Harkness Henry Trust Management Limited
[2019] NZHC 2480
•1 October 2019
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2019-419-179
[2019] NZHC 2480
UNDER The Trustee Act 1956 IN THE MATTER
of the Ross Hamilton Sandford Trust
IN THE MATTER
of an application by Harkness Henry Trust Management Limited
BETWEEN
HARKNESS HENRY TRUST MANAGEMENT LIMITED
Applicant
Hearing: On the papers Counsel:
KJ Matena for applicant
Judgment:
1 October 2019
JUDGMENT OF FITZGERALD J
[As to originating application for orders for removal of trustee, variation to Trust Deed and vesting land]
This judgment was delivered by me on [ ] at [ am/pm], pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Harkness Henry, Hamilton (S Rawcliffe)
Re Harkness Henry Trust Management Limited [2019] NZHC 2480 [1 October 2019]
[1] The applicant (HHTM) applies by way of originating application for an order removing Graeme Clark Sandford (Mr Sandford) as a trustee of the Ross Hamilton Sandford Trust (the Trust); vesting property held by the Trust in the name of HHTM as the remaining trustee; and varying the Trust Deed to give the power of appointment and removal to HHTM.
[2] The basis upon which the orders are sought is that in January 2019, Mr Sandford was determined to be mentally incapable and his enduring powers of attorney (in respect of property and personal care and welfare) were activated.
[3] Six out of the seven beneficiaries of the Trust have formally consented to the orders being made. The remaining beneficiary has been served with the relevant papers but has not filed any notice of opposition or taken any other step in the proceeding.
Factual background – more detail
[4] The Trust was created by Trust Deed by the settlor, Ross Hamilton Sandford, Mr Sandford’s brother. At the time the Trust was settled, the trustees were Mr Sandford and Ross Sandford himself.
[5]The beneficiaries of the Trust include:
(a)Ross Sandford, as primary beneficiary;
(b)Stella Sandford (Ross Sandford’s wife);
(c)Any of Ross Sandford’s children; and
(d)Any of Ross Sandford’s grandchildren.
[6] The Trust Deed was varied on 2 October 1998 to permit the Trust to have a minimum of one trustee.
[7] Ross Sandford passed away on 8 August 1999. By his will, he appointed his brother, Mr Sandford, and a partner of Harkness Henry Lawyers, Mr Warren Scotter, as the executors of his estate. Pursuant to the terms of the Trust Deed, upon Ross Sandford’s death, the power of appointment and removal of trustees devolved to his executors, namely Mr Sandford and Mr Scotter.1
[8] HHTM was appointed as a trustee of the Trust by way of a Deed on 15 October 1999. The Deed noted that HHTM was appointed a new trustee in place of Mr Ross Sandford. That then meant Mr Sandford and HHTM were the trustees of the Trust, which remains the position today.
[9] Sadly, by January 2019, Mr Sandford had been determined to be mentally incapable. Medical certificates invoking Mr Sandford’s powers of attorney (in respect of personal care and welfare and his property) have been produced in evidence in support of the application. The certificates confirm that Mr Sandford has dementia, causing him “not to have capability to make informed decisions”. He is also described as having “very poor short-term memory”.
[10] As the trustees are required to act unanimously, the Trust is presently deadlocked, as Mr Sandford is unable to carry out his duties as trustee and HHTM is unable to act unilaterally.
Beneficiaries’ consent to the application
[11] Evidence filed in support of the application demonstrates that the beneficiaries of the Trust at the time of the application are:
(a)Stella Sandford (Ross Sandford’s wife);
(b)Carole Sandford (Ross Sandford’s child);
(c)Scott Sandford (Ross Sandford’s child); and
1 Mr Scotter remains employed by Harkness Henry and is aware of and also consents to the proceedings.
(d)Four grandchildren of varying ages, of which one is Ms Toni-Anne O’Mahony.
[12] As noted, six of the above seven beneficiaries have provided written consent to the orders sought.2
[13] Ms O’Mahony has not provided a signed consent form. Mr Peploe, a partner at Harkness Henry Lawyers and also a director of HHTM, explains in his affidavit filed in support of the application that they do not have a postal address for Ms O’Mahony. However, he annexes to his affidavit a copy of correspondence with Ms O’Mahony in which she advised she would accept emailed documents and then sign and return the consent form. Despite this, however, Ms O’Mahony did not return the signed consent form within a reasonable time and subsequent attempts to contact her went unanswered.
[14] Affidavits of service have been filed, confirming personal service on Ms O’Mahony of all relevant documents. As noted, Ms O’Mahony has not filed any notice of opposition or appearance, or taken any other action in relation to these proceedings within the timeframe ordered for her to do so (being 20 working days from the date of service). I am therefore satisfied it is appropriate to proceed to determine HHTM’s substantive application.
Discussion
Removal of trustee
[15] The Trustee Act 1956 (the Act) does not provide for the statutory removal of a trustee (rather than the substitution of a new trustee for a retiring trustee or one who has been removed). Nevertheless, is clear the Court has inherent jurisdiction to remove a trustee when to do so is consistent with the welfare of the beneficiaries and the protection of trust property.3
2 Carson Weldon is one of the grandchildren and is a minor. Associate Judge Smith made orders that his father represent him in these proceedings, and his father has signed the consent form on his behalf.
3 Greg Kelly and Chris Kelly Garrow & Kelly Law of Trust and Trustees (7th ed, LexisNexis, Wellington, 2013) at [17.54]. (footnotes omitted).
[16] It is clear on the materials before the Court that Mr Sandford is no longer capable of properly carrying out his duties as trustee. It is accordingly appropriate he is removed as a trustee and an order will be made to that effect.
Variation to Trust Deed
[17] As noted, HHTM seeks an order varying cl 14 of the Trust Deed so that the remaining trustee holds the power of appointment and removal.
[18]Clause 14.1 of the Trust Deed states:
The power of appointment of New Trustees is vested in the Primary Beneficiary during his lifetime and may be exercised by him by deed or by will and after his death is vested in the administrator or the executors or trustees for the time being of his will. If at any time after his death and the winding up of his estate there is no such administrator, executor or trustee able and willing to act then in the person or persons in whom the statutory power is vested by the Trustee Act 1956.
[19] The Trust Deed also provides that the person holding the power to appoint new trustees also has the power to remove any trustee.
[20] Pursuant to cl 14.1, the power of appointing and removing trustees was originally held by Ross Sandford (as the Primary Beneficiary). On his death, the power of appointment and removal passed to Mr Sandford and Mr Scotter jointly, as executors of Mr Sandford’s estate. Now that Mr Sandford is mentally incapable, the joint power of appointment cannot be exercised. As a result, the power of appointment and removal is now held by “the person or persons in whom the statutory power is vested by the Trustee Act 1956”. I accept counsel for HHTM’s submission that this is a reference to the powers referred to in s 43(1) of the Act.
[21]Section 43(1) of the Act provides as follows:
43 Power of appointing new trustees
(1)Where a trustee (whether original or substituted, and whether appointed by the court or otherwise)—
(a)is dead; or
(b)remains out of New Zealand for the space of 12 months during which no delegation of any trusts, powers, or discretions vested in him as such trustee remains in operation under section 31; or
(c)desires to be discharged from all or any of the trusts or powers reposed in or conferred on him; or
(d)refuses to act therein; or
(e)is unfit to act therein; or
(f)is incapable of so acting; or
(g)being a corporation, has ceased to carry on business, is in liquidation, or is dissolved, then—
the person nominated for the purpose of appointing new trustees by the instrument (if any) creating the trust, or if there is no such person or no such person able and willing to act, then the surviving or continuing trustees for the time being, or the personal representatives of the last surviving or continuing trustee, may by deed appoint a person or persons (whether or not being the person or persons exercising the power) to be a trustee or trustees in the place of the first-mentioned trustee.
[22] Section 43 vests the power of appointment and removal in the trustees. While Mr Sandford remains a trustee, that does not assist matters, given his present health condition. HHTM notes that on the basis Mr Sandford is removed as trustee, it is arguable that it, as the “continuing trustee” (for the purposes of s 43(1)) could exercise the power of appointment and removal under the Trust Deed alone. However, HHTM notes the restrictions in s 43(2)(c) of the Act relating to the minimum number of trustees. Given this, it does not consider it appropriate for it to rely on cl 14.1 of the Trust Deed (and the powers in s 43(1)) in order to remove Mr Sandford as trustee. Hence the application for the Court to make that order.
[23] As counsel notes, where the Court has determined it is appropriate to remove a trustee and that person also holds the power of appointment and removal, the Court may also use its inherent jurisdiction to vary the terms of the Trust Deed to deal with that issue.4 This is on the basis that a variation to the power of appointment and removal is not a variation of the Trust itself, but of an administrative provision.
4 Clifton v Clifton (2004) NZTR 14-018 at [42]-[43]; Mudgway v Slack (2010) 3 NZTR 20-023 at [38]-[39]; Tarasiewicz v Titford [2013] NZHC 3466 at [83]-[85]; Nysse v Nysse [2014] NZHC 2833 at [25].
[24] In the above circumstances, I consider it proper and prudent of HHTM to have sought the Court’s assistance in relation to these matters, even though it considers it is technically able to rely on cl 14.1 and s 43 to exercise the power of appointment and removal going forward. I agree that it is appropriate to make an order varying the administrative provisions in cl 14.1 and 14.4(e) regarding the power of appointment and removal and granting that power to HHTM.
Vesting order
[25] Section 52 of the Act permits vesting orders to be made in relation to trust property, including where a trustee entitled to or possessed of land, either solely or jointly, is under a disability.5
[26] This section applies in the present circumstances, given Mr Sandford’s present medical condition. Orders vesting trust property in the remaining trustees are routinely made upon an incapacitated trustee being removed.
[27] As Mr Sandford is unable to fulfil his duties as registered proprietor or to facilitate the transfer of property held by the Trust, it is appropriate that the property ought to be vested in HHTM as the remaining trustee.
[28] There will accordingly be an order that the land described in paragraph 1(b) of the originating application be vested in the name of HHTM as remaining trustee.
Costs
[29] Finally, given the present application was not brought unanimously by the (then) existing trustees, HHTM seeks an order that the costs of the application may properly be paid out of trust funds. I am satisfied that is appropriate.
Result
[30]I accordingly make orders:
5 Section 52(1)(d)(i).
(a)Removing Graeme Clark Sandford as a trustee of the Ross Hamilton Sandford Trust;
(b)Vesting the property identified by Certificate of Title 282797 in the name of the remaining trustee, Harkness Henry Trust Management Limited;
(c)Varying the Trust Deed to give the power of appointment and removal to HHTM;
(d)That the reasonable actual costs of this application are met by the Trust fund.
Fitzgerald J
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