Foote v Foote - [2013] NZHC 2590

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2013-485-648 [2013] NZHC 2590

UNDER The Trustee Act 1956

BETWEEN JACINDA ANN FOOTE Plaintiff

ANDCRIAG LINDSAY FOOTE Defendant

Hearing: 4 October 2013

Counsel: C J Kelly for Plaintiff
No appearance for Defendant

Judgment: 4 October 2013

ORAL JUDGMENT OF THE HON JUSTICE KÓS

[1] The management of a trust is deadlocked. One of the trustees has lost interest in its affairs and will make no decisions. The trust deed provides for majority decision making. But there are only two trustees. The deed also provides that in the event of equality the dispute may be referred to arbitration.

[2] The plaintiff, Mrs Foote, proposes another solution. It is that both trustees be replaced. In addition she seeks orders vesting the trust properties in the new trustees and orders for reimbursement of costs that she has incurred personally in sole management of the trust.

Background

[3] The parties, Mr and Mrs Foote, are the two trustees of the Foote Family
Trust. They were formerly husband and wife. They separated in 2000. The defendant, Mr Foote, now lives in Tauranga.

FOOTE v FOOTE [2013] NZHC 2590 [4 October 2013]

[4] The trust was settled on 1 August 1996. The primary beneficiaries are the plaintiff, defendant and their two children, Deanne and Brandon. They are now adults in their own right.

[5] Clause 16 of the trust deed provides for the power of appointment of trustees. The power is vested in “Craig Lindsay Foote or Jacinda Ann Foote” to appoint additional trustees and new trustees, or also to remove any trustee. Mr Chris Kelly, who appears today for Mrs Foote, accepts that that power must be a joint one. It would make no sense in this case for the power to be able to be exercised unilaterally. In that event an appointment could immediately be countermanded by the other trustee removing the new appointee. Removal could immediately be countermanded by reappointment by the other trustee. None of this makes any sense unless the power of appointment is regarded as a joint one. I also accept in the circumstances that the power of appointment is one personal to the two named parties. It is not a power ex officio their status as trustees. Indeed they are, de facto, the settlors of the trust, even though formally the trust was settled by their then solicitor.

[6] Clause 17 provides for the making of majority trustee decisions. The clause is curiously worded:

If the Trustees are not anemones in their decision as to the exercise or non- exercise of any power authority or discretion conferred on them by this Deed of by law then and where there are more than two (2) Trustees the decision of the majority of the Trustees shall be final.

In this case it is clear that neither Mr nor Mrs Foote are anemones. Nor plainly, in the circumstances, are they unanimous, which I think is the word intended by the draftsperson.

[7]…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Foote v Foote

Details

AGLC: Foote v Foote [2013] NZHC 2590
Case: [2013] NZHC 2590
Decision Date: 4 October 2013

CaseChat Overview and Summary

The case of Foote v Foote involves a dispute concerning the management of the Foote Family Trust, which was established in 1996. The trust is governed by a trust deed that provides for the appointment and removal of trustees by the two original trustees, Jacinda Ann Foote and Craig Lindsay Foote. The trust properties include three dwellings located in Porirua, which have significant equity but require substantial structural maintenance that has not been addressed due to the deadlock in decision-making. Jacinda Foote, the plaintiff, sought to resolve the deadlock by replacing both trustees and sought orders vesting the trust properties in the new trustees, as well as reimbursement for expenses she incurred in managing the trust.

The court had to decide whether the plaintiff's proposed solution was appropriate under the circumstances. Specifically, the court needed to determine if the power of appointment of trustees was indeed joint and whether the deadlock justified replacing both trustees. The court also had to consider if the new trustees should be reimbursed for expenses incurred by the plaintiff and if costs should be awarded against the defendant.

The court held that the power of appointment of trustees was a joint one, and in light of the deadlock, it was appropriate to replace both trustees. The court appointed the couple's adult children, Deanne and Brandon, as the new trustees. The court further held that it had the authority to vest the trust properties in the new trustees and that the new trustees should reimburse the plaintiff for expenses she incurred in managing the trust, including legal fees. Finally, the court awarded costs against the defendant for his persistent inaction as a trustee.

In summary, the court made an order removing both Jacinda Foote and Craig Lindsay Foote as trustees of the Foote Family Trust and appointed their children, Deanne and Brandon, as the new trustees. The court also made an order vesting the trust properties in the names of the new trustees and directed that they reimburse the plaintiff for expenses she incurred. The court awarded costs against the defendant on a category 2 band B basis, along with reasonable disbursements.

Orders