Boston Trustees 3131 Limited v Chapman
[2019] NZHC 1801
•29 July 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-1491
[2019] NZHC 1801
UNDER the Trustees Act 29156 BETWEEN
BOSTON TRUSTEES 3131 LIMITED
Applicant
AND
ETHNE WINIFRED CHAPMAN AND BOSTON TRUSTEES 3131 LIMITED as
former Trustees of Ecko Trust Respondents
Hearing: On the papers Counsel:
P B Friedlander for the Applicant
Judgment:
29 July 2019
JUDGMENT OF GORDON J
This judgment was delivered by me on 29 July 2019 at 4.30 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Freidlander & Co Ltd, Auckland Counsel: S Hamilton, Auckland
BOSTON TRUSTEES 3131 LIMITED v CHAPMAN [2019] NZHC 1801 [29 July 2019]
[1] The applicant, Boston Trustees 3131 Ltd (Boston Trustees), as a trustee of the Ecko Trust (the trust), seeks an order under s 52(1)(b)(i) of the Trustee Act 1956 (the Act) vesting the mortgage over a property currently registered in the names of Ethne Winifred Chapman (Mrs Chapman) and Boston Trustees (the mortgage) in the sole name of Boston Trustees.
[2] Boston Trustees also seeks associated orders permitting commencement of this proceeding by originating application and dispensing with service of this proceeding on Mrs Chapman. The application is supported by an affidavit of Alan Tong, chartered accountant, and Patrick Graham, medical practitioner.
Background
[3] The trust was constituted by Deed of 13 May 1996. When the trust was first constituted, the trustees were Mrs Chapman and her solicitor, Mr Freidlander. Mrs Chapman is the primary beneficiary of the trust.
[4] On 14 February 2013, Mr Freidlander resigned as a trustee and Boston Trustees was appointed as a trustee. Boston Trustees is a professional trustee company. Mr Tong is the sole director of Boston Trustees. From 14 February 2013 until 16 May 2019, Mrs Chapman and Boston Trustees continued as the trustees of the trust. Mr Tong says that unfortunately from about 2017 onwards it became clear that Mrs Chapman no longer had the mental capacity to discharge her responsibilities and perform her role as a trustee. However, as the trust did not enter into any transactions or conduct any business between 2017 and the present time, Mrs Chapman remained as a trustee. But, Mr Tong says that was “in name only” as Mrs Chapman was not required to do anything or to exercise any powers or discretions.
[5] Mr Tong says that once it became clear that the trust would need to make the present application for a vesting order, it was decided that Mrs Chapman should be removed as a trustee. On 16 May 1996, Mrs Chapman had executed an enduring power of attorney in respect of property rights in favour of her son, Peter Chapman. On 16 July 2019, Mr Chapman, as attorney for his mother and as appointor under the trust by virtue of that attorneyship, signed a deed whereby Mrs Chapman was removed as a trustee.
[6] The result is that Boston Trustees is now the sole trustee. This is permissible under the Trust Deed. Clause 14.3(a) of the Trust Deed provides that there will always be no fewer than two trustees. However, a single trustee is permissible under cl 14.3(c) which provides that where there is a corporate trustee, that corporate trustee may hold office as the sole trustee.
[7] The trust holds a mortgage over a property at 13B Corinth Street, Remuera, Auckland (the property). It arose in this way. In 2009, the trust agreed to lend
$470,000 (the loan) on interest free terms to Peter William Chapman, Elizabeth Claire Chapman and Paul Benjamin Freidlander, as trustees of the Chapman Family Trust.
[8] The loan was secured by a mortgage in favour of the trust. On 16 November 2009, that mortgage was registered against the title to the property, which was owned by the Chapman Family Trust.
[9] Consequent upon the change of trustee, on 14 February 2013, the mortgage was transferred to the then trustees of the trust, Mrs Chapman and Boston Trustees.
[10] On 13 June 2019, the Chapman Family Trust entered into an agreement for sale and purchase to sell the property for $1,420,000. By 18 July 2019, the Chapman Family Trust had repaid all but $270,000 of the loan. Mr Tong says that the Chapman Family Trust will repay the final $270,000 to the trust from the settlement proceeds. That payment will discharge the Chapman Family Trust’s liability to the trust under the loan. Once the Chapman Family Trust has repaid the loan in full there will be no reason for the trust to maintain its mortgage over the property.
[11] Settlement under the agreement for sale and purchase is due to take place on 23 August 2019. In order for settlement to take place on time, the trust must discharge its mortgage, or at least give an undertaking that it will do so, in order for the Chapman Family Trust to give clear title to the property to the purchasers.
[12] Even though Mrs Chapman has now resigned as a trustee, the mortgage is still legally registered in favour of her and Boston Trustees. The application is therefore made to the Court to vest the mortgage solely in the name of Boston Trustees so it can
discharge the mortgage on repayment of the final $270,000, and allow the agreement for sale and purchase to settle as scheduled on 23 August 2019.
[13] With that background, and before turning to the matter of the vesting order itself, I deal with the prior matters which I need to address.
Should permission be granted to commence the proceedings by way of originating application?
[14] This proceeding is not of a kind that can be commenced by way of originating application as of right, pursuant to rr 19.2–19.4 of the High Court Rules 2016. However, the Court may, in the interests of justice, permit any proceeding not mentioned in rr 19.2–19.4 to be commenced by originating application. The Court’s permission may be sought without notice.1
[15] In Jones v HW Broe Ltd,2 McGechan J considered an application for leave to use the originating application procedure on an ex parte basis, discussing the rationale underlying the predecessor to r 19.5 as follows:3
The … originating application procedure was designed as a genuine exception, and as an expedient for cases where there was in reality no opposing party, avoiding clumsy and unnecessary use of a full statement of claim and notice of proceeding. It was not intended for routine use in cases where there was another likely party with contrary interests.
[16] I am satisfied that it is appropriate that this proceeding proceed by way of originating application.4 This is a case where it is not necessary for the parties to file particularised pleadings or to complete steps such as discovery in order for the Court to determine the single issue before it in the proceeding. There is no party before the Court (or that could be served were directions as to service to be made) whose interests are not aligned with those of the respondents. As a result, there is no need for further evidence.
1 High Court Rules 2016, r 19.5.
2 Jones v H W Broe Ltd (1989) 5 PRNZ 206 (HC).
3 At 207. These comments were made in the context of an earlier version of the High Court Rules (rr 239 and 485D). The comments remain applicable.
4 See, for example, Re Hamertons Trustee Services Ltd [2018] NZHC 2720; Macpherson v Macpherson [2018] NZHC 240; and McKean v McKean [2017] NZHC 2212.
Should orders dispensing with service of the proceedings on Mrs Chapman be made?
[17] Dr Graham is a registered medical practitioner. His practice is mostly as a general practitioner, although it includes assessments as to the scope of a patient’s mental capacity. Dr Graham says that on 28 September 2017 he examined Mrs Chapman. At that stage he had been asked to assess whether Mrs Chapman had mental capacity for the purposes of engaging an enduring power of attorney that she had signed on 16 May 1996. Dr Graham says he is aware of enduring powers of attorney and similar documents and he has experience in assessing whether a patient has capacity to enter into an enduring power of attorney. He is also experienced in assessing and certifying, due to the possibility of a patient no longer having capacity to manage his or her own affairs, whether a document such as a power of attorney has been engaged.
[18] Dr Graham says that, after examining Mrs Chapman, he signed a certificate in the prescribed form under the Protection of Personal and Property Rights Act 1988 that Mrs Chapman was not mentally capable. He formed that view because Mrs Chapman was not wholly competent to manage her affairs in relation to her own property. The certificate, which is annexed to Dr Graham’s affidavit, records that the reason for his opinion was that Mrs Chapman was suffering from “advanced cognitive impairment associated with debility of old age”.
[19] I am satisfied, on the evidence of Dr Graham, that service on Mrs Chapman should be dispensed with. Any documents served on her will effectively not come to her knowledge due to her mental incapacity. There is no detriment to Mrs Chapman by proceeding in this manner. She has no real rights as a mortgagee because the underlying debt will be repaid on settlement. Further, Mrs Chapman remains one of the primary beneficiaries under the trust.
Should the mortgage be vested in the sole name of Boston Trustees?
[20] Section 52(1) of the Act permits the vesting of land or interest therein in any such person and any such manner and for any such estate or interest as the Court may direct.
[21] The reason for the vesting order is purely to enable the transaction to settle. There would be no difficulties in the transaction settling but for Mrs Chapman’s incapacity and resultant inability to instruct her solicitor to discharge the mortgage. But for Mrs Chapman’s incapacity, the trust would not require the vesting order.
[22] In all the circumstances, I consider that a vesting order, as sought, should be made.
Orders
[23]I order that:
(a)The applicant may commence this proceeding by way of a without notice originating application;
(b)Service of the proceeding on Ethne Winifred Chapman is dispensed with; and
(c)The mortgage over the property at 13B Corinth Street, Remuera, Auckland, being instrument 8335715.2 currently registered in the names of Ethne Winifred Chapman and Boston Trustees 3131 Ltd is vested in the sole name of the Boston Trustees 3131 Ltd.
Gordon J
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