FL Trustees 2012 Limited v Moore
[2019] NZHC 1588
•9 July 2019
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2019-470-35
[2019] NZHC 1588
UNDER Part 18 of the High Court Rules AND
the Trustee Act 1956, section 52
BETWEEN
FL TRUSTEES 2012 LIMITED, MICHELLE GAYLENE MOORE and
WILLIAM JOHN MOORE as trustees of the Valerie Moore Family Trust
Plaintiffs
AND
VALERIE MARGARET MOORE
Defendant
Hearing: 9 July 2019 Counsel:
MP Ward-Johnson for plaintiffs
Judgment:
9 July 2019
(ORAL) JUDGMENT OF FITZGERALD J
Solicitors: Fenton McFadden, Te Puke (R McFadden)
FL Trustees 2012 Limited & Ors, as trustees of the Valerie Moore Family Trust v Moore [2019] NZHC 1588 [9 July 2019]
Introduction
[1] Mrs Valerie Moore was settlor and a trustee of the Valerie Moore Family Trust (the Trust). She was removed as a trustee when she became incapable of continuing to act as a trustee due to dementia. The new trustees now apply under s 52 of the Trustee Act 1956 (the Act) to vest trust property currently held by Mrs Moore and the first-named plaintiff (FL Trustees) in them instead.
Background
[2] The following background is taken primarily from the affidavit evidence of Mr McFadden, a director of FL Trustees and a solicitor who has previously acted for Mrs Moore.
Mrs Moore settled the Trust in 2012. The trust deed relevantly provides that:
(a)Mrs Moore has the sole power of appointment and removal of trustees;
(b)The beneficiaries of the Trust are Mrs Moore herself (as a preferred beneficiary), her children, her grandchildren, and her great- grandchildren; and
(c)There were two trustees, namely Mrs Moore and FL Trustees.
[4] Mrs Moore and FL Trustees are the registered proprietors of two parcels of land, which they hold as trustees of the Trust.
[5] Sadly, Mrs Moore has in recent times developed dementia. A General Practitioner, Dr John Almond, assessed her on 30 November 2017 and concluded that Mrs Moore lacked mental capacity with respect to both personal care and welfare, and property. He issued two Health Practitioners Certificates to that effect, which activated a power of attorney in relation to property in favour of Mrs Moore’s daughter Michelle and her son William, and a power of attorney in relation to personal care and welfare in favour of William.
[6] Given these developments, FL Trustees considered the position as to Mrs Moore’s ability to continue as appointer and trustee under the Trust’s trust deed. At this time, Michelle and William also agreed to be appointed as new trustees of the Trust.
[7] In light of Mrs Moore’s condition, a deed of retirement and appointment of new trustees was drawn up and executed by FL Trustees which records as follows:
(a)Mrs Moore ceased to hold her power of appointment by virtue of cl 12.2.1 of the Trust’s trust deed, which provides the appointer ceases to hold office when she becomes mentally incapable;
(b)The power of appointment accordingly passed to the continuing trustee, FL Trustees, as a result of the operation of s 43(1) of the Act;
(c)Mrs Moore would be retired as a trustee;
(d)Michelle and William would be appointed as trustees; and
(e)The property vested in Mrs Moore and FL Trustees would from the date of the deed instead vest in Michelle, William and FL Trustees (as the continuing trustees).
[8]Achieving the vesting referred to at (e) has necessitated the present application.
Procedural history
[9] Associate Judge Andrew made directions as to service on 5 April 2019. The effect of his directions was that, in addition to Mrs Moore, all adult beneficiaries of the Trust were to be served with the application; where a grandchild or great- grandchild was a minor, their interests were provided for through service on their parents.
[10] An affidavit of service filed 18 June 2019 confirms that service has been effected as ordered on all persons, other than Mrs Moore herself. None of those served has taken any steps.
[11] At the hearing this morning, Mr Ward-Johnson made an oral application for an order dispensing with service on Mrs Moore. I granted that application. Service is routinely dispensed with in a case such as this.1 Given her current medical condition, no purpose would be served in serving the papers on Mrs Moore, and indeed may only cause unnecessary distress. The more pertinent question is whether a litigation guardian ought to be appointed on her behalf, a point to which I return later in this judgment.
[12] In a further minute dated 19 June 2019, Associate Judge Andrew granted the plaintiffs’ request for the matter to be determined by formal proof.
Relevant Law
[13]As noted, the plaintiffs seek vesting orders.
[14]Vesting orders are governed by s 52 of the Act which provides as follows:
52 Vesting orders of land
(1) Subject to the provisions of subsections (2) and (3), in any of the following cases, namely—
(a) where the court appoints or has appointed a trustee of any land or interest therein, or where a trustee of any land or interest therein has been appointed out of court under any statutory or express power:
(b) where a trustee entitled to or possessed of any land or interest therein, whether by way of mortgage or otherwise, or entitled to a contingent right therein, either solely or jointly with any other person—
(i)is under disability; or
(ii)is out of the jurisdiction of the court; or
(iii)cannot be found; or
1 See, for example, Docherty v Docherty [2013] NZHC 1885; Godfrey v McCormick [2017] NZHC 420; Re Marshal Family Trust – John Philip Hectrick [2017] NZHC 472; Lance v Lance [2014] NZHC 2725.
(iv)being a corporation, has ceased to carry on business or is in liquidation or has been dissolved:
[…]
(h) where land or any interest therein is vested in a trustee whether by way of mortgage or otherwise, and it appears to the court to be expedient—
the court may make an order (in this Act called a vesting order) vesting the land or interest therein in any such person in any such manner and for any such estate or interest as the court may direct, or releasing or disposing of the contingent right to such person as the court may direct.
(2) Where any such order is consequential on the appointment of a trustee, the land or interest therein shall be vested for such estate as the court may direct in the persons who on the appointment are the trustees.
(3) Where any such order relates to a trustee entitled or formerly entitled jointly with another person, and that trustee is under disability or out of the jurisdiction of the court or cannot be found, or (being a corporation) has ceased to carry on business or is in liquidation or has been dissolved, the land, interest, or right shall be vested in the other person who remains entitled, either alone or with any other person that the court may appoint.
Discussion
[15] First, I am satisfied that Mrs Moore is mentally incapable, in terms of cl 12.2.1 of the trust deed. Two certificates of mental incapacity are attached as exhibits to the affidavit of Mr McFadden. These certificates confirm Mrs Moore is mentally incapable in relation to property and personal care. Notes on the certificate of mental incapacity in relation to property described her as having “significant dementia and cognitive impairment” and had been inappropriately withdrawing large sums of money. The certificate of mental incapacity in relation to her personal care notes she suffers paranoid delusions.
[16] I interpolate to note that a finding of mental incapacity would normally require the appointment of a litigation guardian to represent Mrs Moore in any legal proceedings.2 In my view, however, it is appropriate to exercise the discretion in r 4.30(1) of the High Court Rules 2016 to proceed without a litigation guardian. Given her condition, Mrs Moore would not be in a position to provide any meaningful instructions to a litigation guardian. This case also bears similarities to Docherty v
2 High Court Rules 2016, r 4.30.
Docherty, where the plaintiff trustees sought vesting orders under the Act after the respondent, Mr Docherty, had also been removed as a trustee due to mental incapacity.3
[17]Associate Judge Bell held no litigation guardian was needed for Mr Docherty:
[29] In many cases a litigation guardian can serve a useful role, even when the merits of the case against the incapacitated person are overwhelming. In those cases the litigation guardian may usefully ensure that the interests of the incapacitated person are not impacted more than is appropriate and may also usefully liaise between the incapacitated person and the other parties to the litigation. I do not consider that those considerations apply here.
[30] The relief the plaintiffs seek is strictly limited to the vesting orders and does not otherwise impact on the interests of Mr Docherty. Given the extent of Mr Docherty's incapacity, it is clear that a litigation guardian could not serve any useful purpose by trying to obtain some form of instructions from him while trying to explain to him the purpose of the proceeding. In short, appointing a litigation guardian would be an empty charade.
[18] In my view, the same considerations operate here. In effect, the relief sought on the present application is somewhat mechanical in nature. It does not alter or affect Mrs Moore’s status as preferred beneficiary under the Trust. The trustees can also be expected to continue to exercise their duties as trustees in accordance with law, including, no doubt, taking into account Mrs Moore’s ongoing care and welfare needs as a preferred (and vulnerable) beneficiary.
[19] Second, and as noted above, the evidence confirms that Mrs Moore is now mentally incapable. She therefore no longer has the ability to responsibly perform her functions either as trustee or as the holder of the power of appointment of the Trust. Given this, I am satisfied that, in accordance with the terms of the trust deed, Mrs Moore ceased to hold her sole power of appointment.
[20] Clause 12.3.3 of the trust deed recorded the power of appointment would in those circumstances transfer to the person entitled to exercise the statutory power of appointment under the Act. Pursuant to s 43(1) of the Act, that power vested in the remaining trustee, FL Trustees. Pursuant to cl 12.5.5 of the trust deed, FL Trustees, as appointer, had the power to remove Mrs Moore as a trustee, and pursuant to cl 12.5.1,
3 Docherty v Docherty [2013] NZHC 1885.
had the power to appoint new trustees. FL Trustees therefore had the power to substitute Mrs Moore for Michelle and William.
[21] So that the new and validly appointed trustees can properly carry out their duties, it follows that it is necessary for the two pieces of land to vest in them.
[22]Accordingly, the following orders are made:
(a)An order pursuant to s 52 of the Trustee Act 1956 vesting the estate in fee simple in certificate of title SA61B/914 South Auckland Registry with an area of 1.043 hectares more or less on Lot 1 Deposited Plan South Auckland 77297 in the plaintiffs’ names as trustees of the Valerie Moore Family Trust; and
(b)An order pursuant to s 52 of the Trustee Act 1956 vesting the estate in fee simple in certificate of title SA7D/239 South Auckland Registry with an area of 938 square metres more or less on Lot 178 Deposited Plan South Auckland 7609 in the plaintiffs’ names as trustees of the Valerie Moore Family Trust.
Fitzgerald J
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