Dorman v McIlraith HC Timaru CIV-2011-476-000294

[2011] NZHC 1404

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

CIV-2011-476-000294

UNDER  the Trustees Act 1956

BETWEEN  SIMON JAMES DORMAN

PAUL ALEXANDER JOHNSTON Plaintiffs

ANDROBERT BRUCE MCILRAITH Defendant

Hearing:         4 October 2011 by telephone Appearances: M Dirkzwager for Plaintiffs Judgment:    10 October 2011

JUDGMENT OF HON JUSTICE FRENCH

Introduction

[1]      The plaintiff trustees seek orders under ss 64 and 64A of the Trustee Act

1956 amending the trust created by a will so as to include a charging clause. [2]      The application is supported by affidavit evidence.

Factual background

[3]      The plaintiffs are the trustees of a trust established by the will of the late

Bruce McIlraith.

[4]      Mr McIlraith died on 10 January 2001.

[5]      The will named three executors and trustees.

DORMAN V MCILRAITH HC TIM CIV-2011-476-000294 10 October 2011

[6]      In November 2002, Family Protection Act proceedings were brought against the estate.

[7]      While the proceedings were still on foot, two of the trustees retired and the remaining trustee, who was the husband of one of the claimants, appointed his solicitor to be a co-trustee.

[8]      The Family Protection Act proceedings were eventually settled by way of a consent order in the Family Court dated 28 March 2006.

[9]      It was a term of the consent order that the trustees would resign and be replaced by:

… Mr Simon Dorman, or other solicitor as agreed, and a farm chartered accountant to be agreed.   In default of agreement to be chosen by the President of the Canterbury District Law Society.

[10]     It was also a term that satisfactory arrangements would be made for the payment of the fees of the trustees resigning.

[11]     In due course, agreement was reached that Mr Dorman would be appointed as an independent trustee, together with an accountant from Timaru, Mr Paul Johnston.

[12]     The nett assets of the estate are approximately $1.5 million.   The estate includes an interest in a farm currently leased to a third party.

[13]     Since being appointed trustees, Messrs Dorman and Johnston have carried out considerable work, including overseeing the lease operation.

[14]     In February this year the life tenant died, and the trustees will now have to realise the estate’s interest in the farm property in order to distribute the estate in accordance with the consent orders.

[15]     The two trustees agreed to act as trustees in the estate on the basis and understanding that they would be able to charge for their services.

[16]     Unfortunately, the will did not include any power for professional trustees to charge for their services.   It is a reasonable inference that the absence of such a clause was simply due to the fact that the original trustees were not professionals.

[17]     Without the ability to charge for their time in acting as trustees, Messrs

Dorman and Johnston will have no option but to resign.

[18]     All beneficiaries were party to the Family Court proceedings, with infant beneficiaries having their own counsel.

[19]     It was implicit in the consent order that the independent trustees would be entitled to charge for their services.  The lack of a charging clause in the will was simply overlooked.

[20]     Given that background, this Court ordered that the application for a variation was not required to be served on the beneficiaries, and that it was not necessary for counsel to be appointed to represent the infant beneficiaries.

[21]     I am satisfied that this is an appropriate case for the exercise of the Court’s powers under s 64 of the Trustee Act.   In my view, the absence of the charging clause in the original will does not amount to a contrary intention expressed in the instrument.  As I have stated, I accept that it is a reasonable inference that the reason for the absence of any charging clause was due simply to the fact that the original trustees were not professionals.

[22]     I  am  also  satisfied  that  the  requirements  of  s  64A  relating  to  infant beneficiaries are satisfied.

Outcome

[23]     The application is granted.  There will be an order amending the will by the inclusion of the following clause:

Any Trustee or advisory trustee of the Trust, or in the case of a Corporate Trustee, a director of the Corporate Trustee, engaged in any profession, business or trade may act in that capacity in connection with the affairs of

the Trust, and such Trustee or advisory trustee of the Trust may charge and be paid all reasonable and proper charges for all services rendered, business transacted, responsibility involved, time spent and all acts done by that Trustee, advisory trustee, or by any firm or entity of which that Trustee or advisory trustee is a member, partner, employee or associate in connection with the affairs of the Trust.

[24]     The reasonable costs of this application are to be borne by the estate.

Solicitors:

Timpany Walton, Timaru