Gray v Heighway
[2020] NZHC 473
•11 March 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-15
[2020] NZHC 473
UNDER Sections 51, 52 and 64A of the Trustees Act 1956 IN THE MATTER
of substitution of a trustee and variation of Trust Deed
BETWEEN
JOHN ANDREW GRAY
Applicant
AND
SELWYN CLIVE HEIGHWAY
Respondent
Hearing: On the papers Appearances:
SPH Elliott for the Applicant
G D Stringer for the Final Beneficiaries
Judgment:
11 March 2020
JUDGMENT OF GAULT J
This judgment was delivered by me on 11 March 2020 at 2:30 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors / Counsel:
Mr SPH Elliott, Barrister, Auckland
Mr H Gladwell (applicant’s instructing solicitor), Insight Legal, Warkworth
GRAY v HEIGHWAY [2020] NZHC 473 [11 March 2020]
[1] This is an originating application for the appointment and removal of trustees, a consequential vesting order and variation of a trust deed, pursuant to ss 51, 52 and 64A of the Trustee Act 1956 (the Act).
[2] The applicant, John Gray, is a trustee of the Heighway Family Trust (the Trust). The respondent, Selwyn Heighway, is the settlor of the Trust and also a trustee. Mr Heighway is elderly and his mental health is said to have deteriorated to the point that he is no longer able to fulfil his obligations as trustee. Accordingly, Mr Gray seeks orders from the Court for the replacement of Mr Heighway as trustee, for vesting of the main asset of the Trust, a small rural property in Warkworth,1 in the continuing trustees and for a variation of the power of appointment in the Trust deed.
Background
[3] The Trust was settled by Mr Heighway on 3 May 2001. The trustees of the Trust were, and remain, Mr Heighway and Mr Gray. In that capacity, they are the registered proprietors of the Warkworth property.
[4] Mr Heighway is 75 years old. Dr Wood, a consultant geriatrician, reviewed Mr Heighway on 26 November 2018 and diagnosed him with dementia. Dr Wood was of the opinion that Mr Heighway lacked the capacity needed to understand and manage the financial affairs of the Trust, despite retaining “some capacity in terms of the overall intent of the trust”. Mr Elliott has advised that Mr Heighway is now in a dementia facility at Warkworth Hospital and his power of attorney in respect of property is operative.
[5] Under cl 17 of the Trust deed, only the settlor (Mr Heighway) has the power to appoint and remove trustees. However, he now lacks the capacity to exercise that power. Accordingly, Mr Gray says the assistance of the Court is required to replace Mr Heighway as a trustee. Mr Gray proposes that Samuel Bassett, a chartered accountant in Auckland, be appointed in substitution. Mr Bassett is a director of Moore Markhams Auckland and has consented to be appointed as a trustee.
1 Identifier NA105A/390 (North Auckland Registry) being Lot 2 Deposited Plan 171889 and Lot 1 Deposited Plan 78109.
[6] I granted leave to commence the proceeding by way of originating application on 20 January 2020, and made directions dispensing with service on Mr Heighway, dispensing with the need for a litigation guardian, and dispensing with service on the discretionary beneficiaries.2 The five final beneficiaries (Mr Heighway’s children) have all been served. Mr Stringer for the final beneficiaries advises that they do not wish to oppose the application and accept the orders sought are appropriate.
Replacement of trustees
[7] The Court may order the removal of a trustee under s 51(1) of the Act, which provides that:
The court may, whenever it is expedient to appoint a new trustee or new trustees, and it is found inexpedient, difficult, or impracticable so to do without the assistance of the court, make an order appointing a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
[8] The Court is guided by the welfare of the beneficiaries when exercising its jurisdiction to remove trustees.3 The security of trust property and the satisfactory execution of the trust are recognised as further guiding principles.4
[9] Mr Heighway has the sole power to appoint and remove trustees under cl 17 of the Trust deed and now lacks the capacity to exercise that power. Mr Heighway has granted a power of attorney in respect of property matters to Ms Burns (his daughter and one of the final beneficiaries). However, as Mr Elliott submits, in Godfrey v McCormick, Nation J held that “an [enduring power of attorney] does not give the attorney the power to act for the donor in relation to the donor’s obligations, rights and powers as a trustee”.5 Part 9 of the Protection of Personal and Property Rights 1988 governs the powers under an enduring power of attorney. Section 97(1) of that Act provides that an attorney can be authorised “to act generally in relation to the whole or a specified part of the donor’s affairs in relation to his or her property”. Nation J considered that the more common view is that the property the donor holds on trust is
2 Minute of Gault J, 20 January 2020.
3 Hunter v Hunter [1938] NZLR 520 (CA) at 529 per Myers CJ; Kain v Hutton (2002) 1 NZTR 12-004 (CA) at [18]; and Green v Green [2015] NZHC 1218, (2015) 4 NZTR 25-017 at [601].
4 Green v Green at [602].
5 Godfrey v McCormick [2017] NZHC 420, [2017] 3 NZLR 198 at [8].
not included in his or her property; as such, trustee powers are not exercisable by a donee of an enduring power of attorney.6
[10] As it appears Ms Burns would be unable to exercise the powers needed, I am satisfied the assistance of the Court to remove Mr Heighway as a trustee is appropriate.
[11] I am further satisfied that Mr Heighway’s health means he is unable to fulfil his role as a trustee of the Trust. He has dementia and in the opinion of Dr Wood, lacks the ability to understand and manage the financial affairs of the Trust. The five final beneficiaries accept Mr Bassett’s appointment as a replacement trustee. Mr Bassett has consented to the appointment.
[12] I am accordingly satisfied it is appropriate to appoint Mr Bassett as trustee in substitution for Mr Heighway.
Vesting of property
[13] Section 52(1)(b)(i) of the Act permits the vesting of land or interest therein in any such person or any such manner as the Court may direct, where a trustee entitled to or possessed of land, either solely or jointly with another person, is under a disability. Under the Act, a person is deemed to be under a disability while not of full mental capacity.7
[14] Having substituted a trustee, it is appropriate to make a consequential vesting order in relation to the property. Mr Gray says there is an urgent need for the Trust property to be sold. Mr and Mrs Heighway previously lived on the property. However, Mr Heighway has now been admitted to a dementia facility. Mrs Heighway is at least aware of the application as she consented to and supported the without notice application for directions as to service and conduct of proceeding dated 19 December 2019 signed by Mr Gray’s solicitor. Given the circumstances, and the need for the continuing trustees to be able to deal with the Trust property in accordance with their duties, I consider it appropriate to vest the Trust property in the remaining trustees.
6 At [9].
7 Trustee Act 1956, s 2(2).
Variation of trust deed
Section 64A(1) of the Act provides as follows:
(1)Without limiting any other powers of the court, it is hereby declared that where any property is held on trusts arising under any will, settlement, or other disposition, or on the intestacy or partial intestacy of any person, or under any order of the court, the court may if it thinks fit by order approve on behalf of—
(a)any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of infancy or other incapacity is incapable of assenting; or
(b)any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description, or a member of that class, as the case may be, if the said date had fallen or the said event had happened at the date of the application to the court; or
(c)any unborn or unknown person; or
(d)any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined—
any arrangement (by whomsoever proposed, and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees of managing or administering any of the property subject to the trusts:
provided that, except by virtue of paragraph (d), the court shall not approve an arrangement on behalf of any person if the arrangement is to his detriment; and in determining whether any such arrangement is to the detriment of any person the court may have regard to all benefits which may accrue to him directly or indirectly in consequence of the arrangement, including the welfare and honour of the family to which he belongs:
provided also that this subsection shall not apply to any trust affecting property settled by any Act other than the Administration Act 1969.
[16] In exercising the Court’s role under s 64A, the Court stands in the shoes of the beneficiaries on whose behalf it is acting.8
8 Jones v Collings [2015] NZHC 3002 at [32(a)], citing Re Byrne (2004) 1 NZTR 14-008 (HC) at [24]. See also Ewington v Schulz (2009) 2 NZTR 19-013 (HC) at [20].
[17] Currently Mr Heighway has the sole power under cl 17 to appoint and remove trustees. The variation sought would vest the power of appointment and removal in the trustees, rather than the settlor. The application claims the variation is necessary to enable changes to be made the trustees in the future (for example in the case of retirement) without requiring the assistance of the Court.
[18] The five final beneficiaries accept the proposed orders. Considering the position of other (discretionary) beneficiaries as well, I consider it is appropriate to vary cl 17 of the Trust deed. Otherwise, any further changes in trustees will need a further order of the Court, which may involve unnecessary cost.9 As to the terms of the variation, I accept the proposed replacement clause 17 in the Amended Draft Order provided by Mr Elliott is appropriate.
Orders
[19]I make the following orders:
(a)Samuel Michael William Bassett of Auckland, Chartered Accountant be appointed as a trustee of the Heighway Family Trust settled by Deed of Trust dated 3 May 2001 in substitution for Selwyn Clive Heighway, who is removed as a trustee.
(b)Identifier NA105A/390 (North Auckland Registry) being Lot 2 Deposited Plan 171889 and Lot 1 Deposited Plan 78109 is vested in the said Samuel Michael William Bassett and John Andrew Gray of Warkworth, solicitor, jointly.
[20] That clause 17 of the Trust Deed is varied as sought in the Amended Draft Order.
Gault J
9 Re Zaitsev [2019] NZHC 1579, (2019) 5 NZTR 29-012 at [20].
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