the jurisdiction in s 51 is made out.

[15]   I am also satisfied that the proposed appointments of Messrs Bish, Hoole and Meltzer are appropriate. Mr Hoole deposes that both the Trust and Wellpark face a number of imminent challenges which cannot be addressed without urgent professional assistance and that this necessitates a properly constituted Trust Board. Such Trust Board will in turn be in a position to make appropriate appointments to the Board of Wellpark. I am satisfied that Messrs Bish, Hoole and Meltzer are appropriate appointees. Each are experienced independent professionals and with particular expertise in management of high net-worth entities in financial difficulties as well as complex trust structures.

[16]   Mr Meltzer is a Fellow – Chartered Accountants Australia and New Zealand, a former member of the Disciplinary Tribunal of the New Zealand Institute of Chartered Accountants (NZICA), former member of the Professional Conduct Committee of the NZICA and past chairman of the Auckland Branch of the NZICA. He is a well known insolvency practitioner, director and professional trustee.

2      Attorney-General v Ngati Karewa and Ngati Tahina Trust HC Auckland M 2073/99 and CP 242/00, 5 November 2001 at [68].

[17]   Messrs Bish and Hoole are both principals of Ecovis KGA chartered accountants with extensive experience as directors and professional trustees.

[18]   I am satisfied that all such appointees have the skills, qualifications and reputations appropriate to the task intended.

Appointment of advisory trustees

[19]Section 49(2)(b) of the Trustee Act provides that;

49       Advisory trustees

…

(2)        An advisory trustee may be appointed in respect of all or any part of the trust property—

…

(b) by order of the court made on the application  of  any  beneficiary or trustee or of any person on whose application the court would have power to appoint a new trustee;

[20]   There is limited authority relating to the circumstances in which advisory trustees might be appointed by the Court. In Oldfield v Oldfield the Court made orders removing Mr and Mrs Oldfield as trustees and substituting New Zealand Guardian Trust (NZGT).3 It was, in that context, invited to make further orders appointing Mr and Mrs Oldfield as advisory trustees together with a third person. Van Bohemen J acknowledged that there may be some value in doing so, in that the proposed appointees understood the needs and circumstances of the primary beneficiaries and the perspective and interests of the capital beneficiaries,4 but ultimately declined to make the appointment because of divisions within the family and the likelihood that NZGT may feel compelled under ss 49(3)(d) and (e) of the Act to seek the directions of the Court if its views were to come into conflict with those of the advisory trustees.5

3      Oldfield v Oldfield [2019] NZHC 492 at [68].

4 At [58].

5 At [59].

[21]   No such considerations apply in this case. The application is not made against a disputatious background but against one of oversight. Counsel confirms that the proposed trustees welcome the applicants’ continued involvement in an advisory role.

[22]   I therefore consider the discretion in s 49 of the Act appropriately exercised in favour of appointment of the advisory trustees.

Result

[23]I make orders:

(a)appointing Clive Robert Bish, Gareth Russell Hoole and Jeffery Phillip Meltzer as trustees of the Prema Charitable Trust.

(b)appointing Phillip Neil Cottingham, Jennifer Margaret Cottingham, Glenn Joseph Wilcox and Dr Paul Garth Butler as advisory trustees to the Prema Charitable Trust.

(c)that the costs incidental to this application be met from the funds or assets of the Prema Charitable Trust.

Muir J