Daniel v Cundall
[2020] NZHC 1590
•6 July 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-3033
[2020] NZHC 1590
UNDER Section 51 Trustee Act 1956 and Part 18 High Court Rules IN THE MATTER
of a trust settled by CH and JD Cundall under a certain Deed of Trust dated 13 September 1991 (the “trust”).
AND
IN THE MATTER
of an application to replace the defendant as a trustee
BETWEEN
DAVID GLOSTER DANIEL
Plaintiff
AND
STEPHEN BRUCE CUNDALL
Defendant
Hearing: 4 February and 14 and 15 October 2019 Appearances:
R O Parmenter for Plaintiff L Ponniah for Defendant
Judgment:
6 July 2020
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 6 July 2020 at 4.30 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date: ...................................
DANIEL v CUNDALL [2020] NZHC 1590 [6 July 2020]
[1] The plaintiff and defendant (“Mr Daniel” and “Mr Cundall”) are the trustees of a trust settled by Mr Cundall’s parents, Mr and Mrs C & J Cundall, in 1991 (“trust”). Mr Cundall and Mr Daniel are also the executors and trustees of the estate of Mrs Cundall (“estate”). Mr Daniel was Mr and Mrs Cundall’s family solicitor and, for many years, a partner in Daniel Overton & Goulding, solicitors of Auckland (“Daniel Overton”).
[2] Each trustee seeks an order removing the other, and the appointment of Mr Timothy Grant Livingstone, an experienced chartered accountant, in substitution.
[3] The orders are sought pursuant to s 51 Trustee Act 1956 (“Act”), the relevant part of which provides:
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.
…
[4] The Court also has inherent jurisdiction to remove a trustee. In either case, whether proceeding under s 51 or in the exercise of inherent jurisdiction, such an order is made to ensure the proper execution of the trust in the interests of the beneficiaries.
[5] There is no dispute either or both of the trustees must be removed. For reasons given below, I propose to substitute Mr Livingstone in place of Mr Cundall, so that from hereon the trustees will be Mr Daniel and Mr Livingstone.
Background
[6] The beneficiaries of the trust are Mr Cundall, his sister Ms Dianne Cundall, and any children of Mr Cundall. Mr Cundall has an adult daughter (“R”).
[7] Ms Cundall is intellectually disabled and Mr and Mrs Cundall, concerned for Ms Cundall’s future, settled a unit in Onehunga on the trust to ensure she would have somewhere to live (“unit”). The trust deed provides Ms Cundall is to be allowed the “use occupation and enjoyment” of the unit as her personal residence for life “or until
such time as she is no longer able to occupy it as her own personal residence”.1 This provision anticipates there might come a time when Ms Cundall would not be able to occupy the unit, and that appears to have occurred several years ago.
[8] It is not entirely clear when Ms Cundall ceased living in the unit but certainly she had vacated by the end of 2014, if not well before, and there is no expectation she will return. At present, Ms Cundall lives in sheltered accommodation, and in February 2019, the Family Court at Auckland appointed a property manager, Ms M Selwyn, in respect of her affairs, pursuant to the Protection of Personal and Property Rights Act 1988.
[9]The unit is the trust’s only asset of any consequence and it is tenanted.
[10]The trust is indebted to Mrs Cundall’s estate (see below) in the sum of
$110,000, this being the price at which Mr and Mrs Cundall transferred the unit to the trust (“debt”). That the trust owes this sum is a source of grievance for Mr Cundall because, until early-2012, he thought the debt had been forgiven.
[11] Mrs Cundall died in October 2011.2 The effect of her will of 17 May 2005 was to devise her home, a unit in Mt Albert, to Mr Cundall, with the residue of the estate to be divided into two equal shares. One half share of the residue is to be paid to Mr Cundall. The other half share is to be held on trust for the use and benefit of Ms Cundall for life, and thereafter paid to Mr Cundall, or to R if he has predeceased her. The residue comprises cash of approximately $161,000 and the debt.
[12] Ms Jane Goulding, a senior lawyer at Daniel Overton, dealt with the day-to- day administration of Mrs Cundall’s estate. She obtained probate and corresponded with the executors, that is Mr Cundall and Mr Daniel, about various matters. In the course of correspondence, Mr Cundall made several statements relevant to my decision. First, he said, since 2005, he had found Mr Daniel “antagonistic and obstructive”. Nothing in the evidence, or my observations of Mr Daniel giving evidence, would suggest Mr Daniel is anything of the sort and, as Mr Parmenter,
1 Deed of Trust dated 13 September 1991, cls 1(a) and 1(b).
2 Mr Cundall Snr died in January 1999. Mr Cundall and Mr Daniel were the executors and trustees of Mr Cundall Snr’s estate.
counsel for Mr Daniel, submitted, it contrasts with Mr Cundall’s other expressed complaint that Mr Daniel has been “passive”.3 Secondly, in response to a letter from Ms Goulding regarding the testamentary trust in favour of Ms Cundall, Mr Cundall said:4
2.I refuse to work with David Daniel again in any capacity. If he is a Trustee then I am not ...
[13] In his evidence, Mr Cundall explained this statement as meaning he would not work with Mr Daniel in respect of the testamentary trust, but that is of no consequence. If Mr Cundall cannot work with Mr Daniel on paying a modest sum of income to his sister, because that is all that is required under the testamentary trust, he cannot be relied on to work with Mr Daniel in respect of the inter vivos trust.
[14] Mr Cundall also complained Mr Daniel had told him to pay invoices outstanding at Mrs Cundall’s death from funds in her account, saying the worst that could happen was the “cheques would bounce” if the bank closed her account in the meantime, that is, on learning of her death. I was advised (from the bar) this is not unusual but, in any event, Mr Cundall took an adverse view of this suggestion.
[15] In the early part of 2012, Mr Cundall learned the debt was still outstanding and that his parents had not forgiven it, as he had thought. Mr Cundall advised Daniel Overton he would be taking legal advice about this matter as he considered Mr Daniel ought to have ensured this occurred. There is nothing in this grievance. The reason Mr Cundall knew the debt was outstanding was because, amongst Mrs Cundall’s papers, was a letter from Mr Daniel to her in early 2007, reminding her the debt was still outstanding and asking her to contact him if she wished to forgive it in her will. As far as Mr Daniel recalls, Mrs Cundall did not contact him. The only inference to be drawn is Mrs Cundall did not wish to forgive the debt, a matter for her alone of course.
3 For instance in [18] of his brief of evidence dated 24 September 2018, Mr Cundall states Mr Daniel was a passive trustee from the date of settlement until 2016 and, when on the rare occasion they spoke, Mr Daniel made no enquiry about trust affairs or finances. In [19] of his brief, Mr Cundall refers to Mr Daniel appearing “uninterested”.
4 Letter from Mr Cundall to Daniel Overton dated 7 December 2011.
[16] Ms Cundall issued proceedings against Mrs Cundall’s estate under the Family Protection Act 1955. The status of that proceeding is not clear. In responding to Ms Cundall’s claim, Mr Daniel learned Ms Cundall was no longer living in the unit, and he asked Mr Cundall for the trust’s financial statements. Mr Cundall did not provide the statements, saying in evidence he could not as there were none.
[17] In April 2016, Mr Daniel wrote to Mr Cundall regarding the estate and the trust. Mr Daniel advised he had retired from legal practice; that the estate had “effectively been wound up”; and that Daniel Overton were holding funds, that is some of the residue, pending resolution of the debt due from the trust to the estate. Mr Daniel said he and Mr Cundall, as executors and as trustees of the trust, needed to address the debt, and thus the consequent shortfall in income earnt on the residue.
[18] Mr Daniel also said other trust issues required attention. Mr Daniel asked whether rent was being received from the unit, although he mistakenly described it as the “Mt Albert Rd property”; said he had no information regarding the trust’s financial affairs; said, when they had last met at Court in connection with Ms Cundall’s claim, Mr Cundall had promised to provide him with financial information relating to the trust but had not done so; and that Mr Cundall had not replied to enquiries from Daniel Overton for information.
[19] Mr Daniel asked to meet Mr Cundall, suggesting a date in May 2016; asked Mr Cundall to provide details of Ms Cundall’s current financial and living situation; the occupation and/or rental of the unit (again by mistake referred to as the Mt Albert Rd property); and financial information regarding the trust. Mr Daniel closed by saying, absent a meeting, he would consider other means of progressing matters, including an application to the Court, but he hoped such could be avoided.
[20]Mr Cundall did not respond to this letter.
[21] Mr Daniel wrote again to Mr Cundall on 3 May 2016, asking whether he would attend the meeting or that Mr Cundall suggest an alternative date. Mr Cundall did not reply to this letter and no meeting took place.
[22] On 15 July 2016, Daniel Overton wrote to Mr Cundall, saying it was reasonable for Mr Daniel to seek a meeting and asked Mr Cundall to make available the information Mr Daniel sought and referred to in [19] above. Mr Cundall did not reply to this letter.
[23] Daniel Overton wrote to Mr Cundall again on 17 November 2016. They again asked Mr Cundall make available the information sought. Mr Cundall did not reply to this letter either.
[24] As the information sought had not been forthcoming, in November 2016, Mr Daniel commenced proceedings against Mr Cundall in the High Court, seeking an order Mr Cundall supply Mr Daniel with the trust’s financial statements.
[25] Thereafter, Mr Cundall took legal advice, there were exchanges of correspondence between the solicitors (Daniel Overton and Corban Revell), the financial information sought was provided, and Mr Daniel discontinued the proceedings in or about July 2017.5
[26] In the course of the solicitors’ exchanges of correspondence, in May 2017, Daniel Overton repeated Mr Daniel’s request for a meeting with Mr Cundall to discuss whether the unit should be retained and, if so, decide on the distribution of income, or sold, in which case they would need to decide how to apply the proceeds of sale.
[27] Following this, Mr Cundall delivered some papers to Daniel Overton for Mr Daniel’s receipt, with a covering note stating:
Keep your attention focused entirely on what is truly your own concern and be clear that what belongs to others is their business, and not yours.
[28] What this note reveals is Mr Cundall’s failure to grasp that decisions regarding the retention or sale of the unit were, and are very much, Mr Daniel’s business as a trustee.
[29] In July 2017, Mr Daniel wrote again asking Mr Cundall to confirm he had provided the accountants with the information required to prepare the trust’s financial
5 Daniel v Cundall [2017] NZHC 2339.
statements and tax return for the year ended 31 March 2017. Mr Daniel also said he had been advised Ms Cundall’s quality of life could be improved “with a relatively modest addition to her weekly income” and he wished the trustees to consider making a regular payment to her. Mr Daniel recorded Mr Cundall had indicated “that it is not your intention for [Ms Cundall] to receive anything from the trust”. Mr Daniel also made various proposals to deal with the debt so that Ms Cundall did not continue to be disadvantaged in terms of her life interest in a half share of the residue.
[30] By 31 July 2017, Mr Daniel had been advised Mr Cundall proposed to apply for Mr Daniel’s removal as a trustee. Mr Daniel advised Mr Cundall he considered the Public Trustee, or another trust company or suitable independent person, should be appointed. There is no record of any response to this letter.
[31] By letter of 3 October 2017, Mr Daniel again requested a meeting to discuss the matters referred to in his letter of 24 July 2017 and particularly, the financial statements and tax return to 31 March 2017 (the latter had not been filed and was overdue); a payment to Ms Cundall; a possible change of trustee; and any other trust matters Mr Cundall wished to discuss.
[32] Mr Cundall did not reply to this letter, and in November 2017, an approach was made to Mr Cundall’s solicitors to intervene.
[33]Again, no meeting occurred and Mr Daniel issued this proceeding.
Ms Cundall
[34] Ms Cundall was not represented at the hearing. However, shortly before the hearing resumed, her counsel, Mr Gilchrist, filed a memorandum to the effect it would assist Ms Cundall to have a weekly allowance for incidentals, and a “buffer” for her special needs and/or legal costs. Apparently, a modest weekly sum is being paid at present but without any commitment to continue to pay it in the future. In any event, these are matters for the trustees of the trust and the estate to consider.
Discussion
Mr Cundall
[35] I have decided to remove Mr Cundall as a trustee but to leave Mr Daniel in place for these reasons.
[36] First, Mr Cundall has repeatedly refused to meet Mr Daniel to discuss trust matters. There are important trust issues to attend to, namely to find out whether Ms Cundall might return to the unit; whether to sell the unit; how to deal with the debt or at least the portion of it that should be earning interest for Ms Cundall as part of the residue of the estate; and whether the trustees should pay or appropriate income or capital to any beneficiary. Mr Cundall’s refusal to discuss these issues is preventing the proper administration of the trust. There will be no progress whilst Mr Cundall remains a trustee.
[37] Secondly, Mr Cundall is hostile to Mr Daniel. The reason does not matter much. The fact of the hostility is sufficient.
[38] Thirdly, Mr Cundall has a conflict of interest. The trust assets are to be distributed to R five years after Ms Cundall’s death. Accordingly, if the unit is retained, ultimately, it will be vested in R. Evidence of Mr Cundall’s inability to act impartially arises from correspondence in 2005. Individuals assisting Ms Cundall wrote to Mr Cundall several times about the need to replace a leaking toilet in the unit. The best that can be said of Mr Cundall’s responses is that they were aggressive and unhelpful.
[39] For instance, in a letter of 17 April 2005, Mr Cundall said as he saw it, he had two options:
...
i. Resign. As I never wanted anything to do with The Trust or the flat this is very tempting, but hardly useful. There is no one else in the family who can or will undertake this role. A professional would therefore be needed who would necessarily reduce the returns to the remaining beneficiaries – the principal one being my daughter. And why should I sacrifice my daughter for Dianne?
ii. Take the attitude of a professional landlord: So long as the rent comes in and the flat is kept in a reasonable condition, the tenant [Ms Cundall] can go hang.
I have decided to take the second option.
1. I will leave Dianne completely alone. I will have no emotional stake in the flat or in her.
2. I will demand every right granted to every landlord by the law, and will resort to the Courts to have it enforced.
...
[40] In another letter, having requested confirmation from a plumber the toilet was leaking and needed to be replaced, Mr Cundall declined to accept the same saying the plumber had a “vested interest”.
[41] At some point in this saga, Ms Cundall obtained a protection order against Mr Cundall because he became very angry during a visit to the unit.
[42] These matters, individually or combined, are sufficient evidence that Mr Cundall is incapable of fulfilling his duties as a trustee and it is in the interests of the beneficiaries he be removed.
Mr Daniel
[43]I turn now to Mr Daniel’s position.
[44] Mr Daniel did not take an active interest in the trust’s affairs until after Mrs Cundall’s death. As Mr Daniel explained it, until 2012 and possibly later, he understood Ms Cundall was living in the unit so there was not much to do. Also, under cl 12 of the trust deed, the settlors had “directed” the trustees to “delegate to [Mr Cundall] the day to day administration of the trust’s affairs”.
[45] However, Mr Daniel has endeavoured to progress matters with Mr Cundall since learning Ms Cundall had vacated the unit. This has included commencing proceedings twice, once to obtain documents and, secondly, to seek Mr Cundall’s removal. I do not consider there are grounds to remove Mr Daniel and indeed it is in the interests of the beneficiaries he remains, at least for a period. Mr Daniel knows Mr and Mrs Cundall’s intentions when they settled the trust, is impartial between the
beneficiaries and, in addition, Mr Livingstone advised me he would prefer to have a co-trustee if possible.
[46] Lastly, I referred above to the settlors’ “direction” to the trustees to delegate the day-to-day administration of the trust to Mr Cundall. Whatever the merits of this clause when the trust was settled, it is no longer apposite given the orders I propose to make. Moreover, for what it is worth, I am not aware a settlor may “direct” a trustee to delegate. A settlor may confer a power of delegation but even that is subject to constraints.6 In any event, I reserve leave to apply if necessary.
[47] To conclude, it is in the interests of the beneficiaries to remove Mr Cundall as a trustee and expedient to appoint Mr Livingstone as a trustee in his place. It is impracticable to appoint Mr Livingstone without the assistance of the Court as the power of appointment is vested in the settlors’ personal representatives. Mr Cundall cannot remain as a trustee even if Mr Livingstone is appointed and, in any event, the trust deed requires unanimity in decision making.
Result
[48] Pursuant to s 51 Trustee Act 1956, and in the exercise of inherent jurisdiction, I appoint Mr Timothy Grant Livingstone trustee of the CH & JD Cundall trust, in substitution for the defendant, Stephen Bruce Cundall.
[49] Pursuant to s 52 Trustee Act 1956, I make an order vesting the assets of the CH & JD Cundall trust in Mr Timothy Grant Livingstone and Mr David Gloster Daniel.
[50]I reserve leave to apply.
[51]The parties may make submissions on costs in the absence of agreement.
Peters J
6 Trustee Act 1956, s 31.
Solicitors: Graham & Co, Auckland
Corban Revell, Auckland
Counsel:R O Parmenter, Auckland L Ponniah, Auckland
Copy for: Kiely Thompson Caisley, Auckland
A R Gilchrist, Auckland
T G Livingstone, c/- Corban Revell, Auckland