Baker v Baker

[2019] NZHC 2426

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2019-419-235

[2019] NZHC 2426

UNDER

Part 19 of the High Court Rules 2016 and the Trustee Act 1956

IN THE MATTER

of an application for a vesting order in respect of land

BETWEEN

BRIAN HERBERT BAKER and MSCA TRUSTEES (2011) LIMITED

Applicants

AND

CHRISTINE CONNIE BAKER

Respondent

Hearing:	On the papers
Counsel:	RL Buttar for applicants
Judgment:	25 September 2019

JUDGMENT OF FITZGERALD J

[As to interlocutory application for directions and originating application seeking vesting orders]

This judgment was delivered by me on 25 September 2019 at 2:30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Edmonds Judd, Te Awamutu

Baker v Baker [2019] NZHC 2426 [25 September 2019]

Introduction

[1]    The applicants are two of the three trustees of a family trust (the Trust) settled by the first-named applicant (Mr Baker) and his wife Mrs Baker (the respondent and third trustee). Sadly, as of at least 2016, Mrs Barker has suffered with mixed dementia (Alzheimer’s and frontal dementia). Since that time, her condition has deteriorated and in October 2018, her enduring power of attorney (EPOA) was invoked. A more recent medical certificate records her worsening condition.

[2]    Given Mrs Baker’s current condition, the two remaining trustees, the applicants, are understandably of the view she is no longer able to carry out her role as trustee. They also wish to sell some bare land held by the Trust, which is currently registered in the applicants’ and Mrs Baker’s joint names. They apply for a vesting order vesting title to the land in their names only.

[3]    As matters presently stand, Mrs Baker remains a trustee of the Trust. The applicants accordingly also seek an order formally removing Mrs Baker as trustee.

Factual background – more detail

[4]    The Trust was originally settled in September 1997. Its settlors were Mr and Mrs Baker. They, with one other person, were also the original trustees. The second- named applicant, MSCA Trustees (2011) Ltd (MSCA Trustees) later replaced the third trustee. There are a (potentially large) number of discretionary beneficiaries under the Trust, which include Mr and Mrs Baker themselves, and their three children. Each of the three children has provided consent to the orders sought (although not the order removing Mrs Baker as a trustee; as the need for this order was raised by the Court after the proceedings were commenced and the written consent had been given).

[5]    As noted, Mrs Baker was first diagnosed with mixed dementia in May 2016. An EPOA in relation to her personal welfare was invoked in October 2018. Dr Jo Ann Francisco, a General Practitioner, has provided a report  dated  20  May 2019  on Mrs Baker’s condition at that time, which is described as having “progressed significantly”. She is described as having “worsening memory and behaviour”.

[6]    Part of the Trust assets is bare land located in Ōtorohanga, being land contained in the record of title SA48A/740, being Lot 2, Deposited Plan 382251 (the Land). The current registered proprietors of the Land are Mr and Mrs Baker and MSCA Trustees. Given Mrs Baker’s present condition, the applicants are prevented from dealing with the Land in their role as trustees. Hence the request for a vesting order.

[7]    The papers came before me and I noted that the applicants did not seek an order removing Mrs Baker as a trustee. I sought further information from counsel as to whether Mrs Baker had already been removed, given the applicants’ description of themselves as the “continuing trustees”.

[8]    Ms Buttar, counsel for the applicants, noted in her memorandum in response that the application had proceeded on the assumption that Mrs Baker’s incapacity itself disqualified her from acting as a trustee by operation of law. Nevertheless, counsel noted that the Court may remove trustees under its inherent jurisdiction, as part of its role in seeing that a trust is properly executed. Counsel was in agreement that it would be prudent for the Court to also make an order removing Mrs Baker as a trustee.

[9]    Finally, also filed with the application for a vesting order is an interlocutory application seeking leave to bring the substantive application under Part 19 of the High Court Rules 2016 and seeking orders dispensing with service.

Originating application

[10]   I am satisfied it is appropriate to grant leave for this matter to be commenced by way of originating application under Part 19 of the High Court Rules. Matters such as this are routinely dealt with under Part 19, given the process envisaged under that Part is ideally suited for proceedings of this kind. They can and ordinarily are dealt with by way of affidavit evidence, and often on the papers.

[11]   Leave is accordingly granted to commence these proceedings by originating application under Part 19 of the High Court Rules.

[12]   I also consider it appropriate to dispense with service on Mrs Baker herself, given her current medical condition. It is also appropriate to dispense with the need

to appoint a litigation guardian on Mrs Baker’s behalf. No useful purpose would be served in that regard, particularly given it is, in my view,  plainly appropriate for  Mrs Baker to be formally removed as a trustee, given her inability to carry out that role. Further, the vesting order can be considered somewhat mechanical in nature, given it does not alter or affect the beneficiaries’ entitlements under the Trust, including those of Mrs Baker herself.1

[13]   I also take into account Mr and Mrs Baker’s children’s consent to the vesting orders. While consent has not been provided by all potential discretionary beneficiaries, I am satisfied it is not necessary to effect service of the proceedings on all those persons. As noted, the vesting orders do not alter or affect the present beneficiaries’ entitlements under the Trust Deed. The applicants will no doubt continue to be cognisant of their duties and obligations as trustees to all beneficiaries of the Trust.

[14]   I accordingly make an order dispensing with service on Mrs Baker, the discretionary beneficiaries of the Trust and any other third parties.

Removal of Mrs Baker as trustee and vesting order

[15]   Pursuant to s 51 of the Trustee Act 1956 (the Act), the Court may appoint a new trustee in substitution for a retiring trustee or a trustee who has been removed. That statutory power does not, however, extend to the removal of a trustee. It is clear, however, that the Court has inherent jurisdiction to remove a trustee. As the learned authors of Garrow & Kelly Law of Trust and Trustees state:2

The court has inherent jurisdiction to remove a trustee if the welfare of the beneficiaries and of the trust property requires this. That is, when the Court considers that allowing the trustee to continue in office would prevent the proper execution of the trust.

[16]   I am satisfied Mrs Baker’s current medical condition means she is unable to fulfil her role as trustee of the Trust. Her continued role as trustee is also hampering

1      See Docherty v Docherty [2013] NZHC 1885 at [29]-[30].

2      Greg Kelly and Chris Kelly Garrow & Kelly Law of Trust and Trustees (7th ed, LexisNexis, Wellington, 2013) at [17.54]. (footnotes omitted)

the continued operation of the Trust, including the other trustees’ dealings in relation to the Land.

[17]   It is therefore appropriate for the Court to exercise its inherent jurisdiction and remove Mrs Baker as a trustee of the Trust. I make an order to that effect.

[18]   Given Mrs Baker’s removal as trustee, it is necessary to make a vesting order pursuant to s 52 of the Act. As noted earlier in this judgment, the applicants wish to sell the Land but are prevented from doing so given Mrs Baker presently remains a registered proprietor on the title to the Land.

Result

[19]I make orders:

(a)granting leave to commence these proceedings by way of an originating application under Part 19 of the High Court Rules;

(b)dispensing with service on Mrs Baker, the discretionary beneficiaries of the Trust and any other third party;

(c)removing the respondent, Christine Connie Baker, as a trustee of the Trust; and

(d)vesting title to the Land (as defined in this judgment) in the names of the applicants, Brian Herbert Baker and MSCA Trustees (2011) Ltd.

[20]I make no order as to costs.

Fitzgerald J