Gough v Ram Custodian Limited

[2012] NZHC 2218

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-006645 [2012] NZHC 2218

BETWEEN  H D GOUGH Plaintiff

ANDRAM CUSTODIAN LIMITED, J R STRAHL AND B W M TOTHILL First Defendants

ANDR W RAYMOND, D A H BROWN AND B W M TOTHILL

Second Defendants

ANDR W RAYMOND, D A H BROWN AND B W M TOTHILL

Third Defendants

Hearing:         21-22 May 2012

Appearances: N W Ingram QC and M T Kyriak for Plaintiff

A S Ross and R A Rose for First Defendants
T C Weston QC and A V Foote for Second and Third Defendants

Judgment:      30 August 2012

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 30 August 2012 at 4:00 pm

pursuant to R 11.5 of the High Court Rules

Registrar / Deputy Registrar

Date………………………………………

Solicitors:           Kyriak Law Solicitors, 4/40 Eden Crescent, Auckland 1010

Fax: [phone] – Email:[email protected]
Duncan Cotterill, P O Box 5, Christchurch 8140
Fax: [phone] – A V Foote

Chapman Tripp, P O Box 2206, Auckland 1140

Fax: [phone] – A S Ross / R A Rose

Counsel:             N W Ingram QC, P O Box 6569 Wellesley Street, Auckland 1141

Fax: [phone]

T C Weston QC, P O Box 3976, Christchurch 8140

Fax: [phone]

GOUGH V RAM CUSTODIAN LTD & ORS HC AK CIV-2011-404-006645 [30 August 2012]

Introduction

[1]      This case concerns the Head Trust of the Tracy Thomas Gough Estate and the sub-trusts that represent two branches of the Gough family, the Blair Gough Sub- trust and the Owen Gough Sub-trust.   The Head Trust is required to have three trustees.   They are appointed in the following way: the trustees of each sub-trust appoint one of their number and those trustees then appoint the third.  The issue in this case is the validity of the appointments of two of the Head Trust trustees.

[2]      The plaintiff, Harcourt Gough, is a beneficiary under the Owen Gough Sub- trust.  The first defendants are trustees of the Head Trust and the second defendants trustees of the Blair Gough Sub-trust.  The third defendants are the trustees of the BT Gough Family Trust, which is a private trust.  Benjamin Tothill (the third named first defendant and third defendant) is a trustee of the Blair Gough Sub-trust and that sub- trust’s appointee to the Head Trust.  Ram Custodian Limited (Ram Custodian), (the first named first defendant), is the independent trustee of the Head Trust.

[3]      The plaintiff asserts that the appointments of Mr Tothill and Ram Custodian during the period 2005-2011 were invalid. The issues that arise are:

(a)       Can a trustee of the Head Trust be reappointed more than once?

(b)Were  Ram  Custodian’s  appointments  in  2006  and  2009  made  in accordance with the relevant trust deed?

(c)       Were Mr Tothill’s appointments in 2005, 2008 and 2011  made in accordance with the relevant trust deed?

[4]      At the request of counsel I have not considered what consequences might follow in the event of some or all of the appointments being ultra vires.  That issue and any decision on relief will be determined at the next trial.

The Head Trust

[5]      Tracy Thomaas Gough died in 1954 leaving a large estate.  The main asset in the estate was a shareholding in the company Gough Gough & Hamer Limited, of

which Tracy Gough was a founder.  Mr Gough was survived by four children from his first marriage and his widow and son from his second marriage.  Claims against the estate resulted in a Deed of Family Arrangement being approved by the then Supreme Court in 1962.  That enabled the assets of the estate to be restructured and combined with assets settled under a separate deed of settlement before Mr Gough’s death.

[6]      Ongoing tensions between the two branches of the family meant that by the mid-1980s it was clear that there needed to be some means of separating the interests of these two branches.  To achieve this, the trust was varied by a Deed of Variation dated 28 May 1987.1     The deed recorded the reasons for and objectives of the restructuring, including:

9.Difficulties have arisen in the administration of the Trust and the management of the Company which have been resolved subject to:

(a)      the management of the Company being restructured,

(b)       the separation so far as possible of the ownership of the Company from its management and in particular the deletion of  the  requirement  that  the Trustees  be  Directors  of  and control the Board of the Company.

10.The  adult  beneficiaries  also  consider  it  to  be  desirable  that  the interests of the Owen Gough family be separated from the interests of the Blair Gough family.

[7]      Under the Deed of Variation the estate’s trust became the Head Trust and the trustees were empowered to create two sub-trusts to represent each branch of the family.  One of the sub-trusts was the Owen Gough Sub-trust, Owen Gough being the oldest son of Mr Gough’s first marriage and the plaintiff’s father.  The other was the Blair Gough Sub-trust, Blair Gough being the only son of Mr Gough’s second marriage.

[8]      The trustees of the Head Trust were empowered to appropriate up to half its capital assets to the Owen Gough Sub-trust, and up to the other half of its capital

assets and all accumulated income to the Blair Gough Sub-trust.

1 Approved by the High Court in Re the Estate of Tracy Thomas Gough HC Christchurch M369/86, 20

May 1987.

[9]      The trustees of the Head Trust were also empowered to sell their majority shareholding in Gough Gough & Hamer Limited to a new holding company for the Gough group.  Gough Holdings Limited (GHL) was the new holding company and the trustees sold their shares to it in exchange for redeemable preference shares in GHL.   The redeemable preference shares were held on trust for the Owen Gough Sub-trust as to one half and the Blair Gough Sub-trust as to the other.

[10]     Although  the  trustees  of  the  Head  Trust  hold  title  to  the  redeemable preference shares on trust for the sub-trusts, they nevertheless play an important role in the governance of GHL.  Under GHL’s constitution the Head Trustees have the power and duty to appoint and remove directors of GHL and the power to influence dividend policy and approve the payment of dividends to the holders of ordinary shares, which are the two sub-trusts and certain other family members.

Can trustees of the Head Trust be reappointed more than once?

[11]      The plaintiff contends that, on a proper construction, clause 6B permits a trustee to be reappointed only once so that a trustee must retire either at the expiry of the initial term or, if reappointed, at the expiry of that further term unless retirement is waived under the proviso to clause 6B(c) (which would permit one further term only).   Mr Tothill served more than two terms during the relevant period and the plaintiff asserts that any appointment in excess of two terms is invalid.

The scheme for appointments of trustees

[12]     The initial appointment of trustees to the Head Trust and each of the sub- trusts proceeded in the manner required by clause 5 of the Deed of Variation: the existing trustees of the estate appointed three trustees to each sub-trust.  The trustees of each sub-trust then nominated one of their number as a trustee of the Head Trust and  those  two  nominees,  in  turn,  nominated  a  third  trustee  of  the  Head  Trust. Finally, the existing trustees appointed the three nominees as trustees of the Head Trust.  Following the appointment of these nominees to the Head Trust the existing trustees retired.

[13]     The initial appointments to both the sub-trusts and Head Trust were required to be for staggered terms of one, two and three years to ensure that only one vacancy would arise in any one year in each trust.  All subsequent appointments were to be for terms of no more than three years.

[14]     Clauses 6A and 6B of the Deed of Variation provide a scheme for subsequent appointment, rotation and retirement of trustees of both the sub-trusts (clause 6A) and the Head Trust (clause 6B).

[15]    Clause 6A, which controls the appointment of trustees to the sub-trusts, provides:

(a)       The appointment of Trustees to the subtrusts shall be subject to the consent of the majority of all adult beneficiaries of that subtrust other than the annuitants in the case of the Owen Gough Subtrust and the annuitants other than Blair Tracy Gough in the case of the Blair Gough Sub-trust.

(b)       The appointment of Trustees to the Blair Gough Subtrust shall be subject to the consent of Blair Gough while any child of his is under

30 years of age, such consent not to be unreasonably withheld AND

if Blair Gough does not consent to a proposed appointment of a Trustee to the Blair Gough Subtrust then he shall be entitled to appoint a Trustee, subject to the consent of the continuing Trustees.

(c)       Henceforth no beneficiary or relative of a beneficiary by marriage directly or by blood within the fourth degree other than Blair Gough in respect of the Blair Gough Sub-Trust shall be eligible to be appointed a trustee.

(d)      The Trustees shall be three in number.

(e)       Subject to (a) and (b) new trustees in the place of deceased or retired trustees  shall  be  appointed  by  the  continuing  trustees.     The continuing trustees shall consult with all adult beneficiaries eligible to consent under (a) and (h) of this clause with a view to obtaining the consent of the majority.   The trustees shall allow a period of seven days to enable beneficiaries to respond to their enquiry.

(f)       The Trustees shall endeavour to act unanimously.   If, however, at any time or times the Trustees are not unanimous in their decision to exercise or implement any of their powers, authorities or discretions they shall record their decision and the decision of a majority of the Trustees (if there is a majority) shall prevail and shall be final.  Any Trustee shall be entitled to have his opposition and concerns and the reasons therefor recorded in the minutes of the Trustees if he so desires.

(g)       The Trustees shall be appointed for fixed terms designed to expire at annual intervals so that one Trustee shall be appointed for a term of one year, one Trustee for a term of two years and one Trustee for a term of three years.   Thereafter, Trustees shall be appointed for a term of not more than three years.

(h)       At the expiration of their initial terms of office and, if reappointed, at the expiration of any subsequent term, the Trustees shall retire PROVIDED THAT  a majority of the adult beneficiaries of each subtrust other than the annuitants in the case of the Owen Gough Sub-Trust and the annuitants other than Blair Tracy Gough in the case  of  the  Blair  Gough  Sub-Trust  shall  have  the  right  to  be exercised by written notice to the Trustees of that subtrust three months before the expiration of a Trustees [sic] term to waive the requirement for his retirement, in which case that Trustee’s term shall be extended for a further term of three years and no Trustee shall retire in that year.

(i)        Subject to (a) and (b) the trustees other than the retiring trustee shall appoint a new trustee to fill the vacancy left by the retiring trustee.

(j)        Subject to (a) and (b) in the event of any Trustee ceasing to be a Trustee  during  his  term  of  office  the  continuing  Trustees  shall appoint a replacement Trustee who shall hold office for the balance of that Trustee’s term.

[16]     Clause 6B, which governs the appointment of the trustees of the Head Trust, provides:

(a)       The Trustees shall be three in number.

(b)       The Trustees shall be appointed for fixed terms designed to expire at annual intervals so that one Trustee shall be appointed for a term of one year, one Trustee for a term of two years and one Trustee for a term of three years.   Thereafter Trustees shall be appointed for a term of not more than three years.

(c)       At   the   expiration   of   their  initial   terms   of   office   and   if reappointed  at  the  expiration  of  any  subsequent  term  the Trustees shall retire  PROVIDED THAT a majority of the Trustees of the two Subtrusts shall have the right to be exercised by written notice  to  the Trustees  three  months  before  the  expiration  of  the Trustees [sic] term to waive the requirement for his retirement, in which case that Trustee’s term shall be extended for a further term of three years and no Trustee shall retire in that year.

(d)       In the event of any Trustee ceasing to be a Trustee during his term of office the continuing Trustees shall appoint pursuant to sub-clause (f) hereafter a replacement Trustee who shall hold office for the balance of that Trustee’s term.

(e)       The Trustees shall endeavour to act unanimously.   If, however, at any time or times the Trustees are not unanimous in their decision to exercise or implement any of their powers, authorities or discretions

they shall record their decision and the decision of the majority of the Trustees (if there is a majority) shall prevail and shall be final. Any Trustee shall be entitled to have his opposition and concerns and the reasons therefor recorded in the minutes of the Trustees if he so desires.

(f)       New Trustees in the place of retired Trustees shall be appointed as follows:

(i)       The   nominee   of   the   Owen   Gough   Subtrust   shall   be appointed by the Trustees of that Subtrust;

(ii)      The nominee of the Blair Gough Subtrust shall be appointed by the Trustees of that Subtrust;

(iii)     The third Trustee shall be appointed by the other two. (emphasis added)

The approach to interpreting the Deed of Variation

[17]     There is general acceptance that a trust deed is to be interpreted in accordance with the same principles as apply to contracts.2   The correct approach to contractual interpretation is settled in New Zealand as being the principles set out in Investors Compensation Scheme Ltd v West Bromwich Building Society,3  confirmed in New Zealand in Wholesale Distributors Ltd v Gibbons Holdings Ltd4 and Vector Gas Ltd v Bay of Plenty Energy Ltd.5   In summary, these principles require the words in issue to  be  read  in  the  context  of  the  whole  document  and  of  the  surrounding

circumstances.    The  exercise  is  undertaken  with  the  object  of  identifying  the meaning that the parties intended, through an inquiry as to what a reasonable and properly informed third party would consider that the parties intended the words to mean.

[18]     In his recent decision Bulley v Attorney-General Clifford J referred to the

question of who “the parties” are in the context of a trust deed, drawing on the

discussion in Drafting Trusts and Will Trusts in New Zealand.6   The authors of that

2 See, for example, Re Sigma Finance Corp [2009] UKSC 2; Bulley v Attorney-General [2012] NZHC 615.

3 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL).

4 Wholesale Distributors Ltd v Gibbons Holdings Ltd [2007] NZSC 37, [2008] 1 NZLR 277.
5 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444.

6 James Kessler and Kerry Ayers Drafting Trusts and Will Trusts in New Zealand (Brookers, Wellington, 2010).

text argue that, although the principles of construction of wills, trusts, contracts and statements are all the same, allowance must be made for differences in context:7

“[A] will is a soliloquy while the language of a contract is addressed to another.”   Because a will or trust is normally a unilateral document, it is more often possible to find the subjective intention of the author if looks for it sympathetically.  In a contract one must asume that the parties are of one mind (which may not be the case) and seek a common intention.

[19]     Whilst I accept that context might alter the approach to construction in some cases, I do not consider it to be material here.   The Deed of Variation was not a unilateral document and may be approached in the same manner as a contract.

Does clause 6B permit more than one reappointment?

[20]     Mr Ingram, for the plaintiff, submitted that the second sentence in clause

6B(b),  “[t]hereafter, Trustees shall be appointed for a term of not more than three years”, and the first sentence of clause 6B(c), “[a]t the expiration of their initial terms of office and if reappointed at the expiration of any subsequent term the Trustees shall retire…”, when read together, allow only for the initial term of appointment and one reappointment for a term of up to three years, after which the trustee must retire (subject only to a waiver under the proviso).  He argued that the reference in clause 6B(b) to “a term” was consistent with only one reappointment and the phrase “any subsequent term” in clause 6B(c) reflected plurality of trustees not plurality of appointment periods.  The clauses were therefore consistent with and directed towards allowing only one reappointment.

[21]     I do not accept that the provisions should be read in this way.  I consider it more natural to read clause 6B(b) as simply reflecting the language of the preceding sentence, which refers to “a term of one year”, “a term of two years” and “a term of three years”.  If read in the same way as these phrases it would refer to the length of the term of the particular reappointment rather than limiting how often a re- appointment  may  be  made.    If  so,  there  would  be  no  reason  to  construe  the expression “any subsequent term” in clause 6B(c) as limited to a single term on the

basis that only one reappointment is permitted.

7 At [3.11].

[22]     Mr Weston QC, for the second and third defendants, submitted, and I agree, that the use of the indefinite article “any” also indicates that more than one reappointment is possible.   Had only one reappointment been intended use of the definite article would have been more natural.

[23]     Nor do I accept Mr Ingram’s submission that the number of reappointments was limited to safeguard each sub-trust from being foisted for long periods with an undesirable trustee nominated by the other sub-trust.  Given the reason for the Deed of Variation being entered into it is likely that ongoing disagreement between the sub-trusts was anticipated, including the likelihood of one sub-trust disapproving of the other’s choice of trustees.   There is, however, a balance to be struck between ensuring that tensions between the branches of the family do not disrupt the effective administration of the Head Trust and ensuring that the beneficiaries of the sub-trusts are represented by a person in whom they have confidence.  The risk that one sub- trust may appoint a person who is unacceptable to the other is off-set by the right of the  other  sub-trust  to  choose  a  representative  acceptable  to  it.    Ultimately,  the greatest protection for both is the control each has over the identity of the third trustee.

[24]     Not only is there no need for the kind of safeguard that Mr Ingram suggests, the history of the estate leads me to think that if any such limitation was intended, that would have been made explicit.   Prior to the Deed of Variation trustees of the estate had held office for very long periods of time: both Owen Gough and John Burtt were trustees of the estate for 25 years.  If the Deed of Variation intended to limit that practice, I would have expected such a limitation to be clearly stated.

[25]     Further, the plaintiff’s interpretation of the deed would deprive each sub-trust of the opportunity to retain the knowledge and skill of its chosen trustee, a benefit that is particularly valuable in the case of professional trustees.   If trustees were limited to serving a maximum of two terms (subject to an exercise of the waiver) the pool  of  new  suitably  qualified,  experienced   and  willing  trustees   to  accept appointment would be seriously reduced over time and valuable knowledge of the trusts’ affairs lost.

[26]     Finally, it is notable that the scheme under clause 6A for appointing trustees to the sub-trusts is very similar to the scheme for appointing trustees to the Head Trust. Yet there is no suggestion that any safeguard is needed in that context.

[27]     Mr Ingram also argued that if it were intended that a trustee be reappointed following retirement there would be little point in the proviso to clause 6B(c), since the same effect could be achieved by simply allowing multiple reappointments.  It is true that, because waiver under clause 6B(c) requires a higher level of consensus than  reappointment  under  clause  6B(f),8   the  scheme  could  operate  without  the waiver provision.   The appointment of a new trustee under clause 6B(f) is straightforward; if the vacancy is of the position occupied by a nominee of a sub-

trust then the trustees of that sub-trust make the appointment and if the vacancy is of the third trustee the two sub-trust nominees make the appointment.  In comparison, a waiver under clause 6B(c) requires the agreement of at least four sub-trust trustees and can therefore only be achieved with support from both sub-trusts.

[28]     Clearly, the simpler course would have been not to provide for a waiver at all. The answer, I think, lies in the context in which the Deed of Variation was implemented.   The waiver provision is a means by which the sub-trusts can co- operate.   Viewed against the unhappy background to the Deed of Variation, that opportunity has real value.  It is a significant rationale for the proviso and does not detract from the power to reappoint more than once.

The source of the power to reappoint

[29]     Despite the explicit reference to reappointment, clause 6B(c) does not contain any words that might be construed as conferring a power to reappoint.  Clause 6B(f) is the only sub-clause that uses specific words to confer a power to appoint trustees to the Head Trust.

[30]     Mr Ingram did not argue that a power to appoint could not encompass a power to reappoint.  However, he rejected clause 6B(f) as the source of the power to reappoint because it applies only to the appointment of “[n]ew Trustees in the place of retired Trustees”.  Mr Ingram says a new trustee and a retired trustee cannot be the

same person, so it would not make sense to construe these words as conferring the power to reappoint a retired trustee “in the place of” himself or herself.  Therefore the reappointment  of a  trustee who had  only just  retired  could  not  sensibly be regarded as the appointment of a new trustee “in the place of” a retired trustee.

[31]     I do not agree with this.  The ordinary meaning of retirement, in the sense of leaving an office or employment,9  connotes a permanent state of affairs and if the word had that meaning in clause 6B then reappointment after retirement would not be possible.  However, I consider that on the proper construction of clause 6B(c), the words “shall retire” apply to the expiry of every term, whether an initial term or a subsequent term resulting from reappointment.  That is, the position occupied by a

trustee becomes vacant at the end of every term.

[32]     The vacancy created by the compulsory retirement at the expiry of any term (absent a waiver) means that a new trustee will be required.  That new trustee will, in normal parlance, be in the place of the retiring trustee.   The identity of the new trustee is not the important thing.  The important thing is that there is a vacancy left by a trustee who is retiring because his or her term has expired.  There is no reason that the appointment of a trustee to fill a vacancy cannot be of the same person who previously held that office.  In the context of clause 6B(c) retirement therefore means only the stepping down from the position held, but says nothing about the status of that person afterwards.

[33]     That this is the correct interpretation can be tested by considering whether, on Mr Ingram’s argument, a trustee can be reappointed after a period of retirement on the basis that trustees who have been retired for a period of time might fairly be regarded as “[n]ew Trustees in the place of retired Trustees”.   Mr Ingram acknowledged that as a possibility, though preferred the construction that would preclude a former trustee from ever being reappointed after retiring.   However, it seems to me that if a trustee who has been retired for a period can later be appointed, the rationale for excluding newly retired trustees from being appointed is weakened. In particular, there is no means by which to decide how much time must pass before a  former  trustee  should  be  regarded  as  eligible  for  appointment  again.    More

significantly, being able to reappoint a person after a period of retirement would undermine  Mr Ingram’s  argument  that  limiting  the  power  of  reappointment  is intended to protect one sub-trust from the appointment of a trustee by the other which is unacceptable to it.

[34]     To conclude, the Deed of Variation does not limit the number of terms a trustee may be appointed for, nor preclude the reappointment of retiring trustees.  It follows that the reappointment of Ram Custodian in 2009 and the reappointments of Mr Tothill in 2008 and 2011 are not invalid simply because those trustees had already served two terms at the date of reappointment.  The plaintiff has, however, levelled other challenges at those appointments (and at earlier appointments) which I now turn to consider.

Appointments of Ram Custodian

[35]     Ram Custodian is a company whose sole director and shareholder is Robert Arnold McLeod.  By a Deed of Appointment dated 28 October 2004 Ram Custodian was appointed for a two-year period expiring on 28 October 2006.   There is no challenge to that appointment.   The plaintiff is challenging the validity of the subsequent appointments for the periods 28 October 2006 – 28 October 2009 and 28

October 2009 – 28 October 2012.

First cause of action: Was Ram Custodian a properly appointed trustee of the Head

Trust for the period 28 October 2006 – 28 October 2009?

[36]     By  Deed  of  Appointment  dated  28  October  2004,  Ram  Custodian  was appointed as a new trustee of the Head Trust for a term of two years ending on 28

October 2006.  The first cause of action relates to the validity of Ram Custodian’s

appointment in the period following that initial appointment, 28 October 2006 – 28

October 2009.  There is no affidavit from Robert McLeod, Chairman of the Head Trust in 2006, regarding Ram Custodian’s trusteeship during the relevant period. John Russell Strahl, one of the current trustees of the Head Trust, has deposed that Ram Custodian was granted a waiver from the requirement to retire prior to October

2006, thereby extending its term to 28 October 2009.  It is, however, accepted by all parties that not all the sub-trust trustees who signed a waiver in that year did so

within the time period required by the proviso to clause 6B(c), namely three months

before the expiration of the trustee’s term.

[37]     Self-evidently, with Ram Custodian’s term expiring on 28 October 2000, the waiver had to be exercised by 28 July 2009.  A summary of a meeting of trustees of the Head Trust held on 31 July 2006 noted that:

… the resolution re-appointing Ram Custodian Ltd as a Trustee needs to be signed by the remaining sub Trustees.

[38]     Mr  Ross,  for  the  first  defendants,  submitted  that  the  waiver  was  not ineffective simply because not all the signatures had been obtained within the three- month period prior to Ram Custodian’s retirement.   He submitted that the proviso should be interpreted to give it meaning and effect, namely to ensure that the requirement that the Head Trust have three trustees continued to be satisfied.  He did not consider that the time stipulation in the proviso to clause 6B(c) precluded an effective waiver for two reasons.   First, because of the consensual nature of the proviso denying the effect of the waiver would be to deny the will of both sub-trusts. Secondly, he submitted that this was not a situation where time was of the essence. Rather, the prupose of the time stipulation is to give appointing trustees time to find a new candidate in the event that the two branches of the family do not agree to waive retirement.  Where there is agreement (as is the case here), the time stipulation serves no useful purpose.   The proviso ought, Mr Ross submitted, to be given a purposive interpretation, with the time stipulation functioning like a “directory”, as

opposed to mandatory statutory provision.10

[39]     The difficulty with Mr Ross’ approach is that clause 6B specifically provides for consequences in the event of the waiver not being exercised.  It is perfectly clear that under clause 6B(c), in the absence of a waiver, a trustee retires at the expiry of his or her term and new trustees are appointed under clause 6B(f).   The retiring trustees and the continuing trustees who appoint the new trustees have no discretion in these matters.  When one considers the position on the day after the expiry of a

trustee’s term of office it is obvious that the drafter cannot have intended the proviso

10 Mr Ross pointed to Body Corporate No 195843 v North Shore City Council [2011] 2 NZLR 222 (HC) as a recent example of a court curing a defect in relation to a time stipulation.

to continue to operate beyond that point.   If no waiver  has been  exercised the relevant trustee must retire on the day that on the day that trustee’s term expires and the remaining trustees must make a fresh appointment.

[40]     The scheme would be unworkable if the waiver could be exercised on any subsequent day; the continuing trustees who have an obligation to make a fresh appointment would have no way of knowing when, or whether, a waiver would be exercised.  Mr Ross’ approach would bring uncertainty for those trustees and also for any newly appointed trustee.

[41]     I therefore reject the idea that the waiver available under the proviso to clause

6B(c) can continue to be exercised after expiry of the time stipulation.  As a result, Ram Custodian was not appointed in accordance with the Deed of Variation in 2006.

Second cause of action: Was Ram Custodian a properly appointed trustee of the

Head Trust for the period 28 October 2009 – 28 October 2012?

[42]     The majority of the trustees of the sub-trusts purported to exercise the waiver in 2009 within the required time.  However, because no effective appointment had been made in 2006 there was nothing to waive in 2009.  Nor is there evidence of any reappointment under clause 6B(c).   It follows that Ram Custodian was not reappointed for this period under the Deed of Variation.

Appointment of Benjamin Tothill

Third cause of action – Was Mr Tothill a properly appointed trustee of the Head

Trust for the period 28 October 2005 – 28 October 2008?

[43]     Under a Deed  of Appointment dated 11  December 2002 Mr Tothill was appointed a trustee to both the Blair Gough Sub-trust and the Head Trust for a three- year term from 28 October 2002 – 28 October 2005.  Upon Mr Tothill’s appointment in 2002 the trustees of the Blair Gough Sub-trust were Blair Tracy Gough, David Brown and Mr Tothill.  The trustees of the Head Trust were Robert Francis Bacon (nominee of the Owen Gough Sub-trust), Mr Tothill (nominee of the Blair Gough Sub-trust) and Peter Taylor.

[44]     The third  cause  of  action  relates  to  Mr Tothill’s  reappointment  in  2005. Mr Tothill maintains that he was validly reappointed by deed in 2005 but no deed has been produced. The plaintiff asserts that either Mr Tothill was not reappointed or there is insufficient evidence of such reappointment to be satisfied that it occurred.

[45]     Mr Tothill  has  deposed  that  in  about April  2005  he  reminded  the  adult beneficiaries of the Blair Gough Sub-trust of the need either to arrange for his re- appointment to the sub-trust and Head Trust, or to decide on an alternative trustee. In July 2005 one of the adult beneficiaries of the Blair Gough Sub-trust emailed Mr Tothill on behalf of all the adult beneficiaries confirming their desire that he continue as a trustee of both the sub-trust and the Head Trust.  However, the timing and the absence of one of the other sub-trust trustees, Blair Gough, overseas precluded use of the waiver process  in  relation  to  the Head Trust.    Mr Tothill therefore began the process for reappointment as the sub-trust’s nominated trustee of the Head Trust through the preparation of a Deed of Appointment by the sub-trust trustees under cl 6B(f)(ii).

[46]     Although   Mr   Tothill   cannot   specifically   recall   signing   a   Deed   of Appointment, he is confident that a deed was executed by him and the other trustees of the sub-trust on or about 26 September 2005.  On that date the Gough family had held an Annual General Meeting and Mr Tothill had met with his co-trustees of the sub-trust, Blair Gough and David Brown, to view a building the sub-trust had purchased in Christchurch.

[47]     However, no copy of such a deed, executed or unexecuted, has been located. There is some evidence that a draft deed was produced.   At the relevant times Mr Tothill was a partner in the Christchurch firm of Duncan Cotterill.  A search of Duncan Cotterill’s word processing system showed that a draft Deed of Appointment of Mr Tothill  was  created  on  3 August  2005  and  modified  on  8 August  2005. However, the document that has been produced bears a printed date of 2011 which is obscured by a handwritten date of 2004.  The handwriting is that of Mr Tothill; he explained that, although he was able to bring the document up on his screen he could not get it to print without the automatic date function overriding the date.   He

therefore printed the document and inserted the date of 2004 as it had appeared on the screen.

[48]     The body of the document wrongly refers to Mr Tothill being due to retire on

28 October 2004 and being appointed for a further term of three years beginning

28 October 2004 and ending on 28 October 2007.  Mr Tothill suggested that this may have been a simple error or that the document had reverted to its original format and the modified version was not recovered or that the dates were corrected and the document printed but not saved.  There is, however, no means of knowing whether any of these suggestions reflect what actually happened.

[49]     According to Mr Tothill, executed deeds were held in deeds’ packets and stored in the firm’s secure deeds filing system in the offices.   Other documents associated with trustee appointments, including copies of deeds, were held on a file. If these files were no longer being used they were stored off-site.  However, because the file relating to the Blair Gough Sub-trust was used often it was kept in the office.

[50]     Had a deed existed in relation to the reappointment of Mr Tothill in 2005 one would have expected it to be have been in a deeds’ packet or a file in Duncan Cotterill’s offices.   However, those offices were damaged in the Christchurch earthquake in February 2011.  Initially, Mr Tothill did not have access to any files held in the offices.   Earlier this year a number of files were retrieved from the offices.    This  was  done  by  contractors  arranged  by  Duncan  Cotterill’s  insurer. Mr Tothill himself was not able to access the building.   The documents that were recovered included seven files and 11 Eastlight folders relating to the affairs of the Head Trust and the two sub-trusts.   No deed, either executed or unexecuted, was located.

[51]     Subsequently it was realised that some documents and files had been sent to temporary  off-site  storage  during  previous  renovations.    A further  14  boxes  of documents were retrieved from this source but no deed was located among those documents either.

[52]     Mr Tothill has offered one further possible explanation for the absence of an executed deed, namely that it may have been wrongly filed by an employee of Mr Tothill’s firm who was found to have misfiled several deeds over a period of time.

[53]     Because  of  the  chaotic  state  of  the  building  from  which  the  files  and documents  were  retrieved,  coupled  with  the  possibility  of  a  deed  having  been misfiled I cannot draw any inference from the failure to locate the deed from this source.   However, the absence of any evidence of a deed from other sources that could reasonably have expected to have yielded an indication that a deed existed does cause me concern.

[54]     First, a search of Duncan Cotterill’s deeds inquiry reports has failed to find any reference to a Deed of Appointment for Mr Tothill in either 2004 or 2005, even though the system has a record of a Deed of Appointment dated 11 December 2002 and a Deed of Appointment dated 28 October 2008.  It was not suggested that the filing clerk responsible for the various instances of misfiled deeds was also responsible for the data inputting of information to the deeds inquiry records.

[55]     Secondly, none of the other trustees of either the Blair Gough Sub-trust or of the Head Trust either hold a copy of the deed or (more significantly) say that they recall it being signed.  Blair Gough died last year.  Mr Tothill contacted his widow and reports that any documents she might have held were destroyed by flood damage following the Christchurch earthquake.  Mr Tothill also contacted David Brown, the third trustee of the Blair Gough Sub-trust on Mr Tothill’s appointment in 2002.  He has not provided any documents nor deposed to any recollection of a deed being executed in relation to the reappointment of Mr Tothill in 2005.

[56]     The secretary of the Head Trust, David Barker, has made an affidavit.  He has held his position since October 2004 and was therefore in that role when Mr Tothill’s term expired in October 2005.  Although he holds archived material dating back to

2004,  his  premises  were  extensively damaged  in  the  earthquake.    However,  he doubts that his records included any deed executed by Mr Tothill in 2005 because he

has no record of having received such a document and Mr Tothill was in the habit of storing original document at his offices.

[57]     There is no evidence from the trustees of the Owen Gough Sub-trust during

2005 (Messrs Bacon, Farrant and Hagen) and Mr Barker has deposed to enquiries he has made of them and the fact that they have not been able to provide any relevant documentation.   Nor is there evidence from the independent trustee of the Head Trust as at 2002, Peter Taylor, confirming Mr Tothill’s reappointment.  Finally, the adult beneficiaries, Benjamin Gough and Gina Satterthwaite, do not hold any trust documents relating to Mr Tothill’s reappointment and have not provided affidavits on the point.

[58]     Even  allowing  for  the  likelihood  of  documents  lost  as  a  result  of  the earthquake, I find it inconceivable that, had Mr Tothill been reappointed by deed in

2005, one of the other trustees or the secretary of the Head Trust would not have deposed to either seeing an executed deed or to recalling the reappointment.   My concern is heightened by the production of a Notice of Waiver dated 25 July 2005 signed by the adult beneficiaries of the Blair Gough Sub-trust, Blair Gough, Gina Satterthwaite  and  Benjamin  Gough.    It  purports  to  waive  the  requirement  for Mr Tothill’s retirement due on 28 October 2005.

[59]     This document is wholly inconsistent with Mr Tothill’s affidavit evidence that he was unable to obtain a waiver because the adult beneficiaries were difficult to contact during the period in 2005 when the waiver had to be given.  Blair Gough, in particular was overseas until September 2005.  Under cross-examination Mr Tothill admitted that the notice was, in fact, signed some time in 2006.  Quite apart from the obvious concern about the backdating of trust documents, there is no satisfactory explanation as to why, if Mr Tothill had been reappointed by the execution of a deed, there was any need for this purported Notice of Waiver.

[60]     As against the lack of any clear evidence regarding the execution of a deed of re-appointment is the fact that in 2008 and 2011 the trustees of the Blair Gough Family Trust executed Deeds of Appointment of Mr Tothill as trustee of the Head Trust in which Mr Tothill was referred to as “the continuing trustee”.  They record

nomination of “the continuing trustee to continue to be a trustee of the Head Trust”. However, those deeds were prepared by Duncan Cotterill and, I infer, by or under the instruction of Mr Tothill.  In these circumstances I do not place any weight on them as evidence of an effective reappointment by deed in 2005.

[61]     Taking  the  evidence  in  its  totality  I  am  not  satisfied  that  a  deed  of appointment was executed in relation to Mr Tothill in 2005.

[62]     Mr Weston suggested that a reappointment may nevertheless be made without a formal deed, submitting that the Deed of Variation did not impose any formal restrictions upon the power to appoint.  This argument may yet be relevant when I come   to   consider   the   consequences   of   my   conclusion   that   there   was   no reappointment in accordance with the Deed of Variation.

Fourth cause of action – Was Mr Tothill a properly appointed trustee of the Head

Trust during the period 28 October 2008 – 28 October 2011?

[63]     This cause of action is an alternative to the fifth cause of action; if the third cause of action succeeds, which it has, only the fourth cause of action need be considered.

[64]     It  is  not  in  dispute  that  an  executed  Deed  of Appointment  exists  dated

28 October 2008 which purports to appoint Mr Tothill as a trustee of the Head Trust. However, the plaintiff asserts that because (on his argument) Mr Tothill was not validly appointed in October 2005, he was not eligible to be appointed as a “continuing” trustee.  The only substantive reason Mr Ingram offered as to why this misdescription of Mr Tothill’s status should affect the validity of his appointment was the fact that if he were not truly a “continuing trustee” the trust property would not vest in him.

[65]     I do not see that the wrong assumption that Mr Tothill was already a trustee should, in itself, invalidate the appointment.  It is perfectly clear from the terms of the deed that it is Mr Tothill whom the other trustees intended to appoint.  He would have been available for appointment whether he had been a continuing trustee or not. The fact that the deed did not contain a vesting clause on the assumption that he was

a  continuing  trustee  is  remedied  by  s  47(1)(b)  of  the  Trustee Act  1956  which provides that if a deed appointing a new trustee does not contain a declaration vesting property in the trustee the deed shall, subject to any express provision to the contrary,  “operate  as  it  if  had  contained  such  a  declaration  by  the  appointor extending  to  all  the  estates,  interests,  and  rights  with  the  respect  to  which  a declaration could have been made.”

[66]     There being no other objections to this Deed of Appointment, Mr Tothill was validly appointed for the period between 2008 and 2011.

Fifth cause of action – Was Mr Tothill a properly appointed trustee of the Head Trust during the period 28 October 2008 – 28 October 2011?

[67]     I have already noted that the fifth cause of action falls to be considered only if the third cause of action has failed.  Since that cause of action has succeeded, I do not need to consider the fifth cause of action.

Sixth cause of action – Was Mr Tothill a properly appointed trustee of the Head Trust during the period 28 October 2011 – 28 October 2014?

[68]     Although Mr Tothill’s previous term did not expire until 28 October 2011, a Deed of Appointment reappointing him was executed on 17 October 2011.   No explanation was given for this.   However, after the plaintiff ’s first Statement of Claim was served, a fresh deed was executed on 28 October 2011 in anticipation of an argument that valid appointment could only occur after retirement.

[69]     The sixth and seventh causes of action pose alternative challenges to this otherwise apparently valid Deed of Appointment.  The sixth cause of action assumes that there was no valid appointment in 2008 and repeats the argument made in respect of the fourth cause of action (which I rejected).   As  I have found that Mr Tothill was validly appointed in 2008, I do not need to address this cause of action.

Seventh cause of action – Was Mr Tothill a properly appointed trustee of the Head

Trust for the period 28 October 2011 – 28 October 2011?

[70]     This  alternative  cause  of  action  was  based  upon  the  assumption  that Mr Tothill’s appointment in 2005 and 2008 was valid and that, therefore, he was not entitled to be appointed as a trustee for a third term in 2011.  Although I have held that  there  is  insufficient  proof  that  Mr  Tothill  was  validly  appointed  in  2005, Mr Tothill’s 2011 appointment was still his third; his initial appointment occurred on

11 December 2002, he was validly reappointed in 2008 and reappointed again (without recourse to the waiver mechanism) in 2011.  This makes no difference, of course, as this cause of action turns on an issue I have already discussed and decided, namely whether the Deed of Variation limits trustees to an initial appointment and one reappointment (with a waiver).   I have found that it does not and thus, this challenge to that appointment fails.

Summary of conclusions

[71]     I have concluded that:

(a)      In relation to the interpretation of the Deed of Variation clause 6B(f) is the source of the power to reappoint trustees to the Head Trust and a trustee may be reappointed more than once;

(b)      Ram Custodian was not appointed in accordance with the Deed of

Variation for the periods 28 October 2006 – 28 October 2009 and 28

October 2009 – 28 October 2012; (c)   Mr Tothill:

(i)Was not appointed in accordance with the Deed of Variation for the period between 28 October 2005 and 28 October 2008;

(ii)Was appointed in accordance with the Deed of Variation for the  periods  28  October  2008  –  28  October  2011  and  28

October 2011 – 28 October 2014.

[72]     I was not addressed on the issue of costs.  Counsel may file memoranda as to

costs by 13 September 2012 and memoranda in reply by 20 September 2012.

P Courtney J