Beaven v Rea
[2016] NZHC 518
•23 March 2016
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2016-409-000176 [2016] NZHC 518
BETWEEN GWENDOLINE HARLAND BEAVEN
Plaintiff
AND
MARIE ANGELA REA Defendant
Hearing: (On the papers) Judgment:
23 March 2016
JUDGMENT OF DUNNINGHAM J
[1] The plaintiff has filed a statement of claim seeking orders under ss 52(1)(h) and 58 of the Trustee Act 1956, to effect the vesting of a rural property in North Canterbury, Identifier 510310 (The Trust property) in her as the sole remaining trustee of the A M Beaven Trust. The orders are required because the defendant, as a former trustee of the Trust, has failed to sign the necessary documents to have her removed as a registered owner of the Trust property, and when there is an urgent need to effect a sale of that property.
[2] At the same time, the plaintiff has filed a without notice application for an injunction, which seeks an order vesting the Trust property solely in her as the remaining trustee. Ms Beaven also seeks consequential orders under s 58 to appoint her solicitor, Mark Brown of Geddes and Maciaszek, to execute any documentation necessary to give effect to the vesting order, and orders dispensing with the requirement for service and dispensing with the requirement to provide an undertaking as to damages. The application is supported by the affidavit of the
plaintiff, and by the accompanying memorandum of counsel.
BEAVEN v REA [2016] NZHC 518 [23 March 2016]
Factual background
[3] As Ms Beaven explains, she is now the sole remaining trustee under the A M Beaven Trust (the Trust) which was created on 21 November 1997. Ms Beaven’s late mother was the settlor of the Trust and, since her mother’s death, the terms of the Trust Deed mean that the power to remove and appoint trustees is now exercisable by Ms Beaven alone.
[4] The defendant, Ms Rea, was appointed a trustee of the Trust under a deed of appointment signed by Ms Beaven on 11 July 2014. As a consequence, the Trust property was transferred to both Ms Rea and Ms Beaven.
[5] The Trust property is the only asset of the Trust. Trust property, along with another property owned by a company in which Ms Rea and her husband were shareholders, was offered as security to financiers. The other property has been sold by mortgagee sale, but the sale price was insufficient to pay the debt owed to the mortgagees, there being a shortfall of around $250,000.
[6] As a consequence of there being a shortfall, and because the mortgagees have issued notices under s 119 of the Property Law Act 2007, the Trust property was scheduled for mortgagee sale by auction on 11 March 2016.
[7] Ms Beaven has attempted to have the Trust property refinanced but was advised by a potential lender that that would not occur while Ms Rea remained on the title.
[8] Ms Beaven’s solicitor prepared a deed of retirement of trustee for Ms Rea and associated documents, but despite efforts to contact Ms Rea to sign the documents, she has not agreed to execute them.
[9] Ms Beaven could not therefore refinance the loan. She approached her brother and his family trust to see if they would purchase the property to keep it in the family. After discussion, a sale price of $300,000 was accepted.
[10] Ms Beaven’s solicitor approached the mortgagees to ascertain whether they would enter into a contract on the same terms with Ms Beaven’s brother’s trust without going to auction, but they refused to do so unless Ms Rea consented to the sale. In order to facilitate this, Ms Beaven executed a deed of removal of trustee on
10 March 2016, removing Ms Rea as a trustee. She has emailed a copy of that to
Ms Rea on 11 March 2016.
[11] Ms Beaven’s brother’s trust has paid a $30,000 deposit for the purchase of the property and on the strength of that, the mortgagees have agreed to postpone the mortgagee sale of the Trust property to 1 April 2016. However, of course, the Trust property is still in the names of both Ms Beaven and Ms Rea. Ms Beaven’s affidavit sets out the evidence of her attempts to contact Ms Rea to have her sign the documentation removing her as an owner of the property. This includes an offer to pay $500 towards her costs of addressing the request to have the documents signed and returned. Despite numerous attempts to communicate with her, she has failed to respond.
[12] Ms Beaven explains that if Ms Rea is not removed from the title, she will not be able to complete the sale to her brother’s trust on 1 April 2016 and the mortgagees will step in again to complete a mortgagee sale process.
[13] The sale figure of $300,000 will clear the mortgage arrears, meet Ms Beaven’s costs in respect of the sale process and other associated Trust costs and leave only a small amount in the Trust, if anything. The sale to her brother’s trust gives breathing space to see if she can refinance the property without the pressure of a mortgagee auction. She concludes by saying there is no doubt that the mortgagees will sell the Trust property if she cannot sell it to her brother.
The legal issues arising
[14] The supporting memorandum of counsel explains that, as the defendant has been removed as a trustee, pursuant to the power of appointment and removal which is exercisable by the plaintiff, the defendant is no longer a trustee and is not entitled to remain on the title to the Trust property.
[15] Given the evidence as to the extent of efforts to contact Ms Rea and have her sign the documents required to transfer the Trust property, it is clear that she has failed to co-operate. As a consequence, counsel for the plaintiff considers that the circumstances envisaged by s 52(1)(h) of the Trustee Act have arisen, in that it is “expedient” that there be a vesting order in the plaintiff alone. Counsel points out
that s 52(1)(h) was used in similar circumstances by Andrews J in Re Ferguson.1
[16] As is proper in an urgent without notice application, the memorandum considers the potential defences and whether they militate against the grant of the orders sought.
[17] Counsel points out that, whether or not s 52(1)(h) is strictly applicable, the Court also has an inherent jurisdiction to control trustee’s actions, and, where a trustee has been removed, there is no proper basis for that person to remain on the title to the Trust property.
[18] Furthermore, there is no claim in existence or foreshadowed against Ms Rea that could give rise to a call by her to exercise her right of indemnity against Trust assets. However, in any event, the only asset in the Trust is fully encumbered and so any indemnity rights that might be affected by the vesting order are of no value.
[19] Counsel also submits that the overall convenience and the interests of justice favours the mandatory injunction. The proposed sale will clear the mortgage arrears and meet the costs of sale and of this application and keep the Trust property within the plaintiff’s wider family. It at least creates a “window of opportunity” for the plaintiff to look at refinancing the asset and bringing it back within the Trust in due course, or otherwise dealing with the property as she thinks fit. The plaintiff points out that the defendant is not a beneficiary and, if anything, satisfying the mortgage indebtedness is a practical advantage to the Trust.
[20] Finally, in support of the without notice application, counsel for the plaintiff explains that copies of the papers have been emailed to the defendant’s email address and a text message sent to her phone telling her the application has been made. The
application is brought without notice because of delay that formal service would cause and again, counsel refers to Re Ferguson as having parallels on that issue.
[21] The plaintiff also seeks an order dispensing with the requirement for service.2
Counsel explains that the only person who can be affected by the application is the defendant. The proceedings have been brought to the defendant’s attention informally and, while the mortgagees are aware of the application, their interests are not affected by the application as their security is registered on the title, and they will be repaid in full from the proceeds of sale. Furthermore, given the Trust is essentially insolvent and the action is designed to preserve the possibility of the Trust property one day being refinanced and reacquired from the plaintiff’s brother, there is no point in representation for the beneficiaries. The plaintiff points out that the Court has dispensed with service where the sale of assets was urgent, and this is such a case. If there is no sale to the plaintiff’s brother’s Trust, there will be a mortgagee sale, so service on the defendant can achieve no practical benefit.
[22] Finally, the plaintiff asks the Court to exercise its discretion to dispense with an undertaking as to damages. In all the circumstances, given the defendant has been removed as the trustee and is not a beneficiary in the Trust, she has no personal interest in being on the title, therefore can suffer no personal loss in being removed. The only Trust asset must be sold to avoid a mortgagee sale, so the asset is not going to be available in any event to meet any indemnity right that the defendant has and, of course, as already mentioned, the Trust is close to insolvent. Given there is no likelihood of financial detriment to the defendant, the plaintiff argues this is an appropriate case in which to dispense with an undertaking.
Discussion
[23] The without notice application is certified correct pursuant to the rules as required by r 7.23 and so can be considered under r 7.46. A without notice application can be granted only if the Judge is satisfied that:
(a) requiring the applicant to proceed on notice would cause undue delay or prejudice to the applicant; or
(b) the application effects only the applicant; or
(c) the application relates to a routine matter; or
(d)an enactment expressly permits the application to be made without serving notice of the application; or
(e) the interests of justice require the application to be determined without serving notice of the application.3
[24] In the present circumstances, the Property Law Act notices were served on
13 October 2015, and the Trust has already avoided the mortgagee sale which was scheduled for 11 March 2016. Circumstances are pressing because, if a sale at
$300,000 to the plaintiff’s brother’s Trust does not proceed, the property will be sold at a mortgagee sale. Either way, there will be an urgent need to remove the defendant’s name from the title, as she is no longer a trustee, and she has failed or refused to do this voluntarily.
[25] I am therefore satisfied that this application should be dealt with without notice, because requiring the applicant to proceed on notice would cause delay and prejudice to the applicant, and the interests of justice require the application to be determined without serving notice of the application.
[26] In the circumstances, I make the following orders:
(a) an order pursuant to s 52(1)(h) of the Trustee Act 1956 vesting the Trust property solely in Gwendoline Harland Beaven as sole remaining trustee of the A M Beaven Trust;
(b)an order pursuant to s 58 of the Trustee Act 1956 authorising Mark Brown, solicitor of Christchurch, to execute on behalf of the defendant any documentation necessary to give effect to order (a);
(c) an order dispensing with the requirement to serve the application for injunction;
(d)an order dispensing with the requirement for the plaintiff to provide an undertaking as to damages;
(e) costs are reserved.
Solicitors:
Geddes & Maciaszek, Christchurch
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