Dempsey v Dempsey

[2020] NZHC 2251

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2020-404-001416

[2020] NZHC 2251

UNDER

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

IN THE MATTER

of the DEMPSEY FAMILY TRUST

BETWEEN

MARY LYNNE DEMPSEY and SARAH JANINE KATZ

Applicants

AND

EDWIN FRANCIS DEMPSEY

Respondent

Hearing:	On the papers
Judgment:	1 September 2020

JUDGMENT OF VENNING J

This judgment was delivered by me on 1 September 2020 at 9.00 am, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Simpson Western, Auckland

DEMPSEY v DEMPSEY [2020] NZHC 2251 [1 September 2020]

Introduction

[1]                 The Dempsey Family Trust (the Trust) was settled by Edwin Francis Dempsey (Ted) and Mary Lynne Dempsey (Lynne) in 2011. The original trustees were Ted, Lynne and their daughter Sarah Janine Katz (Sarah).

[2]                 The applicants are the current trustees of the Trust. They have made the following applications:

(a)a without notice interlocutory application seeking:

(i)permission of the Court to commence a proceeding by way of an originating application under Part 19 of the High Court Rules; and

(ii)an order dispensing with service of the originating application on Ted;

(b)a substantive originating application seeking a vesting order pursuant to s 52(1)(b)(i) of the Trustee Act 1956, vesting property registered in the names of the applicants and the respondent as trustees of the Dempsey Family Trust in the applicants as remaining trustees, following the removal of Ted as a trustee.

Background

[3]                 The settlors’ intention in establishing the Trust was to provide for both of them during their life and three of their five children after their deaths. The principal beneficiaries of the Trust are Ted, Lynne, and three of their children, Geoff, Christopher, and Tim. Their needs are greater than Ted and Lynne’s other two children, Simon and Sarah. Tim’s two children are also beneficiaries. Neither Geoff nor Christopher have children.

[4]                 The principal property of the Trust is a property at Kawau Island currently in the name of Ted, Lynne and Sarah as trustees. In addition the Trust has investments

held through the Milford Unit Trust PIE Funds. It owes a debt to Christopher, which is recorded by an acknowledgement of debt.

[5]                 Unfortunately Ted’s health has deteriorated to the point where he has lost mental capacity. He was assessed by Dr Alexander Joseph Srzich on 18 February 2020. Dr Srzich concluded that Ted was mentally incapable because he was not wholly competent to manage his own affairs in relation to his property. Ted suffers from a dementia, most likely a combination of Alzheimers disease and cerebrovascular disease. He is now severely cognitively impaired. His condition will not reverse and his cognition will not improve. Ted is currently in a secure dementia unit.

[6]                 Prior to the deterioration in his health Ted appointed Sarah as his attorney pursuant to an enduring power of attorney in relation to property dated 1 November 2017.

[7]                 Following Dr Srzich’s assessment, Sarah removed Ted as trustee of the Trust by deed dated 27 February 2020 in reliance on cl 16.3(b)(i) of the Trust Deed which provides that if a settlor is unable to act their power of removal is exercisable by their attorney.

[8]                 Ted and Lynne formerly lived at the Kawau Island property. Lynne has moved to Auckland to be closer to Ted and other family members. Simon and Tim have agreed to purchase the Kawau Island property (above CV) to help finance the purchase of a property at Mission Bay for Lynne to live in and in order to keep the Kawau Island property within the family. Lynne and Sarah, the remaining trustees, would like to settle the sale of the Kawau property and the purchase of the Mission Bay property on 11 September 2020 if possible. The orders are sought to facilitate that.

Permission to commence the application pursuant to Part 19

[9]                 An application for an order pursuant to s 52(1)(b)(i) of the Trustee Act 1956 is not referred to in rr 19.2, 19.3 or 19.4 as an application that can be brought pursuant to Part 19 of the High Court Rules. However, r 19.5(1) enables the Court to permit

any proceeding to be commenced by an originating application under Part 19 in the interests of justice. The permission may be sought without notice.1

[10]              The Court accepts that permission should be granted to commence the originating application under Part 19 as the application can properly be decided on the affidavit evidence and it is in the interests of justice for permission to be granted.2

[11]              The Court also accepts it is appropriate to make an order dispensing with service of the originating application on Ted. It is apparent from the report of Dr Srzich that service would serve no purpose given his advanced dementia and lack of mental capacity. Rather, service would likely confuse and upset him should the documents be served on him.

[12]              Nor is it necessary to serve the other beneficiaries or appoint counsel to represent their interests. The orders do not change any of the beneficiaries’ rights. It is unnecessary to serve them.3 The Court also notes that Lynne has deposed that all the children are aware of the circumstances giving rise to the current application and are supportive. On the information before the Court the sale of the Kawau Island property is appropriate. The orders will facilitate the exchange of one real estate asset for another.

The vesting order

[13]              Section 52(1) of the Trustee Act 1956 permits the Court to make an order vesting land or interest therein in any such person in any such manner and for any such estate or interest as the Court may direct. One pre-requisite is where a trustee who is possessed of any land or interest therein, either solely or jointly with any other person, is under a disability. In the present case although Ted is no longer a trustee, he remains recorded on the title to the Kawau property in his capacity as trustee.4 It is appropriate to make the substantive order sought.

1      High Court Rule 19.5(2).

2      Re Mead [2019] NZHC 497.

3      Jones v Jones [2019] NZHC 3402 at [8]; and Smith v Walsh [2019] NZHC 3476 at [12].

4      Trustee Act 1956, s 2(2) provides that: “For the purposes of this Act a person shall be deemed to be under a disability while he is not of full age or full mental capacity”.

Result

[14]The Court makes the following orders:

(a)an order granting permission, pursuant to Rule 19.5 of the High Court Rules, to commence the originating application pursuant to Part 19 of the High Court Rules;

(b)an order dispensing with service on the respondent, or on any other party;

(c)an order pursuant to s 52(1)(b)(i) of the Trustee Act 1956 vesting the land situated at 8 Elizabeth Point Road, Kawau Island as described in the application, in the names of Mary Lynne Dempsey and Sarah Janine Katz.

Venning J