Hayward Trustee Services Limited
[2022] NZHC 2217
•2 September 2022
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2022-409-242
[2022] NZHC 2217
UNDER the Trusts Act 2019 IN THE MATTER
of The Wayne Hayward Family Trust
BETWEEN
HAYWARD TRUSTEE SERVICES LIMITED
Applicant
Hearing: On the papers Appearances:
A S Butler and K A Ewer for Applicant
Judgment:
2 September 2022
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 2 September 2022 at 10.30 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
RE HAYWARD TRUSTEE SERVICES LIMITED [2022] NZHC 2217 [2 SEPTEMBER 2022]
Introduction
[1] Hayward Trustee Services Limited (the current trustee) is the trustee of the Wayne Hayward Family Trust (the trust). By way of an originating application,1 the current trustee seeks orders to address concerns as to the validity of certain retirements and appointments of trustees between 2017 and 2021.
[2]The orders the current trustee seeks are as follows:
(a)That the original trustees of the trust, being Alister Argyle and John Falloon (the original trustees), were validly discharged on 23 August 2017 and were validly replaced by Wayne Hayward (Wayne) and the current trustee on that date.
(b)That if the original trustees were not validly discharged on 23 August 2017, then they should now be removed and validly discharged as trustees by the Court under s 112 Trusts Act 2019.
(c)That Wayne’s removal and retirement as a trustee on 16 October 2020 be treated as valid on the grounds that either:
(i)it was permissible under the trust deed; or
(ii)the original trustees had not been validly discharged as trustees due to s 45(3) Trustee Act 1956, therefore when Wayne was removed/retired there were two individual trustees able to act as trustees; or
(iii)in any event, Wayne’s diminishing capacity meant that it was appropriate he remove himself from office as trustee; or
1 Leave was granted to proceed in this way by Associate Judge Lester on 29 June 2022.
(iv)that it is appropriate to treat him as having been discharged as trustee from 30 January 2021 when the Trusts Act 2019, particularly s 104, came into force.
(d)That the current trustee is the validly appointed sole trustee of the trust and is permitted to act as sole trustee on the grounds that there is no minimum required number of trustees under the deed or the Trusts Act 2019.
(e)Alternatively, if the current trustee’s appointment was defective, that it now be appointed by the Court pursuant to s 114 Trusts Act 2019.
(f)That trustee decisions made from 23 August 2017 to date be treated as having been validly made pursuant to s 100 Trusts Act 2019. This order is sought only to the extent that there is doubt as to the validity of trustee actions to date.
(g)That, in the event the current trustee is found to not have been validly appointed, it is nonetheless able to claim the benefit of the trustee’s indemnity under the 1956 and 2019 acts.
(h)The costs the current trustee should be paid out of the trust on an indemnity basis.
(i)The trust should meet the reasonable costs of other parties who have appeared in these proceedings.
Background
[3] The trust was settled on 22 November 1993 for the benefit of Wayne and his family. Wayne’s father was the settlor.
[4] The original trustees were a solicitor, Alister Argyle, and an accountant, John Falloon.
[5] The trust’s named beneficiaries were Wayne, Susan Hayward (Susan), who is Wayne’s wife, and the children of Wayne (Wayne’s children). There were also nominated beneficiaries—three children from Susan’s previous relationship (the Scott children) and the children of Wayne’s children.
[6] The trust’s primary asset is its majority (65 per cent) interest in Brackley Farm Limited (Brackley), a company which owns farmland currently valued at approximately $10,927,500. The farming business associated with this land is run as a partnership between Wayne, Susan, and Glenn Hayward (Wayne’s son).
[7] By cl 11 of the trust deed, Wayne had control over the removal and appointment of trustees. It provided: “[That] power of removal of Trustees and appointment of new Trustees shall be vested in [Wayne]”.
[8] By deed dated 23 August 2017, the original trustees purported to retire from trusteeship, and Wayne appointed himself and the current trustee as trustees. At this point, Wayne owned all the shares in the current trustee and was a co-director with Alister Argyle.
[9] Alister Argyle retired as a director of the current trustee on 5 February 2020 and was replaced by Mark Dineen, of the firm Tavendale & Partners.
[10] In 2020, Wayne was diagnosed with dementia. This had several implications. Wayne had to stop farming, and the farming partnership would have to end. Wayne and Susan also needed to move closer to Ashburton for better access to medical and respite care respectively. This meant leaving their home on the farm and funding a new residence and life. Facilitating the move would require the sale of all or part of the farm.
[11] By deed dated 16 October 2020, Wayne removed himself as a trustee of the trust with the intent that the current trustee remain as the sole continuing trustee. At the same time, he also retired as a director of the current trustee and was replaced by Mark Tavendale of Tavendale & Partners. Wayne transferred his shares to Mark Dineen and Mark Tavendale to be held jointly.
[12] From 26 July 2021, Mark Tavendale became the sole director and shareholder of the current trustee when Mark Dineen retired. He was then replaced by Timothy Keenan (Timothy) on 1 October 2021. Timothy had been approached by Wayne and Susan to take the shares and directorship of the current trustee in an independent and professional capacity.
[13] Upon his appointment, Timothy undertook a review of the trust, a process which included the engagement of Katherine Ewer, a trust law specialist. This raised various issues around the removal and appointment of trustees as well as the validity of the trust’s present management.
[14] Between 2017 and 2021, various decisions were made by the trustees. Some of these are relatively uncontentious, such as approving annual financial statements. However, others are such that a determination of the validity of trustee appointment and removal is important to ensure the decision was made validly. Among these important decisions was the decision made to sell the Brackley farmland. Given the farm was the principal asset of Brackley, the trust’s approval of the sale was required as a major transaction. Timothy considered it appropriate to approve the transaction and canvassed the beneficiaries for their perspectives – they consented to the sale. The sale’s settlement date is 30 September 2022. If the sale goes ahead, the trust will need to decide how to apply its share of the sale proceeds. That does not bear on the present matter.
[15] In order to be sure the current trust is authorised to proceed with the decisions it has made and will need to make, it brought this application.
[16] On 29 June 2022, Associate Judge Lester directed for the application to be served on the original trustees, Wayne, Susan, and Wayne’s children and the Scott children. No party opposed the application, or took a position on what basis the steps taken by the trustees should be confirmed. They were all agreed it could be dealt with on the papers to be determined as the Court thought fit.
Positions
The current trustee
[17] It is the current trustee’s position that the terms of the deed are such that the discharging of the original trustees and replacement by Wayne and the current trustee was valid, as was Wayne’s retirement. For this to be the case, the trust deed needs to permit the trust’s assets to be held by a sole trustee and a corporate trustee. Counsel for the current trustee, Mr Butler, argues if this Court does not agree, it would then need to consider whether the appointments and discharges were valid given the effect of ss 43 and 45 of the Trustee Act 1956 as well as the changes brought about by the Trusts Act 2019.
[18] However, Mr Butler argues the deed allows for there to be a sole trustee. The definition of “date of final distribution” expressly contemplates that there may be a “sole Trustee hereunder”. Under that definition, a sole trustee is permitted to exercise the power of bringing forward the final date of distribution unless the sole trustee is also a settlor of the trust. Mr Butler contends there is no suggestion elsewhere in the deed that this is the only power available to sole trustees. The only reason a sole trustee is referred to here is to prevent the circumstance where a sole trustee (who is also the settlor) attempts to utilise the power. Additionally, cl B(1) of the schedule to the deed provides that “words importing the singular include the plural and vice versa”. As such, reference to “Trustees” throughout the document should also be read as “Trustee”.
[19] Secondly, the current trustee considers that the deed expressly contemplated the appointment of a body corporate as a trustee. Clause 11.02 of the schedule to the deed provides for a trust company to charge its ordinary scale of remuneration. What a trust company is, is not defined. While the Trustee Companies Act 1967 defines a “trustee company” (which is a different term) to mean specific entities (not including the current trustee), there is no definition within the deed, nor a cross-reference to the Trustee Companies Act. As such, there is no reason to believe the mention of a trust company was intended to reference trustee companies as defined under that Act. Moreover, there is no rule of law, besides the limited application of ss 43, 45, and 48(2) of the Trustee Act, which prohibits a company from being appointed as a trustee.
Section 48(2) only prevents a company being appointed as a trustee where the trust deed forbids such an appointment. There is consequently no reason to read down the present deed to exclude companies from appointment as trustees of the trust.
[20] Once it is accepted the deed permits the appointment of a sole corporate trustee then:
(a)The 2017 retirements and appointments are valid;
(b)Wayne’s retirement and discharge in 2020 is valid; and
(c)the current trustee was properly appointed as a trustee in 2017 and was properly in office as sole trustee from the date of Wayne’s retirement and discharge.
Other parties
[21] Alister Argyle considered his retirement in 2017 to be valid pursuant to the trust deed and s 2(4) of the Trustee Act.
[22]Mr Falloon has indicated he will abide by the Court’s decision.
[23]The Scott children have consented to the orders sought by the current trustee.
[24] Glenn Hayward has filed a memorandum to the effect that he does not oppose the orders sought but reserves his rights depending on the positions of other parties.
[25] Wayne has expressed his support for the orders sought and seeks the aid of Susan as a litigation guardian for the purposes of participation in the current trustee’s application.
Appointment of a litigation guardian for Wayne
[26] This Court’s judgment dated 29 June 2022 raised the issue of whether a litigation guardian was required to be appointed for Wayne. He in turn, through counsel, filed a memorandum supporting the appointment of Susan to this role.
[27] Rule 4.35 of the High Court Rules provides that the Court may appoint a litigation guardian if it is satisfied that:
(a)the person for whom the litigation guardian is to be appointed is an incapacitated person; and
(b)the litigation guardian
(i)is able fairly and competently to conduct the proceedings on behalf of the incapacitated person; and
(ii)does not have interests adverse to those of the incapacitated person; and
(iii)consents to being a litigation guardian.
[28] Counsel for Wayne contends that while in June 2021 he was assessed as competent for the purpose of executing an enduring power of attorney, his condition has advanced such that significant decisions require support and medical assessments to determine capacity are difficult for him to complete. He also says that Wayne panics from the perceived pressure when asked to complete tests aimed at assessing capacity, and for this reason, no updated test has been obtained.
[29] I am in no doubt that Susan would be able to fairly and competently conduct the proceedings on behalf of Wayne. Furthermore, their interests are clearly aligned given their stable marriage and nigh identical reasons for needing the trust’s position to be confirmed in order to allow the sale of the Brackley farmland.
[30] However, the evidence around Wayne’s lack of capacity is more equivocal, as is the benefit of appointing a litigation guardian. In assessing capacity, the Court must be satisfied the person is incapacitated—something often shown with a specific assessment.2 Counsel for Wayne points out he “has not lost his cognitive function to the extent where he has been unable to engage with the applications made and the
2 Cade v Cade [2016] NZHC 1624.
orders sought to date”. However, he has not obtained evidence as to his capacity as Susan explains this is “difficult” for him.
[31] In Erwood v Maxted, the Court of Appeal held that the Court must ask whether the litigant is able to understand the nature of the litigation in which they are engaged, its possible outcomes, and associated risks.3 It is only if the litigant does not, that the obligation to appoint a litigation guardian arises, although the Court can order otherwise. The present application involves highly aligned interests, Wayne has already consented to the orders sought by the current trust, and he is sufficiently cognisant of the proceedings to disagree with aspects of Timothy Keenan’s affidavit. His consent to Susan acting as a litigation guardian to support him is also telling. It shows he has sufficient capacity, with the support of counsel and Susan’s informal support, to understand the nature of the proceedings and its possible outcomes.
[32] In light of the above factors, and given I intend to make the orders sought by the current trustee, which are supported by both Wayne and Susan, I consider appointing Susan as a litigation guardian to be unnecessary. This is because, despite some evidence of his incapacity I am not satisfied he is sufficiently incapacitated that he meets the threshold for appointment of a litigation guardian and, in any event, I consider, pursuant to r 4.30(1), it is not necessary to make such an order in the specific circumstances of this case when the application is uncontested.
Discussion
The trust’s application
[33]Under the Trustee Act 1956, s 43 provides:
(1) Where a trustee (whether original or substituted, and whether appointed by the court or otherwise) … desires to be discharged from all or any of the trusts or powers reposed in or conferred on him … the person nominated for the purpose of appointing new trustees by the instrument (if any) creating the trust … 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.
…
3 Erwood v Maxted [2008] NZCA 139 at [26].
(2) On the appointment of a trustee or trustees for the whole or any part of trust property … it shall not be obligatory to appoint more than 1 new trustee where only 1 trustee was originally appointed, or to fill up the original number of trustees where more than 2 trustees were originally appointed; but, except where only 1 trustee was originally appointed, a trustee shall not be discharged under this section unless there will be either a trustee corporation or at least 2 individuals to act as trustees to perform the trust …
[34] Further detail regarding the retirement of trustees is contained in s 45(3) and is of similar effect in many respects:
(3) Except where only 1 trustee was originally appointed, a trustee shall not be discharged under subsection (1) unless there will be either a trustee corporation or at least 2 individuals to act as trustees to perform the trust.
[35] Section 2(4) and (5) of the Trustee Act 1956 make it clear that the Act’s provisions remain subject to the terms of the trust deed. As such, the interpretation of the terms of the deed are salient.
[36] The principles concerning the interpretation of contracts apply to the interpretation of the provisions of express trusts. There has been recent debate about the approach to contract interpretation and the precise balance between literal and contextual influences. But in New Zealand, the principles are well settled and were set out in the judgments of the Supreme Court in Firm PI 1 Ltd v Zurich Australian Insurance Ltd4 and Bathurst Resources Ltd v L & M Coal Holdings Ltd.5 This means that the aim is to ascertain the meaning which the trust document would convey to a reasonable person having all the background knowledge which would reasonably have been available at the time that the trust was settled.
[37] In the present case, the trust deed does not expressly address what numbers of trustees are permissible in what circumstances or whether there were requirements upon the retirement and discharge of a trustee. Power of appointment was vested by the deed into Wayne in very broad terms. It did not impose limitations relevant to the present proceedings.
4 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147; [2015] 1 NZLR 432.
5 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696.
[38] That said, I consider there is strength in Mr Butler’s argument that the deed contemplates there being only one trustee acting. The “date of final distribution” clause makes it clear the deed contemplated there being a sole trustee managing the trust. This is supported by the provision confirming that any reference to a plural also imported the singular. The reference to a sole trustee in the “date of final distribution” clause, but not elsewhere in the instrument, does not, in my view, indicate that this was meant to be a power that could be exercised by a sole trustee as an exception. The inclusion of the phrase must be read in the context of precluding a settlor, acting as a sole trustee, from exercising the power. I therefore conclude that the deed contemplated a sole trustee being appointed to the trust.
[39] As the authors of Nevill's Law of Trusts, Wills and Administration note, in circumstances where the wording of the instrument indicates that the settlor contemplated only one trustee acting for the trust, the one trustee will suffice, and the restrictions imposed by the Trustee Act 1956 do not apply.6
[40] In Sanson v Gray, the Court was dealing with a trust deed similar in many respects to the present. It had a clause which provided for how trustees were to exercise their power “where there are more Trustees than one” and also recognised that words importing the plural included the singular. This indirect reference to a sole trustee acting was taken by the Court as the deed contemplating and permitting such an occurrence, and this ousted the operation of s 43(2)(c) of the Trustee Act.7
[41] The Judge in Sanson drew from a principle of similar effect espoused in the case of Peacock v Colling, although the case there did not pertain to analogous statutory requirements to appoint a certain number of trustees.8
[42] Given the similar function of ss 43(2)(c) and 45(3), I consider the principle that a deed can exclude their function applies in the present circumstances. Here, the deed permits there to be a sole trustee.
6 Lindsay Breach Nevill’s Law of Trusts, Wills and Administration (13th ed, LexisNexis, Wellington, 2019) at [7.2.4(e)].
7 Sanson v Gray HC Invercargill CP14/99, 16 June 1999.
8 Peacock v Colling (1885) 54 LJ Ch 734 (CA).
[43] The next issue is whether the sole trustee can be a company. Body corporates, whether specifically trustee corporations or not, are able to be trustees provided that neither the constitution of the company nor the trust deed precludes this. Section 48 of the Trustee Act provides, “[a]ny trustee corporation may be appointed and may lawfully act as the sole trustee in respect of any trust”. This has been a position confirmed several times in the case law.9
[44] The deed cannot be read as ousting the ability of a company to act as a trustee. Indeed, it appears to contemplate such a circumstance as explained in [19] above. Accordingly, I accept Mr Butler’s submissions that the current trustee was able to be validly appointed as a trustee.
[45] As I am of the view that the retirements and appointments were valid pursuant to the terms of the trust deed and were not precluded by statute, I do not consider it necessary to canvas the alternative orders put forward by the applicant.
Conclusion
[46] The operation of the deed is such that I consider the various retirements, discharges and appointments to have been validly made. It follows from this that the decisions and actions of these trustees in relation to the trust are valid.
Orders
[47]The orders sought by the current trustee are granted as follows:
(a)Alister Argyle and John Falloon were validly discharged on 23 August 2017 and were validly replaced by Wayne Hayward and Hayward Trustee Services Ltd pursuant to the trust deed.
(b)Wayne’s retirement as a trustee on 16 October 2020 was valid pursuant to the trust deed.
9 In re Levin & Co Ltd [1936] NZLR 558 (CA); and In re Rayment (deceased) [1959] NZLR 1184 (SC); and Re Cornelius (deceased) [2012] 1 NZLR 853 (HC).
(c)Hayward Trustee Services Ltd is the validly appointed sole trustee of the trust and may act accordingly.
(d)The costs of Hayward Trustee Services Ltd are to be paid out of the trust on an indemnity basis.
(e)The reasonable costs of the remaining parties to the proceeding are to be paid out of the trust.
Solicitors:
K A Ewer, Christchurch
Argyle Welsh Finnigan Ltd, Ashburton Lane Neave, Christchurch
Wynn Williams, Christchurch Anthony Harper, Christchurch RMF Silva Ltd, Ashburton
Copies To:
A S Butler, Barrister, Wellington
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